Introduction

The 2025 Federal Budget, titled Canada Strong, was released on November 4 by Finance Minister François-Philippe Champagne. This year’s budget reflects a clear direction: automation, affordability, and clean economic growth.

There were no changes to personal or corporate tax rates, but several new credits, extensions, and administrative adjustments will impact both individuals and businesses starting in 2025.

At CapexCPA, we have reviewed the entire budget in detail to bring you a practical summary of what matters most for Canadian taxpayers and business owners.

Personal Tax Measures

Automatic Tax Filing for Low-Income Canadians

Starting with the 2025 tax year, the Canada Revenue Agency (CRA) will begin automatically filing returns for eligible non-filers who have simple income situations and no taxes payable. This move aims to ensure low-income Canadians receive benefits they may be missing.

New 5% Refundable Credit for Personal Support Workers

A new refundable credit of 5% of eligible earnings (up to $1,100) will be available to personal support workers in healthcare facilities such as hospitals, nursing homes, and residential care facilities. This applies from 2026 through 2030.

Top-Up Credit for Non-Refundable Tax Credits

The lowest personal tax rate drops to 14.5% in 2025 and 14% in 2026. To offset potential reductions in non-refundable credit value, a new top-up credit will maintain the same benefit for those whose credits exceed the first tax bracket threshold.

Home Accessibility Tax Credit Clarification

Taxpayers can no longer claim the same expense under both the Medical Expense Tax Credit and the Home Accessibility Tax Credit beginning in 2026.

Canada Carbon Rebate Program Ends

With the removal of the federal carbon tax on April 1, 2025, a final quarterly rebate will be issued in April 2025. After that, the rebate program will end.

Canada Disability Benefit

Recipients of the new Canada Disability Benefit will receive a one-time supplemental payment of $150 once the program launches, expected before the end of 2027.

Business Tax Measures

Accelerated Capital Cost Allowance (CCA)

The budget reinstates accelerated CCA deductions, calling this the “productivity super deduction.” Businesses can claim three times the normal first-year CCA for eligible assets between 2025 and 2029. This applies to manufacturing and processing equipment, clean energy investments, and zero-emission vehicles.

Immediate Expensing for Manufacturing Buildings

Manufacturing and processing buildings that are at least 90% used for production can now be fully written off (100%) when acquired and used before 2030. This immediate expensing encourages capital investment in Canadian manufacturing.

Low-Carbon LNG Facilities

Accelerated CCA rates of 30% for equipment and 10% for buildings have been reinstated for low-carbon liquefied natural gas (LNG) facilities.

SR&ED Program Expansion

The Scientific Research and Experimental Development (SR&ED) program has been enhanced:

  • The expenditure limit rises from $3 million to $6 million.

  • The 35% refundable credit is now accessible to more Canadian public corporations.

  • Capital expenditures are again eligible for both the credit and income deduction.

Dividend Refund Anti-Avoidance Rule

A new rule prevents corporations from deferring taxes through dividend payments between affiliated companies that have different fiscal year ends. This measure will apply to taxation years starting after November 4, 2025.

Worker Misclassification Compliance Program

CRA will receive $77 million to address misclassification of employees as independent contractors, with a focus on the trucking industry. Employers mislabeling workers will face increased enforcement.

Clean Economy Incentives

Expanded Clean Energy and Critical Mineral Credits

The 30% Critical Mineral Exploration Tax Credit will expand to include 12 additional minerals such as tin, tungsten, manganese, and molybdenum.

The Clean Technology Manufacturing Investment Tax Credit will now also apply to investments related to antimony, indium, gallium, germanium, and scandium.

Carbon Capture, Utilization and Storage (CCUS) Credit

The full credit rates for eligible carbon capture and storage investments will now apply until 2035 (previously 2030). A review of the program will take place before 2035.

Canada Growth Fund Eligibility

The Canada Growth Fund is now eligible for the 15% Clean Electricity Investment Tax Credit, making it easier to finance large-scale clean energy projects.

International and Sales Tax Measures

Transfer Pricing Modernization

Transfer pricing rules have been updated to align with OECD international standards. Documentation requirements will become stricter, and taxpayers will now have only 30 days (instead of 3 months) to provide transfer pricing records.

Underused Housing Tax (UHT) Eliminated

The UHT will be eliminated beginning in the 2025 calendar year. No filings or payments will be required after 2024, though past obligations still stand.

Luxury Tax Adjustments

The Luxury Tax will no longer apply to aircraft and vessels after November 4, 2025, but will remain in place for vehicles valued above $100,000.

GST/HST Anti-Fraud Measures

To combat carousel frauds, a reverse charge mechanism will be introduced, starting in the telecommunications sector. Recipients, rather than suppliers, will account for GST/HST under this system.

Manual Osteopathic Services

Osteopathic services provided by non-physicians will now be taxable under GST/HST after June 5, 2025.

Administrative and Other Measures

Bare Trust Reporting Deferred

Filing requirements for bare trusts have been deferred until the 2026 taxation year. This gives taxpayers and advisors additional time to prepare for compliance.

Non-Profit Organization Reporting Deferred

Expanded reporting requirements for non-profit organizations (NPOs) will now begin in the 2027 taxation year instead of 2026.

Trust 21-Year Rule Strengthened

To prevent tax avoidance, the 21-year deemed disposition rule for trusts now covers indirect transfers of property between trusts. This change applies to transfers made on or after November 4, 2025.

Employment and EI Updates

  • New Employment Insurance pilot using real-time payroll data

  • Eight additional weeks of parental benefits following the loss of a child

  • Restrictions on non-compete clauses for federally regulated employers

CRA Modernization

CRA plans to use AI and automation to reduce administrative costs and increase compliance efficiency. Some savings will come from winding down initiatives such as the digital services tax, fuel charge, and the underused housing tax.

Previously Announced but Confirmed

  • The capital gains inclusion rate increase has been cancelled.

  • The lifetime capital gains exemption remains increased to $1.25 million.

  • Canada Carbon Rebate for small businesses remains tax-free.

  • Crypto-asset reporting and the global minimum tax measures will take effect in 2027.

  • Charitable donations made early in 2025 can be claimed for 2024.

Conclusion

Budget 2025 signals a federal government focused on technology, sustainability, and simplification. While there are no rate increases, the combination of accelerated deductions, compliance initiatives, and environmental incentives shows a “carrot and stick” approach: more automation and support for compliant taxpayers, but stricter rules for avoidance and non-compliance.

At CapexCPA, we are already leveraging AI to analyze and implement these changes efficiently for our clients. If you want to understand how these measures affect your business or personal finances, reach out to our team today.