David

Welcome to the Canada Life 2025 federal budget call, Decoding the Budget. I'm Dave Garland, National Vice President for Canada Life Private Wealth, and I'll be your host for today's event.

A few things before we dive into things here, just a few quick tips to help you get the most out of today's session.

First of all, we love questions. So, feel free to ask them using Slido throughout the event. You'll find instructions on the screen right now on how to log into Slido. So please take a second, make sure you're connected here. If you do see a question you like, give it a thumbs up. That's gonna help us prioritize which questions matter most to you.

We're gonna tackle as many questions as we can during the Q&A portion at the end of the session. Of course, this is gonna be time dependent.

For the advisors that are tuning in live, if you attend the full session, you're gonna receive some CE credits, and you'll get a CE credit certificate in the coming weeks via email. So look out for this.

And for our Quebec advisors. At the end of today's webinar, a CE quiz will pop up on your screen as we're wrapping up. So please wait for this. Don't disconnect too soon.

With that said, let's get started. Today we're diving into the 2025 federal budget. We're gonna hear about what's new, what's changed, and what it means for investors and advisors alike.

Joining me today are Wilmot George, Managing Director of Tax and Estate Planning, along with Richard Chang, Director of Tax and Estate Planning, both part of our Canada Life Private Wealth team.

With decades of combined experience, we're here to break down what the 2025 federal budget means for your planning strategies and your client conversations.

So, Richard, Wilmot, thank you both for being here today.

Guys, the 2025 federal budget has introduced several key changes that could impact financial planning across the board. I'm gonna hand things over to the two of you so you can walk us through the most notable updates and highlight what it is our viewers should really be paying close attention to.

So, Wilmot, I know you're first up. I'll hand things over to you to get us started.

Wilmot

Thanks very much, David, for the intro. Depending on where you are in the country, good morning and good afternoon, everyone. It's a privilege and a pleasure to be with you today as we take a look at last week's budget with the goal of understanding impact and uncovering opportunities for financial advisors and investor clients.

For the next 50 minutes or so, Richard and I will aim where possible to do a deeper dive on some, not all, some of the key measures from the budget. We don't have time to cover everything, but we hope that with the time that we do have, our content will help to fill any gaps in your understanding of these measures and what they might mean for Canadians going forward.

Budget season is an exciting time and busy time for tax practitioners as at the time of year when the majority of proposed tax changes are announced. And this particular budget has been highly anticipated as it is the first for the Carney government and the first federal budget after the proroguing of government and the termination of outstanding legislation at the time earlier this year.

So, Richard and I packed our bags and we headed to Ottawa last week to see what the budget would have in store.

It was certainly a cold and sunny day last Tuesday as we prepared for what is typically referred to as the budget lockup process. Budget day is a significant event each year as media, economists, legal professionals and tax practitioners head to the nation's capital to see and hear what the politicians have in store for Canadians for the upcoming year and beyond.

Traditionally this occurs in the spring, but in recent months, the federal government has announced that federal budgets will now occur in the fall to allow more time for planning before the start of the new fiscal year.

For the budget lockup, each of these groups, the media, economists, legal professionals and tax practitioners were granted the opportunity to preview the budget in the hours prior to the Minister of Finance rising to deliver the budget speech, which allows us time to analyze and prepare budget reports, which we share with you, our clients, shortly after the budget is announced.

The goal being to provide you with timely and valued information as soon as we can. You can find our budget report on the Canada Life website or financial advisors can talk, can contact your Canada Life wholesaling team for a copy.

Now the lockup process is appreciated by us. It's hopefully appreciated by you, our clients, but it's also appreciated by the government as well, as it provides them with free marketing of their budget through our efforts and through our reports.

The theme for this year's budget was Canada Strong.

The budget papers, which you see here, were over 405 pages long and provided a roadmap for where the Carney government plans to take Canadians and the Canadian economy over the next five or so years and beyond. Within the papers is an economic overview, information on government revenue and spending, and of course a roadmap for tax changes going forward.

The big question is, will this budget get enough votes to pass?

Or will Canadians be headed back to the polls for an election?

For the remainder of our time today, I will provide a brief overview of the budget, what was not in the budget, and key personal measures that might be of interest to the financial advisor and investor communities.

Richard will then cover key corporate measures and other measures of note.

So, let's get right into the overview. The budget details billions in proposed spending cuts and investments meant to spur growth and productivity amidst trade uncertainty. Why?

Because unemployment is up, business uncertainty has spiked, and productivity is weak.

