Re-elected government’s agenda for tax

More than 30 potential tax measures are set out in the Liberal Party’s 2021 campaign platform, some already announced but most of them new. To help you know what tax changes you might encounter — in the coming months, in Budget 2022 or after — this blog presents a high-level summary of the government’s plans as set out in campaign documents and press releases in these areas:

• COVID-19 support and economic recovery
• tax measures for businesses
• tax measures for individuals
• international measures

Bear in mind that some of these potential changes may not proceed, while others could be substantially modified before they are introduced. In most cases, more information is needed to know how the measures would apply in practice. Note also that some proposals were previously announced in the 2021 federal budget — see our 2021 Federal Budget Tax Highlights for a summary of these changes.

COVID-19 support and economic recovery

The federal government’s tax commitments related to the pandemic and associated economic issues include:

• extending the Canada Recovery Hiring Program to March 31, 2022
• providing temporary wage and rent support to the tourism industry of up to 75 per cent of their expenses
• introducing a tax credit for costs incurred by small businesses to improve ventilation

Tax measures for businesses

Other government promises related to corporate income and business taxes include the following:

Increase taxes for banks and insurance companies

Corporate income tax rates on banks and insurance companies with income exceeding $1 billion per year would be increased to 18 per cent (from 15 per cent). These companies would also pay a temporary Canada Recovery Dividend.

Tax rules for landlords

Landlords would be required to disclose on their tax returns the rent they receive before and after renovations. A surtax would apply if the rent increase was excessive.

Tax treatment of large corporate owners of residential properties

The government intends to review the tax treatment of large corporate owners of residential properties such as real estate investment trusts.

Flow-through shares

The current flow-through share tax rules that apply to oil, gas and coal projects will be eliminated.

Scientific Research and Experimental Development (SRED) Program

The SRED Program will be reformed in order to reduce red tape and better align eligible expenses with current innovation practices.

Business investment tax credits

Commitments for new and amended tax credits for business investment include:

• introducing new investment tax credits for a range of renewable energy and battery storage solutions
• doubling the Mineral Exploration Tax Credit for materials on the Canadian list of critical minerals
• developing an investment tax credit of up to 30 per cent for a range of clean technologies, including low-carbon and net-zero technologies

Tax measures for individuals

On personal taxes, the government has laid out many potential new tax rules, deductions, and credits. These include:

Minimum tax for higher-income individuals

In addition to the existing alternative minimum tax, a minimum tax would apply to individuals in the top tax bracket to ensure they pay federal tax of at least 15 per cent.

Home office expenses

The home office flat rate deduction that applied for 2020 will be extended to 2021 and 2022, and the maximum deduction will be increased to $500.

Anti-flipping tax

An anti-flipping tax on residential properties held less than 12 months will be introduced.

Deduction for health care professionals

The government will introduce a one-time income tax deduction for health care professionals of up to $15,000 over their first three years of practice to help with the costs of setting up a practice.

First Home Savings Account

A potential new savings account would allow Canadians under age 40 to contribute and save up to $40,000 on a tax-free basis, to use for their first home purchase, with no requirement to repay.

Employment Insurance (EI) benefit for self-employed individuals

A possible new EI benefit for self-employed Canadians would be delivered through the tax system and provide benefits similar to the current EI program.

Digital platform workers

There are plans for legislative changes to ensure that workers employed by digital platforms are covered by EI and the Canada Pension Plan (CPP), including employer contribution requirements.

Introduce new non-refundable tax credits

The government plans to introduce a number of credits that appear to be additions to the existing block of non-refundable credits carrying a credit rate of 15 per cent. These potential credits include:

• a Labour Mobility Tax Credit for the eligible expenses of workers in the building and construction trades, allowing them to claim a tax credit based on eligible travel and relocation costs of up to $4,000 (maximum credit of $600)
• a Multigenerational Home Renovation Tax Credit for costs of up to $50,000 for families adding a secondary unit to their home for an immediate or extended family member (maximum credit of $7,500)
• a Home Appliance Repairs Tax Credit for the cost of home appliance repairs performed by technicians up to $500 (maximum credit of $75)
• a Career Extension Tax Credit for individuals aged 65 and over who earn a minimum working income of $5,000 (maximum credit of $1,650; reference is also made to reducing a portion of tax payable on this income)

Changes to existing tax credits

In addition to new tax credits, there are commitments for adjustments to some existing credits. These include:

• reviewing the Disability Tax Credit and other federal benefit programs to ensure they are available to people experiencing mental health challenges
• increasing the credit rate for the Eligible Educator School Supply Tax Credit to 25 per cent and expanding eligibility to include tech devices
• increasing the Home Buyers’ Amount to $10,000 (from $5,000), resulting in an additional credit of $750
• converting the Canada Caregiver Amount into a refundable, tax-free benefit of up to $1,250
• increasing the maximum amount of expenses allowed for the Home Accessibility Tax Credit to $20,000 (from $10,000), for a maximum credit increase of $1,500
• expanding the Medical Expense Tax Credit to include costs reimbursed to a surrogate mother for in vitro fertilization expenses

International measures

Some potential tax measures have an international focus. These include:

General anti-avoidance rule

The government remains committed to modernizing the general anti-avoidance rule by focusing on economic substance and by restricting the ability of federally regulated entities, including financial institutions, to use tiered structures as a form of corporate tax planning that flows Canadian-derived profit through entities in low-tax jurisdictions in order to reduce taxes back in Canada.

Global corporate minimum tax

The government has reconfirmed that it will work with international partners to implement a global corporate minimum tax.

Tax on vacant land

The government plans to extend the tax on non-resident, non-Canadian owners of vacant, underused housing, which takes effect on January 1, 2022, to also cover foreign-owned vacant land within large urban areas.

Watch for further developments

With this full tax agenda, we can expect the re-elected federal government to make a number of announcements in the months to come and particularly in Budget 2022. As the government decides whether, when, and how to implement these changes, we strongly recommend that it seeks to avoid adding more complexity to the tax system and put priority on simplicity and effectiveness. Visit our Canadian tax news and COVID-19 updates page for the latest on this and other tax topics.

NOTE: The commentary function of this page has been temporarily closed. Unfortunately, because of the volume of feedback regarding COVID-19 tax measures, we do not have the capacity to respond to individual inquiries. We strongly encourage you to visit our Canadian tax news and COVID-19 updates page for information.