2024 Budget Proposal
Earlier this week, the Deputy Prime Minister and Minister of Finance, Chrystia Freeland, presented the government’s proposed budget. The short form would be higher deficits, higher spending and higher capital gains taxes. Then there is a request for re-election with the promise of fixing the housing problem by 2031. It is doubtful that the housing problem will be fixed by 2031, no matter who will be elected next year.
With almost $480 billion in program spending and a $40 billion deficit (Source: National Post), some call it the worst budget since that 1982 under Allan MacEachen as the minister of finance and Pierre Trudeau as the Prime Minister, and a move in the wrong direction.
The infamous 1982 budget during a recessionary economy, lacked measures to increase productivity and lower inflation, both usually accomplished by reduced spending, reduced regulation and reduced taxes.
Here are some parts of the budget that may help you to form your own opinion:
1.An increase in the Home Buyers' Plan withdrawal limit from $35,000 to $60,000, which enables first-time home buyers to use the tax benefits of an RRSP to save up to $25,000 more for their down payment, faster. The newly increased limit would be available to first-time buyers after April 16, 2024. There is also an extension of 3 years for re-paying these withdrawals back into the RRSP.
2.Allowing 30-year mortgage amortizations for first-time home buyers purchasing newly constructed homes. That’s an extension of the amortization limits by five years for first-time buyers purchasing new builds and is meant to enable more younger Canadians to afford a mortgage and to encourage new supply. This new insured mortgage product will be available to first-time home buyers starting August 1st, 2024.
3.Providing more flexibility to renew or switch between home internet, home phone, and cell phone plans. Carriers will be prohibited by the CRTC from charging consumers extra fees to switch carriers and will be required to help consumers identify plans, which may include lower-cost plans, in advance of the end of a contract. Carriers will also be required to provide a self-service option, such as an online portal, for customers to easily switch between or end plans with a provider.
4.Capping the non-sufficient funds (NSF) fees charged by banks to $10 per instance, as well as other NSF measures. Banks charge NSF fees when there isn’t enough money in a bank account to cover a cheque or pre-authorized debit transaction. The current charges vary, but is around $40.
5.Increasing the inclusion rate on capital gains realized annually above $250,000 by individuals and on all capital gains realized by corporations and trusts from one-half to two-thirds, by amending the Income Tax Act, effective June 25, 2024.
While this increase in the capital gains inclusion rate is aimed at the wealthier Canadians and may not affect that many, it is the most significant change in this budget proposal concerning my business, and will affect my approach to tax and estate planning with high net worth clients. The first $250,000 of capital gains income earned each year will maintain the 50% inclusion rate and according to federal government data, 28.5 million Canadians are not expected to have any capital gains income at all and another 3 million are expected to earn capital gains below the $250,000 annual threshold. The 2024 budget maintains the existing exemption for capital gains from selling a principal residence. It also retains an existing lifetime capital gains tax exemption on the sale of small business shares, farming and fishing property. The new budget proposes to increase that exemption by about 25% to $1.25 million, and to index that figure to inflation thereafter.