A deficit of $78 billion is projected for 2025, 2026, which is forecast to drop to $65 billion next fiscal year, and then gradually to $57 billion in 2029, 2030. But against this backdrop, the budget pledges to balance operational spending in three years, we'll talk more about that in a minute.

And the budget also calls for some $141 billion in new spending over the next five years, which will partially be offset by billions in cuts and savings. Looking a bit more closely at the deficit, of course the $78 billion figure is the big talking point for media circles and amongst Canadians.

This number is far more than the $42 billion, the last Trudeau government projected, and what the conservatives said they would be willing to support.

With this bar graph, you can see the forecasted drop to $57 billion in 2029, 2030 over time. But some would argue that these deficits are still far too much, which is being explained by the government as being a share between operational day-to-day expenditures, which it plans to balance against revenue in three years, and longer-term capital expenditures, which it views as good debt, longer-term investments to build and grow Canada over time. So, budget 2025 proposes to make capital investments a national priority.

You can see the proposed decline to a balanced budget for day-to-day expenditures with a corresponding increase in deficit share for capital investments. Whether you agree or disagree with this approach will depend on your political stripes, of course.

But this is the approach the government is planning to take and time will tell if it becomes a reality.

Also proposed in the budget was a drop of 40,000 jobs in the public service sector in the coming years, drastically reduced targets for new temporary resident admissions. This speaks to housing challenges and jobs, and $81 billion for defense spending over five years, $72 billion of which is newly announced money.

Will this budget pass? Well, we should know next week. The final confidence vote is scheduled for next week, I believe. And the liberals who have 170 seats need two more from opposition parties for the budget to pass.

If it doesn't pass, we'll go to another election as budget votes are typically a vote of confidence for the government.

While the conservatives, Block and Green Party have indicated that they will not support the budget in its current form, the NDP might. We'll wait and we'll see what happens. So there's been a lot of talk about what was in the budget. We'll discuss more of that shortly. But first, what was not in the budget?

With the government provoking in January and proposed legislation dying on the table, followed by a number of election promises made in April, there was a lot of speculation about this budget and what might and might not be in it.

What we did not see in the budget were any major tax headliners such as TFSA's, FHSA’s or increases in the capital gains inclusion rates. We saw no reduction to RIF minimum amounts. This was a promise made by the liberal party during the election period in April.

Proposed one time 25% reduction to RIF minimum amounts to provide flexibility for seniors in uncertain markets.

Since the promise was made though, the environment has changed. The government has made expensive promises globally and the revenue is tight. As a result, it appears that the appetite for such a measure has softened. And for the time being at least, this measure appears, it appears to be off table. We'll wait and we'll see. Thirdly, there were no changes to personal or corporate income tax rates other than the previously announced middle-class tax cut that was implemented in July. More on that in a minute.

So, this slide here shows 2025 personal income tax rates. Of course, financial or territorial rates would be added to these rates to reach a combined tax rate for taxpayers.

With all the discussion about an announced and since canceled increase the capital gains inclusion rate, capital gains continue to be the most efficient form of taxable investment income, followed by eligible dividends, non-eligible dividends, and then other income.

From a corporate perspective, the 2025 federal general and MMP rates remain at 15%. The small business rate is 9% for business income of up to $500,000.

And the investment rate for CCPCs, Canadian Controlled Private Companies is 38.67%. These rates are flat tax rates from dollar one. No graduated tax rates like individuals and provincial or territorial rates would be added to these rates to arrive at combined tax rates for corporate investors.

Let's change gears here now and talk about personal measures that were in the budget.

Starting with a new personal support workers tax credit. This temporary refundable tax credit is meant to empower and support personal support workers by putting money back into their pockets in recognition of the care they provide to Canadians. The credit will have a value of up to $1,100 based on 5% of eligible earnings, which would include taxable employment income, salaries, wages, and employment of benefits. It does not appear that self-employment income would qualify. The worker must work for an established healthcare establishment, such as a hospital, nursing, or residential care facility, and they must file a tax return to benefit.

Residents of BC, Newfoundland, and Labrador, the Northwest Territories would not qualify due to existing similar agreements in those areas.

So, if you have clients that are personal support workers, or you are a client that is an employed personal support worker, know that this benefit is coming, assuming that the budget does indeed pass.

Note though, this is a temporary measure available only for the 2026 to 2030 tax years.

Next, let's talk about the middle-class tax cut proposed to take effect as of July 1st of this year. You might recall that during their election campaigning in April, the Liberal Party proposed to provide a tax cut for middle-class Canadians as of Canada Day.

