The Federal Government issued the 2021 budget on April 19 and its proposed changes' effect on your taxes will depend somewhat on your lifestyle and business interests. Here are some of the highlights.
Vacant Home Taxes
Homes that are owned by non-Canadians that are “considered vacant or underused” will be subject to a 1% tax. If the property is leased for a minimum period during the year, this tax is waived. Still under discussion is whether this would apply to smaller, resorts, or tourism sites.
Cigarettes and Vaping
Cigarettes will now cost $4.00 more for each carton of 200 cigarettes.
For those who have switched to vaping, a new duty is proposed for next year for vaping liquids made in Canada or imported as long as they are intended for a vaping device used in Canada. The charge will be a flat rate on every 10 ml. of liquid, or fraction within a container. This will include any liquids even if they do not contain nicotine. This “sin tax” is also designed to be a deterrent to the use of harmful consumption of the products.
Cannabis-based products are already subject to excise duties and will not fall under this new tax.
Luxury Tax
Vehicles and personal aircraft (planes, gliders, etc.) priced at over $100,000 will be assessed a one-time luxury tax. It will be calculated as the lower of 20% of the vehicle above the $100,000 or 10% of the total value. Boats will be similarly taxed but the price threshold will be $250,000.
This tax will affect new passenger vehicles (sports cars, sedans, station wagons, SUVs, minivans that set fewer than 10 people, etc.) and personal aircraft. Motorcycles, RVs, and certain racing cars, as well as construction and farm vehicles, are exempted.
If you are planning a purchase, read carefully for which vehicles, planes, and boats are, and are not, included.
Digital Services
Aimed at companies like Amazon and Disney that generate Canadian revenue but do not pay Canadian taxes, this tax will apply to subscription-based, streaming services that enjoy avoiding commercials. Right now a standard Netflix Canada subscription is $13.99 per month and the consumer will be charged an additional $0.98 per month. Over time, this will increase the cost of the subscription. Parliament is calling this the Netflix Tax.
Child Care Expenses
There are plans to implement a national child care program to subsidize the cost of care at $10 per day. To accomplish this, it will take $30 Billion in funding for the first five years and $8.3 Billion each year after that.
This has not been rolled out, but you will probably be hearing a lot of chatter soon.
Covid-19
Small businesses can still benefit from the current funding and rent and wage subsidy programs are available until September 2021.
CEWS
Canada Emergency Wage Subsidy program originated in March 2020 for a twelve-week period. Since then, it has been extended and most recently the end date is June 5, 2021. The total funding was $110.5 Billion. It has been suggested that CEWS be made into a universal income, but this is just speculation at this point.
Canada Recovery
A new hiring program will run from June to November to help employers offset staffing costs. This program will create or maintain 330,000 Canadian jobs by 2022-2023 and offer about 500,000 new training and work experience possibilities.
Federal Deficit
The Canadian tax system funds governmental benefits. The anticipated deficit will be $30.7 Billion in the fiscal year 2025-2026. This is a significant amount but with low interest rates is not horrific. When interest rates begin to climb again, this debt will be more difficult to repay. Finance Minister Freeland seems to have the situation under control without resorting to a wealth or middle class tax. There is little chance of our country going bankrupt.
It takes a lot to keep a country running, including social infrastructure, public transit, and traditional services. The changes outlined in the new budget are slated to provide:
• Vacant Home - $175 Million
• Vaping - $3.5 Billion
• Luxury Tax - $120 Million
• Digital Services - $680 Million
As a reminder, personal income taxes are due April 30, 2021. If you earned less than $75,000 in income, the tax payment is not due until December 31, 2021 without interest charges.
Contact your Accountants today click on this link —> https://capexcpa.com/contact
- The Capex Team