On April 7, 2022, the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, delivered the 2022 Federal Budget: A Plan to Grow Our Economy and Make Life More Affordable.
Federal spending falls to $452 billion in the new fiscal year with a deficit of $52 billion, which are the lowest figures since before the pandemic but still significantly above pre-pandemic levels.[1] The measures announced focus on affordable housing, economic growth, and taxes.
Housing
The Government plans to double housing construction over the next decade. The proposed budget includes initiatives to accelerate development for housing within the country.
Housing Accelerator Fund
Budget 2022 proposes to provide $4 billion over five years to launch a flexible Housing Accelerator Fund to increase the development of new housing supply. The fund will target municipalities and provide them with support such as an annual per-door incentive, or up-front funding for investments in municipal housing planning and delivery processes that will speed up housing development.
Rapid Housing Initiative
To ensure that more affordable housing can be built quickly, Budget 2022 proposes to provide $1.5 billion over two years, starting in 2022-23, to extend the Rapid Housing Initiative. This new funding is expected to create at least 6,000 new affordable housing units to target homelessness, with at least 25% of funding going towards women-focused housing projects.[2]
First Home Savings Account
Budget 2022 proposes to create the Tax-Free First Home Savings Account (FHSA) for prospective first-time home buyers. Eligible individuals may contribute up to $8,000 annually, not to exceed the $40,000 lifetime limit on contributions. The full annual contribution limit will be available effective 2023.[3]
Additional Support
To provide additional housing support to Canadians, the Budget proposes to provide a one-time $500 payment in 2022-23 to those facing housing affordability challenges. More details will be announced at a later date.
Rental Construction Financing Initiative
The Rental Construction Financing Initiative will be reformed to strengthen its affordability and energy efficiency requirements. Exceeding new requirements will mean a portion of repayable loans can be converted to non-repayable loans.[4]
Ban on Foreign Investment & Anti-Flipping Measures
In addition to affordable housing initiatives for Canadians, the Government signaled intent to impose restrictions on foreign ownership of of non recreational residential real estate for a period of 2 years. The restriction will affect people who are not Canadian citizens or permanent residents, with the exemption of refugees, international students who are on the path to permanent residency and individuals with work permits.
Budget 2022 proposes new rules to ensure that the profits from flipping residential properties are subject to full taxation. Specifically, profits arising from dispositions of residential property, including rental property, which was owned for less than 12 months would be deemed to be business income.
Economic Growth and Innovation
Budget 2022 proposes to establish the Canada Growth Fund to attract private sector investment to help meet national economic policy goals. The fund will be initially capitalized at $15 billion over the next five years and will target three dollars of private capital for every one dollar of government investment. The fund aims to achieve three main goals:
To reduce emissions and contribute to achieving Canada’s climate goals.
To diversify the economy and bolster exports by investing in the growth of low-carbon industries and innovative technologies across new and traditional sectors of Canada’s industrial base.
To support the restructuring of critical supply chains in areas important to Canada’s future prosperity. This includes $603 million over five years to support transportation network upgrades. This increase in funding will be allocated to networks such as port or rail expansions on top of the $4.2 billion allocated to the National Trade Corridors Fund since 2017.
Tax Restructuring
The 2022 Budget proposes substantial tax cuts to small business, tax credits to first time homebuyers, a consultation process regarding intergenerational transfers, and incentives for businesses to invest in carbon capture.
Taxes on Bank Profits
The 2022 Budget includes a proposed surtax of 1.5% on bank profits over $100 million, as well as a one-time 15% charge on income above $1 billion for the 2021 tax year, a move Canada's big bank leaders say could hurt Canada’s competitiveness on the global stage. [5]
Small Business Tax Restructure
Small businesses currently benefit from a reduced federal tax rate of 9% on their first $500,000 of taxable income, compared to a general federal corporate tax rate of 15%. A business no longer has access to this lower rate once its level of capital employed in Canada reaches $15 million.
Budget 2022 proposes to phase out access to the small business tax rate more gradually, with access to be fully phased out when taxable capital reaches $50 million, rather than at $15 million. This restructuring will also allow for more medium-sized businesses to benefit from the small business deduction, which is meant to encourage businesses to continue to grow and create jobs.[6]
Home Buyer Tax Credit
Under the existing rules, first-time home buyers can obtain up to $750 in tax relief by claiming the First-Time Home Buyers’ Tax Credit (HBTC). The Budget proposes to double the HBTC amount to $10,000 (previously $5,000). The enhanced credit will provide up to $1,500 in tax relief to eligible home buyers. Spouses or common-law partners may continue to split the credit if the combined tax relief does not exceed $1,500.
Multigenerational Home Renovation Tax Credit & Home Accessibility Tax Credit
The Multigenerational Home Renovation Tax Credit will provide up to $7,500 in support for constructing a secondary suite for a senior or an adult with a disability, starting in 2023.
The Home Accessibility Tax Credit will be increased to $20,000. If eligible, individuals can receive a $3,000 credit for significant home accessibility renovations or alterations.
Housing Owned by Corporations
The Government announced its intention to perform a review of housing as an asset class to better understand the role of large corporate players in the market, and the impact on Canadian renters and homeowners. In its review, the Government indicated it will consider tools to address concerns including potential changes to the tax treatment of large corporate players that invest in residential real estate. More information will be announced at a later date.
Bill C-208 Intergenerational Transfers
There were no changes announced with respect to the current provisions under Bill C-208 relating to intergenerational transfers of family businesses. Instead, Budget 2022 announces a consultation process for stakeholders to share their views as to how the existing rules could be strengthened to protect the integrity of the tax system while continuing to facilitate genuine intergenerational business transfers.[7]
References
Canadian Press. (2022, April 7). $452B federal budget focused on affordability, innovation. rdnewsnow.com. Retrieved from https://rdnewsnow.com/2022/04/07/canadian-press-newsalert-452b-federal-budget-focused-on-affordability-innovation/?msclkid=88ebdfafbc1d11ecb1dd40cb337c9941
Cooper, K. (2022). Federal Budget 2022 Housing Insights Brief. ms, Edmonton. Retrieved from https://www.leadinghousing.com/.
Global News. (2022, April 14). Corporate tax hike could have 'unintended consequences,' says TD CEO - national. Global News. Retrieved from https://globalnews.ca/news/8760850/td-bank-ceo-tax-rate-hike-canada-federal-budget/
Government of Canada, D. of F. (2022, April 7). Budget 2022. Retrieved from https://budget.gc.ca/2022/home-accueil-en.html?msclkid=ce987a7dbc2a11eca17b4be20bba1e0d
MNP. (2022, April 7). 2022 federal budget highlights. MNP.ca. Retrieved from https://www.mnp.ca/en/insights/directory/2022-federal-budget-highlights
Prepared by:
Harris Valdes, Marketing Coordinator
NAIOP Edmonton
Suite 210, 11150 Jasper Ave NW
Edmonton, Alberta<