Well, as promised, the day before Canada Day, the Prime Minister's office released this notice announcing the tax cut would be effective the next day.

Now, there are two interesting things that I wanna point out about this notice before we connect it to budget 2025. The first is the first bullet, which indicates that the tax rate for the low tax bracket would be reduced from 15% to 14% for 2026 and subsequent years, 14.5% for 2025.

The second thing I wanna point out here is that the last point on that slide indicates that most non-refundable tax credits will continue to be based on the lowest personal income tax rate.

Now, to illustrate why this is important, let's take a look at the proposed tax savings from the lowering of the lowest marginal tax rate. The tax cut, which will impact all Canadians with taxable income, including those with incomes that exceed the low tax bracket, will produce a tax savings of approximately $574 simply by lowering the tax rate from 15% to 14%.

This is just straight math for income of up to 57,000, the first tax bracket.

However, while the government might promote this tax savings, the last bullet point on a previous slide indicates that the rate applying to non-refundable tax credits will continue to be the same as a low tax bracket rate.

Now, this is important because many Canadians claim non-refundable tax credits, and by reducing the low tax bracket rate, the government is also reducing the value of the non-refundable tax credits, which reduces the potential savings from the change.

For example, commonly claimed non-refundable tax credits include the basic personal amount, the spousal amount, the amount for eligible dependent, the age amount, the disability amount, you might be familiar with some of these, you might claim them on your tax return, the pension income amount, the Canada employment amount.

The value of the credits at a 15% rate are shown in the middle column, while their value at a lower 14% rate is shown in the second last column.

You can see that by reducing the low tax bracket rate, the government is also reducing the value of these commonly claimed tax credits, which essentially is a tax increase for these credit claims.

Now, two things can be true. Number one, the savings from the tax rate change might not be as large as advertised, which would depend on the number of tax credits you're claiming and so on and so forth. Secondly, non-refundable tax credits have always been tied to the low tax bracket rate, and the government is maintaining this treatment.

So, what does this have to do with budget 2025?

Well, everything we've talked about for this tax cut so far is based on the low tax bracket rate, 57,000 or less, where non-refundable tax credit claims exceed 57,000, consider larger claims in a given year or claim for multiple dependents. The result could be that the decrease in the value of the credit might actually exceed the tax savings from the tax reduction.

To address this, budget 2025 proposes to adjust the rules so that the 15% rate as opposed to 14% will apply to credit claims in excess of 57,000 in the year.

This adjustment will be referred to as a new top-up tax credit that would apply for 2025 to 2020 or 2030 tax years.

Now, this is a highly technical point. I'm not trying to get very technical with this, but this is a technical point, and it should have limited application. The new top-up tax credit would apply only to those who have high credit claims in the year, but it's worth mentioning because of its relationship to the middle-class tax cut.

Okay, next I wanna talk about the 21-year deemed disposition rule for personal trust. This kind of came as a surprise to me. I wasn't expecting to see something in the budget around the 21-year rule. With some exceptions, most formal trusts are subject to a 21-year deemed disposition rule, which deems trust properties sold and repurchased every 21 years. The rule is meant to prevent indefinite tax deferral opportunities for property held within a trust.

Now, where property is transferred by a trust on a tax-deferred basis to a new trust, an anti-avoidance rule prevents the avoidance of the 21-year rule by requiring the new trust to inherit the 21-year anniversary of the old trust. This ensures that transferred property from one trust to another remains subject to the same 21-year period that applied to the old trust.

Now, some Canadians have been creative here now, and there's been some creative tax planning that has resulted in the avoidance of both the 21-year rule and the anti-avoidance rule.

For example, certain strategies have involved trust property being transferred on a tax-deferred basis to a beneficiary that is a corporation owned by the new trust, so an indirect trust-to-trust transfer seeking to do indirectly what cannot be done directly.

Budget 2025 proposes to broaden the current anti-avoidance rule to include indirect transfers of trust property to other trusts. This measure would take effect for transfers that occur on or after budget day. The moral of the story here is the 21-year rule is alive and well.

Certain commonly used strategies to avoid the rule, such as transferring assets in kind on a tax-deferred basis to beneficiaries of the trust prior to the 21-year first anniversary, continues to be effective, so there are still ways to get around it, legal, legitimate ways.

However, if the intention is to transfer trust property between trusts, either directly or indirectly to avoid the rule, opportunities to do so are now fewer.

All right, I'm coming to a close pretty soon. I'm gonna hand to Richard, but before we do that, a couple of things here real quickly. Sticking with the trust rules, let's now discuss very quickly something that's been a talking point for many Canadians since 2017.

