Insurance, Investments and Group Benefits

There are proposals in the recent Federal Budget that are important to you, your family and your business. Here’s
our handy tip sheet to help you manage your finances.

Highlights

 Budget Proposal

Implication of Change 

Intergenerational business transfer

Provide taxpayers with two options:

1. Immediate intergenerational transfer (three-year
   test) based on an arm’s-length sale term; or 
2. Gradual intergenerational business transfer (five to 10-year test) based on traditional estate freeze characteristics 

• 10-year capital gains reserve for genuine intergenerational share transfers satisfying proposed conditions 

Shut down loopholes left in Bill C-208

Prevent conversion of dividends to capital gains, aka surplus stripping without genuine transfer of business between family

• Greater clarity for family business transfers

• Provides tax relief for sellers 

Employee Ownership Trusts (EOTs)

• Permit employee buyout of business
• Trust acquires and holds qualifying shares for eligible employees
• Extend five-year capital gains reserve to a ten-year reserve for qualifying business transfers to an EOT 

EOTs may be an attractive option for succession planning given that up to 75% of small business owners plan to retire in the next decade 

General Anti Avoidance Rule (GAAR)

• Create interpretive rules
• Lower requirements to be avoidance transaction
• Introduce GAAR penalty = 25% of tax benefit
• Extend GAAR reassessment period by 3 years
• New rule would apply where transaction lacks economic substance 

Introduces more clarity and broadens potential transactions caught by the rule  

•  $13 billion over 5 years to implement the Canadian Dental Care Plan 

Start providing dental coverage for uninsured Canadians with annual family income of < $90,000 

Automatic tax filing

• Increase number of eligible Canadians to two million by 2025, nearly tripling current numbers. CRA will pilot a new automatic filing service to help vulnerable Canadians receive eligible tax benefits 

An effort to increase the eligible number of low-income taxpayers who file their annual tax returns for automated service 

Alternative Minimum Tax (AMT) 

Increasing AMT rate from 15% to 20.5%

• Increasing exemption from $40,000 to $173,000 indexed
• Includes larger share of taxpayer income and reduces or denies deductions 
• Reduces tax credits which would reduce AMT 

• Budget aims to broaden the AMT base

• Targeting high income individuals

• Proposed changes can result in extra provincial AMT for individuals unless provinces introduce changes to their AMT rules

• Amendments expected to generate ~ $3 billion in revenue over five years beginning in 2024 tax year

Energy transition  

• Introduce or expand a variety of measures to help with the Government’s energy transition strategies 
  

Tax credits for: 

• Clean Electricity Clean Technology Investment

• Clean Technology Manufacturing

• Clean Hydrogen Investment

• Carbon Capture, Utilization, and Storage

• Flow-Through Shares and Critical Mineral Exploration

Registered Disability Savings Plan (RDSP) 

• Extend measure allowing qualifying family members to open RDSP for an adult beneficiary whose contractual capacity is in doubt and who does not have a legal representative to Dec. 31, 2026 
  

Broaden definition of “qualifying family member” to include an adult brother or sister of the beneficiary

Will enable a sibling to establish an RDSP for an adult with mental disabilities 

Registered Education Savings Plan (RESP)

Increase withdrawals 

• Full-time from maximum $5,000 to $8,000, and 
• Part-time from maximum $2,500 to $4,000 in educational assistance payments during 1st semester of post secondary education 

Proposed changes so divorced and separated parents can open joint RESPs for their children 

“Grocery rebate”  

One time payout:  

• $153 per adult +  
• $81 per child 
• And $81 for childless singles  

Not tied to actual grocery bills; administered through GST rebate system  

Helping the Trades  

• Double the maximum employment deduction for tradespeople’s tools from $500 to $1,000 
  

10% or more of the total labour performed by Red Seal trades to be performed by registered apprentices