Budget 2023 (A Made-in-Canada Plan: Strong Middle Class, Affordable Economy, Healthy Future) was introduced in the House of Commons on March 28, 2023. The top five changes that may impact individuals and owner-managed businesses are as follows:
– Dental plan – The Canadian Dental Care Plan would be introduced to provide coverage for all uninsured Canadians with an annual family income of less than $90,000 (the previous Canada Dental Benefit only provided benefits for children under 12) by the end of 2023. Benefits would be reduced for families with income between $70,000 and $90,000.
– Green investments – New and expanded green investment tax credits for businesses, including for clean electricity at 15%; clean hydrogen ranging from 15% to 40%; clean technology manufacturing at 30%; and expansion of the clean technology investment. Labour requirements, including wage levels and apprenticeship training opportunities, would need to be met to receive the full amount for most business credits.
– Intergenerational business transfers – In the summer of 2021, rules were introduced that allowed individuals to benefit from the sale of their corporation to a child’s corporation in the same way as a sale to a third party. Previously, such transfers to a child’s corporation would result in a capital gain being converted into a more highly taxed dividend and also prevent the usage of the capital gains exemption. Budget 2023 proposed amendments to limit the 2021 rules by adding specific eligibility requirements focused on the transfer of ownership, management and control of the business. The proposals would take effect in 2024.
– Employee ownership trusts (EOTs) – Rules were proposed to better facilitate employees buying their employer through a trust. Proposed to be effective in 2024, these rules would provide business owners with an additional exit strategy, where for example, a third-party buyer or transition to a family member is not feasible or desired.
– Alternative minimum tax (AMT) – The AMT is an alternative method of calculating taxes that ensures that an individual pays a minimum amount of tax even if they would not have a tax balance under the normal system due to using one or more tax advantages. Budget 2023 proposed to modify the AMT rules to better target wealthier individuals. The standard exemption from this tax would be increased from $40,000 to approximately $173,000; however, the tax rate would be increased from 15% to 20.5%. In addition, many of the deductions and credits currently allowed to reduce AMT would be eliminated or restricted. These changes would be effective for the 2024 tax year.
ACTION: If you are significantly affected by, or could benefit from, any of these changes, reach out for more information and assistance.