It was then that Finance Minister Bill Morneau announced an intention to put a plan in place to strengthen the transparency of legal persons and legal arrangements and improve the availability of beneficial ownership information.

In other words, what he was saying is, we want more information. We want more information on legal ownership. We want more information on beneficial ownership. We want more information about trust to crack down on money laundering, terrorist financing, and tax evasion.

The following year in the 2020, sorry, 2018 federal budget, details were announced.

In brief, after some postponements for tax years, beginning 2023, and going forward, the government was requiring additional disclosure for settlers, trustees, beneficiaries, and other persons who can exert influence on trust. The government wanted to know names, addresses, date of birth, jurisdiction of residence, taxpayer identification numbers, such as SINs, business numbers, trust accounts. They wanted left arm, right arm, left leg, right leg. They wanted all of this information about trust. There were limited exceptions and penalties for non-compliance.

And what made this change so impactful, particularly in our industry, is that the government included bare trusts in this conversation as a requirement.

And if we think about bare trusts, I'm not trying to get too technical here, but if we think about what a bare trust is, which is an agency relationship between a beneficial owner and a legal owner, many began to believe that in trust for accounts for minor children might have to do this additional reporting.

Many began to believe that joint accounts between parent and child would have to engage this new trust reporting. And this became a major issue for our industry.

Well, the government provided some relief by indicating that bare trusts would not have to report for 2023 and 2024, but there was question about 2025 and going forward.

There was legislation released in 2024, August, I believe, to address this and provide relief, but that legislation died on the table when the government prorogued. And then in August of 2025, new legislation was tabled, not yet passed.

But what we do know is that the government has indicated that they do plan to move forward with relief for certain trusts. This was in the budget papers, and they've also indicated that bare trust would be exempt from this reporting for 2025.

So, for 2026 going forward, perhaps bare trust might need to report. Trust may continue to need to report, but there is relief on the way. We'll follow this legislation to the end and provide updates as needed.

My last slide here before I headed over to Richard, very quickly, three points, automatic benefits for lower income individuals.

The government is planning to automatically file tax returns for certain lower income Canadians to allow them to receive automatic benefits, such as GST, HSD credits, or the Canada's worker benefit, home accessibility tax credits. In some cases, you can make two claims there. You can make a claim for medical benefits as well as a home accessibility tax credit claim. The government's tightened this up, so you can claim one or the other, not both.

And there is, for Canada, carbon rebates for those provinces that are eligible. The government has indicated that you'll have to file final tax returns by October 30th to receive the final rebates that are being offered.

More information is available on our budget paper. I'm gonna stop there, turn it over to Richard. He's gonna take us the rest of the way. Richard, over to you, sir.

Richard

Thanks, Wilmot.

So, for corporate measures, we can summarize this budget into three main themes.

The first one, in the government's own words, is to supercharge the deductions that are available for businesses making capital investments into Canada.

The second one is to enhance many existing tax credits that can be claimed.

And the last one in budget 2025 is shutting down a perceived abuse of investment tax deferral. And the key word here is perceived, and we'll get into what that means.

So, the first one is the super deduction package. So, to boost Canada's productivity, budget 2025 proposes to allow businesses to write off 100% for tax purposes, the cost of manufacturing and processing machinery, equipment including for clean energy, as well as manufacturing and processing building.

Patent or data network infrastructures and related assets are also included. So are capital expenditures or SR&ED.

In addition to all other types of assets, businesses are also able to enhance the amount of write off for tax.

And this is consistent with the Liberal Party's election campaign, which was stated in their platform.

So, to provide some backdrop on this, during the summer, Donald Trump's One Big Beautiful Bill made a lot of headline news. To stimulate the US economy, the One Big Beautiful Bill included a measure to allow bonus deductions for businesses. So essentially it allows businesses to deduct costs for capital investments much faster.

The interesting part about these rules is they actually started in Trump's first term in 2017. Back then, the bonus depreciation had an end date, which was 2028. One Big Beautiful Bill Act now made a permanent.

Canada at the time also introduced what's known as the accelerated investment incentive rules in response to try and curtail investments from going down south. This also had an end date of 2028.

Now, because of One Big Beautiful Bill Act, which the budget 2025 explicitly made reference to, the Liberal government also proposes to extend all the AII rules, as well as provide the aforementioned 100% write off incentives.

But unlike the US package here, our package, if they pass, would actually phase out after 2033. So, it's always interesting to understand the why behind policies are made, and also how much our policymaking is tied to our neighbors in the US.

