2019 Federal Budget Highlights
MARCH 19, 2019
The 2019 federal budget introduced spending initiatives for certain areas of the economy but not any significant tax changes. The most significant tax measures to take note of are:
Personal Tax Measures
Stock Option Limitations
The government has proposed limits to stock option benefits. Currently, it is possible for employees to pay tax at capital gains rates on employment stock options when certain conditions apply. The government is proposing to limit this deduction for employees of large, long-established, mature firms to $200,000 per year based on the fair market value of the underlying shares. More details will be released by this summer. Finance has said that they do not intend to limit employee stock options for startups and rapidly growing Canadian businesses.
Home Buyer’s Plan Withdrawal Limit Increase
The maximum which can be borrowed from your RRSP to purchase a first home increases from $25,000 to $35,000. In addition, the “first-time home owner” requirement is removed for individuals that separate and live apart due to a breakdown of a marriage or common-law relationship.
Canada Training Credit
An amount of $250 per year is accumulated (up to a $5,000 lifetime maximum) for Canadian resident individuals between the ages of 25 and 65 that have annual earnings of between, approximately $10k and $148k. The amount accumulated can then be claimed as a refundable tax credit in the year that an eligible training course is taken, to a maximum of 50% of the cost of the eligible training course.
Digital News Subscriptions
A new non-refundable tax credit of up to $500 for subscriptions paid in a year to a qualifying Canadian journalist organization – a tax savings of $75 per year. This credit is available for the years after 2019 and before 2025.
Corporate Tax Measures
Limits on Refundable SR&ED Credit Removed
Currently a private corporation with prior year taxable income over $800,000 is no longer eligible for the refundable 35% SR&ED credit and the corporation still remains eligible for the 15% non-refundable tax credit. Effective for tax years ending on or after March 19, 2019, the 35% refundable credit will not be limited by prior year taxable income. There is still a grind where capital exceeds $10M.
Enhanced Zero-Emission Vehicle Depreciation
For vehicles purchased by a corporation for use in business activities, there is a 100% write off of the cost (to a maximum of $55,000) in the year of acquisition. This treatment is available for purchases between March 19, 2019 and January 1, 2024. A significant increase in the write off compared to the typical 30% which was capped at a cost of $30,000.
Some of the Additional Spending Proposals that Affect Small Business
Futurepreneur Canada
Futurpreneur Canada is a national not-for-profit organization that provides young entrepreneurs with mentorship, learning resources and start-up financing to help them bring their business ideas to market. To increase entrepreneurship, Budget 2019 proposes to provide Futurpreneur Canada $38 million over five years, starting in 2019–2020.
EI Training
There are new EI training support benefits measured to help employees improve their job related skills. As a reflection of the Government’s commitment to making this new benefit work for employers as well as employees, Budget 2019 proposes to introduce an EI Small Business Premium Rebate. Starting in 2020, any business that pays employer EI premiums equal to or less than $20,000 per year, would be eligible for a rebate to offset the upward pressure on EI premiums resulting from the introduction of the new EI Training Support Benefit.
Improved Rental Options
To provide more affordable rental options for middle class Canadians, Budget 2019 proposes to provide an additional $10 billion over nine years in financing through the Rental Construction Financing Initiative, extending the program until 2027–2028.
Increase support for Canada Revenue Agency
The budget announced increased funding for CRA including:
- an additional $150.8 million to combat tax evasion and aggressive tax avoidance through hiring additional auditors, creating a new data quality examination team to ensure proper withholding, remitting and reporting of income earned by non-residents, and extending programs aimed at offshore non-compliance.
- an additional $50 million to create four new dedicated residential and commercial real estate audit teams in high-risk regions, notably in British Columbia and Ontario to increase the scrutiny of claiming principal residence deductions and capital gains on the flipping of real estate transactions as well as other real estate related transactions.