HOW CAN AFFECT YOUR FINANCIAL LIFE
By Mauricio Dreher
Although it has passed a few weeks since the government announced the federal budget, perhaps now is the time for you to review what could affect your financial live.
The big themes in this pre-election budget were making home ownership more affordable and investments in skills training. There were also several tax-related and other items that may be of interest to you. Selected items are noted below:
Modernizing the Home Buyers’ Plan
Currently, the Plan allows first-time home buyers to withdraw up to $25,000 from their Registered Retirement Savings Plan (RRSP) to purchase or build a home, without having to pay tax on the withdrawal. The withdrawal must be repaid over a 15-year period or included in the individual’s income if not repaid.
Budget 2019 proposes to increase the Plan withdrawal limit to $35,000.
Furthermore, it proposes that individuals who experience a breakdown of a marriage or common-law partnership be permitted to participate in the Plan, even if they do not meet the first-time requirement. This would be available for withdrawals made after March 19, 2019.
First Time Home Buyer Incentive
The Incentive is a shared equity mortgage that would give eligible first-time homebuyers the ability to lower their borrowing costs by sharing the cost of buying a home with the Canada Mortgage and Housing Corporation.
The Incentive would provide funding of 5% or 10% of the home purchase price. No ongoing monthly payments would be required. The buyer would eventually repay the Incentive, for example, upon selling the home. This program is expected to be operational by September 2019, and more details will be released later this year.
Tax Compliance in Real Estate Sector
Budget 2019 proposes to provide the Canada Revenue Agency with $50 million over five years, starting in 2019–2020, to create four new dedicated residential and commercial real estate audit teams in high-risk regions, notably in British Columbia and Ontario, to ensure that tax provisions regarding real estate are being followed, with a focus on ensuring that:
-Taxpayers report all sales of their principal residence on their tax returns;
-Any capital gain derived from a real estate sale, where the principal residence tax exemption does not apply, is identified as taxable;
-Money made on real estate flipping is reported as income;
-Commissions earned are reported as taxable income; and
-For Goods and Services Tax/Harmonized Sales Tax (GST/HST) purposes, builders of new residential properties remit the appropriate amount of tax to the CRA.
Canada Training Credit
This new non-taxable credit would help Canadians pay for training fees. Every year, eligible workers between the ages of 25 and 64 would accumulate a credit balance of $250 per year, up to a lifetime limit of $5,000.
Starting in 2020, Canadians would be able to apply their accumulated Canada Training Credit balance against up to half the cost of training fees at colleges, universities and eligible institutions providing occupational skills training.
Canada Student Loans – Interest-Free Grace Period
Budget 2019 proposes to amend the Canada Student Financial Assistance Act, so that student loans will not accumulate any interest during the six-month non-repayment period (the “grace period”) after a student loan borrower leaves school.
RDSP – Registered Disability Savings Plan improvement
To open an RDSP, an individual must be eligible for the Disability Tax Credit (DTC). When a beneficiary no longer qualifies for the DTC, the RDSP rules can require that the plan be closed, and that grants, and bonds be repaid to the Government of Canada.
To address concerns that this treatment does not appropriately recognize the financial impact that periods of severe, but episodic, disability can have on individuals, Budget 2019 proposes to eliminate the requirement to close an RDSP when a beneficiary no longer qualifies for the DTC. Doing so will allow grants and bonds that otherwise would be required to be repaid to the Government to remain in the RDSP.
The highlights above are only some of the many measures contained in the budget, and taxpayers should consult their own tax advisors to assess the impact of Budget 2019 on their own situations.