For tax credits, the government proposes to expand many existing credit programs, but the most notable one is the SR&ED program.

Broadly speaking, if you are a business and engage in R&D spending, what the SR&ED program provides is two things for tax purposes. First, you get a tax deduction for qualifying expenses that you made on these activities. And on top of the deductions, you are able to reduce not only your taxable income, but you get an investment tax credit as well. So, you get a tax deduction, as well as a tax credit that reduces the tax payable on a dollar-for-dollar basis.

The investment tax credit is also refundable, meaning if you don't have enough taxes payable, you still get the money back.

Before, only current expenses can claim SR&ED, but now capital expenses can also qualify. In addition, the limit to qualify for the investment tax credit is also increased from what used to be $3 million to now $6 million.

And the phase out requirement is also loosened. So, meaning that more companies could qualify for the SR&ED program, as well as to continue to qualify for longer.

So why is the government doing this? So, we mentioned countering the US as one Big Beautiful Bill act, but the other theme the government pitched is this notion that Canada's effective tax rate for businesses is lowered. So rather than reducing the headline rate, the government is allowing you to claim more deductions, so the effective tax rate businesses paid is lowered.

And with the government's own figure in budget 2025, assuming the super deduction packages are claimed, the overall effective tax rate paid by Canadian businesses as a whole is lowered and continue to be lower than other G7 or OECD countries.

So, what the government wants to say is look at the macro level as opposed to the granular individual level with respect to the corporate measures.

So, for the final part of the corporate measures that we'll talk about is this idea of tier structure tax deferral that the government perceives there's to be an abuse.

And before we talk about the budget's proposal, first we need to recap a little bit on what's called the refundable tax regime in Canada.

So, at a very high level, investment income and dividends from Canadian corporations attract refundable tax for corporations. So, if a corporation receives a taxable dividend, they will be potentially subject to refundable tax and payment of dividends later on can entitle them to a refund. Well, so far fairly straightforward.

But where it can get complicated is if, for example, we have corporation A being an owner of corporation B, if it's connected to corporation B, then the refund that corporation B had received actually becomes A's refundable tax.

So why is the system designed this way? Well, essentially what the whole purpose of the refundable tax regime is to try to encourage companies to pay out dividends up the chain to the individual's shareholder. So, for example, if dividends is paid throughout the chain from corporation B and corporation A, the refundable tax will be refunded at the corporate level and the individual will have taxable dividend income tax at the individual level.

So, what is budget 2025 trying to target? Well, it now says if A and B are what's known as affiliated and crucially, if the recipient corporation can pay taxes later than the payer, the dividend refund is actually suspended. For example, if corporation A has a December 31st, 2025 year you would generally pay taxes two or three months after year end, so potentially February, 2026.

If B, the dividend payer has a January 31st, 2025 year end you will pay tax in March or April of 2025.

So, if B pays a dividend in January of 2025 before it's year end, it could claim a refund on its refundable tax and avoid paying that tax and defer the payment of this amount into what is A's tax due date, which is February, 2026. So essentially you get about the 11 months of deferral.

The budget goes on to say that in theory, if you keep adding, holding companies on top of corporation A and so on and so forth, in theory, you could defer this tax indefinitely. So practically speaking, this is not a very sophisticated tax planning in my opinion. And personally, I've never seen this type of planning being implemented by people when I was in public practice.

And even in the lock out room that we were in, when we received the budget ahead of time, most people in the industry are also puzzled by why the government perceived this to be such an abuse and thought it was necessary to have a legislation try to curtail this.

Well, what is the impact?

So what many people don't realize is paying dividends between corporations is actually very, very complicated from an income tax perspective. In fact, when I was in public practice, I had to spend weeks digging through clients’ historical tax return, just to compute what's known as the tax retained earnings to justify a simple dividend from one corporation, such as in this case, corporation B, to its parent company, corporation A. And if you don't do it right, there's a potential for capital gain being triggered. So, something as benign as just paying dividends between companies can have unexpected tax issues.

With this new rule, now you have to track what's called connective status, which is a relationship between corporations. You also have to track what, if they are affiliated, which is a separate concept under the tax code. And then lastly, if you do have these taxes being suspended, now your accountant will also have to track these balances and make sure that if you do pay dividends down the road, they get released as recording.

So all this is to say is, if you have a corporation or a group of companies and you have layer structures, if this legislation does pass, unless there are business reasons that really support having different year ends, it may be worth talking with your accountant just to see, to make things more manageable, doesn't make sense to align the year ends or keep things as is and be faced with these additional complexities.

