The 2023 federal budget contained a number of important tax changes for both individuals and corporations, said Jamie Golombek, managing director of tax and estate planning with CIBC Private Wealth.
Most important for higher-income Canadians are details regarding the new alternative minimum tax (AMT), Golombek said.
Canada already has an AMT to limit the tax deduction available to high earners from certain incentives. However, Golombek said the 2022 budget found that 28% of tax filers with income above $400,000 — the top 0.5% of earners — paid an average federal income tax rate of 15% or less in 2019.
“Having analyzed that personally, a lot of it relates to things like the capital gains inclusion rate, the Canadian dividend tax credit, charitable donations, and employee stock options,” Golombek said.
To address the gap, the budget proposes increasing the AMT rate to 20.5% from 15%. Other proposed changes take aim at deductions, credits and other tax strategies. “They are broadening the AMT base,” Golombek said.
These amendments are expected to bring in almost $3 billion in revenue over five years beginning in the 2024 tax year.
Another notable change is a new, targeted inflation relief program to help low- and modest-income Canadians save on groceries. “People know that inflation has been a big issue, and in particular the cost of food,” Golombek said.
The grocery rebate is not tied to actual grocery bills but is instead administered through the GST rebate system, Golombek said, and will be paid “as soon as the budget passes and becomes law.”
The rebate would provide a maximum of $153 per adult, plus $81 per child and $81 for childless singles, adding up to a maximum of $234 per qualifying Canadian adult living alone.
Other positive changes, according to Golombek, include allowing withdrawals of up to $8,000 in educational assistance payments (EAPs) from an RESP for beneficiaries during the first semester of education, as well as proposed changes to RESP rules to allow divorced and separated parents to open joint RESPs for their children.
On the RDSP side, the federal government is proposing to extend a measure allowing qualifying family members to open an RDSP for an adult beneficiary, in addition to adding siblings as “qualifying family members,” Golombek said.
The government has also stated it will nearly triple the number of eligible Canadians for its File My Return program.
On the corporate side, the budget finally addressed intergenerational business transfers by shutting down loopholes left in Bill C-208.
Lastly, Golombek highlighted strict new measures regarding the general anti-avoidance rule (GAAR).
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