Canada's 2019 Budget Update - A Summary

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This year’s budget was released March 19, 2019, and thankfully, few changes were made to the Canadian tax system after a rough few years. The government has stated its’ commitment to continuing to work for the middle class, and there were no increases in tax rates either corporately or personally at the federal level. Below are some key highlights:

CORPORATE TAX:

  1. Small business rate

As stated previously, the small business rate was reduced from 10% to 9% effective January 1, 2019. This brings the rate for Ontario to 12.5% at the small business level, and the general rate to 26.5%. For comparison, British Columbia is sitting at 11% and 27%. For a list of all provinces and 2019 rates, click HERE.

2. Investment in Zero Emissions Vehicles

A new CCA (capital cost allowance) class (Class 54) will be created for zero-emission vehicles that would normally be included in Class 10 or Class 10.1 that allows for a 100% write off of CCA in the first year with a limit of $55,000. This will also include a new Class 55 for vehicles that would normally be included in Class 16 with no limit on value.

3. Employee Stock Options

The new budget proposes that employee stock options be capped at $200,000 (annual) for employees of large, long-established, mature firms. It does not seek to impose a cap on start-ups and rapidly growing Canadian businesses. It is unclear on the definition of a “large, long-established, mature firm”, however a further update will be released in summer of 2019.

4. Personal Income Tax Credit for Digital Subscriptions

Budget 2019 proposes a temporary non-refundable 15% tax credit to individuals on eligible digital news subscriptions to a maximum of $75 (or $500 total cost to the subscriber). In order to qualify for a credit, the subscription must be through a Qualified Canadian Journalism Organization (QCJO). There are several criteria being rolled out to determine what meets the criteria of QCJO.

 PERSONAL TAX:

  1. Canadian Training Credit

A new Canadian Training Benefit of up to $250 annually was introduced to help alleviate those required to pursue professional development in the work place. To qualify, eligible fees and tuition will be similar to the rules currently in place for tuition and the credit will be non-refundable. Individuals must also be between the age of 25 and 65, be a resident in Canada throughout the year, have earnings in excess of $10,000 and file a tax return.

2. Home Buyers’ Plan

Budget 2019 proposes to increase the Home Buyers’ Plan withdrawal limit to $35,000 (previously $25,000). The increase will apply to 2019 and all subsequent calendar years. The rules will remain the same, in that homebuyers will still be required to repay the loan to their RRSP within 15 years.

3. New First-Time Home Buyers Incentive

A new first-time home-buyers incentive was released that would involve CMHC funding between 10% (new home) and 5% (existing home) of a mortgage. For first-time homebuyers to qualify, their family income must not exceed $120,000, and the assistance available is up to four times the participants’ annual household income. Further details on this program will be released in September of 2019.

 FINAL THOUGHTS

Overall this was a fairly quiet budget, that has little negative impact to the Canadian tax system and small business owners. The budget contains some small incentives geared towards what the Liberal government has been campaigning on: mainly small businesses, the middle class, climate change, and a long-term housing strategy.

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