So, these are kind of the highlights of the corporate measures from budget 2025.

Now onto the other measures. Unlike budgets in the past, this one really had a long list of past proposals that had been in limbo because our government had been provoked in early 2025 and the successor government needed to confirm if they were perceived with these measures or not.

There are four pages on just past proposals, but we've highlighted some of the key ones that are of interest. So, for lifetime capital gain exemptions, it was proposed to increase the amount to one and a quarter million index for inflation. The government again, confirmed they were perceived with this, which is positive news for business owners.

The same goes with capital gain rollover, which is an existing rule to allow serial entrepreneurs to defer capital gain on exit if they reinvest the money into another qualifying business.

The government is committed to loosening the rules and increasing the limits of eligible shares from 50 million to a hundred million. So again, loosening the rules available for people to take advantage of these deferral mechanisms.

For alternative minimum tax or AMT, the key thing of interest is the cancellation of allowing resource expenses from being deductible. And this could be relevant to investors that invest in what's called flow through shares, where you get resource expenses deductions flow through to the investor level. And if you have high income, you can use those expenses to deduct against your income.

The AMT rules here essentially limits the amount of tax benefit from the flow through rules. And this is notable for the investors in these schemes to revisit the economics of the flow through as well as the tax impact with the advisors.

The last two topics are something that we'll spend a little bit more focus on given their potential impact.

The first one is the loss carry back rule. And why this matters is under our current income tax rules, if a business owner passes away, if you don't have the proper planning in place, the deceased could actually be subject to double taxation. So once when you are deemed to sell the shares for fair market value at death, triggering a capital gain. And another one when the estate liquidates the assets in the company, which results in a decrease in the dividend. And the combined effective tax rate could be close to 75% when we're using BCH rates, for example.

The loss carry back rule simplified is, if you execute the right planning within a year of death, then the loss can be triggered to offset the capital gain on death. So you're faced with only the dividend tax. So right off the bat, you take about 27% off the table and left with an effective tax rate just a little bit under 50%.

And taking this step one step further, if you layer on life insurance, for example, this deemed dividend tax can further be reduced and optimize the overall effective tax rate for the deceased.

What the budget commits to is allow the time to execute these strategies from within one year of death to within three years. And this is big news for taxpayers, as anyone's been involved in an estate battle probably understands that the process can be very time consuming and trying to execute the tax planning before the deadline can be very stressful.

So the takeaway here is, while the government is giving you more flexibility, the owners are still up to the business owners to work with their advisors, work with their legal professionals to make sure the ducks are in a row and to execute the plan. So this is a good reminder again on the importance of planning.

The other one is the CRA's expanded powers. So, in a world where we're distracted by the latest shiny thing, one thing that some might have forgotten from 2024 was the proposal to expand the CRA's powers. And in this budget, it was confirmed the government will move forward with the past plans to expand the CRA's powers. And they're doing this in four ways.

First is a new power to issue what's called notice of non-compliance. Which can be issued if you don't comply with the CRA's information request. And this carries a penalty up to $25,000. Plus, the CRA can extend the normal reassessment period. So, allowing them more time to investigate.

The second has to do with compliance orders. So right now, the CRA can go to the courts and obtain an order to make taxpayers comply with their information request.

What's new here is they can impose an additional penalty and a new one that is equal to 10% of the taxes payable where the tax owing is more than $50,000.

The CRA is also entitled that oral or written documentations has to be provided under oath. So now when taxpayers or even taxpayers representatives like CPAs are answering questions for their clients, they may need to engage legal advice as now anything that they provide will have to be made under oath. And this raises the potential bar as well as the cost of answering questions to the CRA.

And finally, the CRA can issue, when they issue non-compliance orders, they can stop the clock if you will, the time for reassessment, which allows again the CRA more time to investigate.

So, the takeaway here is it is even more important that taxpayers seek professional advice when they're planning their affairs.

Finally, with respect to measures that were canceled, a few notable ones include the underused housing tax and the luxury tax.

So, the part on the underused housing tax that I want to highlight is this is a federal measure. So, in different provinces, there may be similar empty home tax rules that are in existence, and that's not impacted by this federal budget change.

The one that is interesting to see is the government is actually cancelling what's known as the Canadian Entrepreneurs' Incentive. And this was a new measure proposing budget 2024, which was supposed to provide up to $2 million of additional exemptions of capital gain when you sell qualifying shares. The exemption was supposed to reach the full $2 million potential by 2029, and it could be stacked on top of things like the lifetime capital gain exemption, assuming you qualify the rules for the rules of both regimes.

