Financial institutions will soon be required to report the total fair market value of each RRSP and RRIF each year to the Canada Revenue Agency if Budget 2022 passes.
Such reporting would help the CRA “in its risk-assessment activities regarding qualified investments held by RRSPs and RRIFs,” the budget document said.
While this change won’t affect the average account holder, the proposal signals that the government may start targeting very large RRSP balances, said Jamie Golombek, managing director of tax and estate planning with CIBC Private Wealth.
“They may start querying, ‘How did they get so big? Is anything fishy going on? Were you involved in any of those maximizer schemes?'” he said.
Golombek noted that financial institutions already have to report detailed information about TFSAs.
This measure would apply to the 2023 taxation year onward.
Intergenerational small business transfers
The federal government is launching a consultation regarding the rules outlined in Bill C-208 around intergenerational share transfers. The consultation will end on June 17.
Bill C-208 was a private member’s bill meant to facilitate “genuine” intergenerational transfers of small businesses, farms and fishing corporations. It was enacted on June 29, 2021, even though it did not have the support of the government, which was concerned that the bill created opportunities for tax avoidance.
The following day, the Department of Finance issued a release indicating that it would delay the implementation of the bill until Jan. 1, but subsequently “replaced” that release with another on July 19, where Minister of Finance Chrystia Freeland affirmed Bill C-208 was indeed law.
The government said in the 2022 budget that it would like to determine “how the existing rules could be modified to protect the integrity of the tax system while continuing to facilitate genuine intergenerational business transfers.” The government also said it is “committed to bringing forward legislation to address these issues, which would be included in a bill to be tabled in the fall after the conclusion of the consultation process.”
Medical expense tax credit
The definition of “patient” for the purposes of medical expense tax credit (METC), a 15% non-refundable tax credit, is being expanded.
The broader definition would allow medical expenses paid by the taxpayer, or the taxpayer’s spouse or common-law partner, with respect to a surrogate mother or donor to be eligible for the METC.
A “patient” is proposed to be defined as:
- the taxpayer;
- the taxpayer’s spouse or common-law partner;
- a surrogate mother; or
- a donor of sperm, ova or embryos.
This measure would apply to expenses incurred in the 2022 taxation year and onward. For 2022, the METC is available for qualifying medical expenses costing more than $2,479 or 3% of the taxpayer’s net income, whichever is less.
Not in the budget
The mandate letter to Seniors Minister Kamal Khera included a directive to increase the guaranteed income supplement by $500 for single seniors and by $750 for couples, beginning at age 65. This proposal did not appear in the budget.
The Canada Disability Benefit was introduced in Bill C-35 on June 22, 2021, but the legislation died when Parliament rose. The mandate letter for Carla Qualtrough, Minister of Employment, Workforce Development and Disability Inclusion, directs her to “move forward with the design, introduction and implementation of a Canada Disability Benefit Act and Canada Disability Benefit for low-income working age persons with disabilities.” The Canada Disability Benefit was not mentioned in the budget.
The Liberals’ election platform had promised to implement a Career Extension Tax Credit to allow working seniors older than 65 who earn at least $5,000 at their jobs to eliminate taxes payable on a portion of their income and receive a tax credit of up to $1,650. While no such credit was announced in the budget, the government said it “intends to engage with experts on the role that a Career Extension Tax Credit could play in boosting the labour force participation of seniors who want to continue to work later in life.”