Back in January, the message was still the government will move forward with this and that this will be a existing exemption for business owners looking to sell their business.

But in fact, when we're in the budget room and the budget lockup, it wasn't explicitly stated that the Canadian Entrepreneur Incentive was going to be canceled. What we have to look at was on page 277 of a 406 page document in the footnotes to say where there's a small line that mentions the government has assumed their projections based on the fact that the Canadian Entrepreneur Incentive is going to be canceled.

So, this is where the government was kind of quietly suggesting that this is something that they're looked to cancel in the budget. And this is also another example where proposed legislations from the government can also be canceled at any time by the government. And for taxpayers, you have to exercise caution when you're looking to execute planning based on proposed rules.

So that summarizes the measures canceled as part of budget 2025. And that concludes our presentation related to this year's budget. Back to you, David.

David

All right, well, Wilmot, Richard, thank you so much for sharing those great insights. Let's move on to some questions from our audience. We've had a number of submissions come in through Slido. So, let's take a look at what's top of mind for everyone. Top question here.

What is the status of the capital gains inclusion? Are they leaving it at 50% or is the proposed 66% going ahead?

Richard

So that's a good question for this one. The government did not mention that they will look to increase the capital gain inclusion rate. So, this is good news. So, it would for now still stay at 50% inclusion rate.

David

Great. So, the next one I can see there.

Understanding that RIF minimum amounts were not reduced in this budget. Any discussion about increasing the RRSP to RIF conversion age from 71?

Wilmot

Yeah, I'll take that one. We hear that conversation every year, right? I'm certainly working with advisors and being part of different industry groups. It seems like every year, a number of different industry groups are sending notices to finance requesting an increase of that conversion age from 71.

But look, I mean, I've been going to budgets now for a number of years and we're still waiting for this increase, right? We're still waiting for this change. So, the budget did not talk about increasing the conversion age from 71. It continues to be 71, but I know for sure that the Department of Finance has heard this request a number of times and some might even say that they're getting pressure to increase that conversion age. Time will tell if that does indeed happen, but as it stands right now, no change and that wasn't in the budget.

David

Thank you, Wilmot. Some great questions here.

Next question I can see here.

Given that Bare trusts are exempt from the new trust reporting rules for 2023, 24 and 25, do you expect similar treatment in 2026?

Wilmot

Yeah, I'll take that one there too because I spoke about this a little bit earlier.

Look, this thing is a moving target, right? We've been talking about this thing now for a number of years. There's been a lot of attention around this.

And at the last minute, there was the exemption for the 2023 year. Then we received the exemption from the 2024 year. And now we've got a confirmed exemption for the 2025 year, at least administratively, still waiting for legislation to pass and so on and so forth.

I expect that in 2026 and going forward, this thing will be addressed as the current proposed legislation is.

There's no exemption for 2026, but there's certainly relief for a number of trusts, formal trusts from this year going forward, assuming legislation is passed. And then for Bare trust for 2026 going forward, there's some relief there as well. Not a full exemption on the current rules, but some relief depending on how the trust is set up, depending on the number of assets in the trust, depending on the type of property in the trust, including Bare trust and so on and so forth. So look, this thing is gonna be addressed for the 2026 year.

If we just followed the legislation as it currently proposed, it's not an outright exemption for 2026, but it's quite possible, quite likely that many Bare trusts, in addition to other trusts, will have some relief whereby, trust with significant assets may have to report, whereas trust with lesser amounts may not need to report.

But again, this is a moving target. I had lunch just two days ago with another member of our industry, a tax practitioner well-known, and he was saying that he thinks they're just gonna exempt Bare trust from this whole thing going forward. But that certainly hasn't been announced. We will continue to follow the bouncing ball, so to speak, and see where we end up at the end of this thing. But the good news is for 2025, Bare trusts don't have to worry about this reporting.

David

Okay, thank you. So next question, guys, that's moved up the board here. Are there any new benefits for people with disabilities? Will the GST rebate on new home purchases apply, even though client is not a first-time home buyer?

Wilmot

Oh, that's a great question. I don't know that I have the answer just off the top of my head. Perhaps that's one that we take offline and think about a little bit further. I can tell you that in reviewing the budget and reviewing the headliner items, I didn't see anything in there that was a big headliner item for folks with disabilities.

Okay, that doesn't mean to say that there weren't some smaller nuggets in there, but I didn't see anything in there, any headliner items for folks with disabilities.

And I don't recall from when we put together our budget report, I don't recall including anything in our budget report that was specific to folks with disabilities. Richard, if you remember something, but I don't remember that.

So look, we can do a deeper dive on this. Whoever asked this question, perhaps it can make its way to our desk and we'll do a deeper dive, but I didn't see any headliner items for folks with disabilities in this budget.

David

All right, thank you.

So next question here. Can the home accessibility tax credit be transferred to a child member who is not living with the parent?

Wilmot

Again, this is a great question. The focus of the budget was really just to talk about not being able to claim a double dip, right? With respect to home accessibility tax credit.

So, we know that these home accessibility expenses in some cases were claimable as a medical expense tax credit and also claimable as a home accessibility tax credit. So, the double dip opportunity.

What the budget focused on was reducing the opportunity to double dip, right? So, you're not gonna be able to claim both of those credits anymore. It's gonna be one or the other. Whether or not the home accessibility tax credit can be transferred to a child member who is not living with his parents. Again, we will do a deeper dive on that and confirm what those rules are. But the budget focus was just on claiming one or the other as opposed to both.

David

Fantastic, yeah. So many different questions coming in, so many different places to go here.

Next one that's at the top here. I've heard that the government is changing when federal budgets occur from spring to fall. "Why are they making this change? "And what are your thoughts about this, guys?"

Wilmot

Okay, this is a great question. I'll weigh in with my comments. And Richard, I'd love to hear your comments on this one as well. I think that this was a surprise for many of us in the industry, right?

Look, we've been doing federal budgets for a long time, two decades at least. And of course they've been around longer than that. And they've always been in the springtime, right? We would normally see provincial budgets starting in and around February, February, March, April in some cases, and then the federal budget would be in there. And then recent weeks, the government has indicated that they wanna change course with that and they wanna now do it in the fall.

And what they've said is they wanna do it in the fall, really, to give folks more time to plan, right? Because I think the fiscal year, if I'm not mistaken here, the new fiscal year begins in April, if I'm not mistaken. And their view is if they do the budget in the fall as opposed to in the spring, it gives everybody a little bit more runway and opportunity to plan for the new year.

My view is, yeah, I think it's fine, right? I think if the federal government does their budget in the fall and then the provincial governments do their budgets in the springtime, the provincial government certainly will have the benefit of knowing what the feds plan to do before they release their budgets. And look, you're giving a little bit more time in advance of the new fiscal year. So look, I think it's fine.

It means Richard and I have to go to Ottawa now in the fall when it's getting a little bit colder as opposed to when it's starting to warm up. But I think it's fine. Richard, do you have any thoughts there?

Richard

Yeah, so I think just to kind of give a little bit of background too, the government usually releases the budget in April and there will be a fall economic statement as well. So, they do kind of stagger it into two events per year.

Personally, I think the big part of reason why it became a fall one really has to do with the fact that our government was provoked in the beginning of the year and then we had an election and also the mounting political pressure of that we're operating a government without a budget. And that was constantly a talking point from opposition parties. And they just felt that rather than having to wait even a few more months until in April of 2026 to then release the budget, they really need to have something earlier in the fall.

And now that they have it in the fall, it just didn't make sense for them to try to really scramble again to have another one in April. So, it sort of became a domino effect and it actually is interesting in that we are in a kind of witnessing history, if you will, the fact that the budget now gets pushed to the fall.

Whether or not they will continue this will remain to be seen. If there are other election impacts, we'll knock on wood hopefully, we have these measures go pass and we don't have to go through another election cycle. But if that goes, again, potentially you wouldn't look at maybe coming back into a spring budget and that could be the outcome of those results.

David

Great, yeah, listen, guys, I think we have time for one more here, one more quick. And Richard, I think this one here is for you.

When can you start claiming the immediate expensing deductions on qualifying assets?

Richard

Great, so that's a great question. So again, the budget has effective dates for these rules. And for this particular one will be for the budget date.

Now, what is something, again, we want to kind of highlight for a lot of taxpayers is that right now all these are still, again, proposed legislation. So there's that theoretical potential that the government will change things. And if you were to proceed based on these proposed rules, you do run into that potential risk.

So, for people that are sick of having to deal with those, capital gain and inclusion rate being said, they're going to be implemented and then backed away. And also things like the Canadian entrepreneurs incentives saying they'll be implemented and then backed away. If you want to just be cautious, you couldn't wait just to maybe a few weeks to see if these measures get passed. And then you start implementing or thinking about implementing these rules with the assets that are applicable.

David

All right, well, listen, thank you guys for the answers there. Our time is coming to an end. So thank you to everyone who joined us. We really hope today's conversation has provided some clarity, maybe sparked some ideas.

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