Real Solutions
for Real Growth

The federal home buyers' plan (HBP) allows eligible first-time home buyers to withdraw up to $35,000 from a registered retirement savings plan (RRSP) to purchase or build a first home. No tax is payable on such withdrawals, but amounts withdrawn must be repaid to the RRSP over the subsequent 15 years.

The 2024 Federal Budget proposes to increase the amount of an eligible withdrawal from an RRSP from $35,000 to $60,000. The change would be effective for withdrawals made after the budget date of April 16, 2024.

Details of the changes are outlined in the 2024 Federal Budget papers, which can be found on the Finance Canada website at https://budget.canada.ca/2024/report-rapport/tm-mf-en.html#a29.

Budget 2024 proposes to repeal the exception to the debt forgiveness rules for bankrupt corporations and the loss restriction rule applicable to bankrupt corporations. This change would subject bankrupt corporations to the general rules that apply to other corporations whose commercial debts are forgiven.

These proposals would apply to bankruptcy proceedings that are commenced on or after Budget Day.

Budget 2024 proposes to remove the tax-indifferent investor exception (including the exchange traded exception) to the anti-avoidance rule. This measure would simplify the anti-avoidance rule and prevent taxpayers from claiming the dividend received deduction for dividends received on a share in respect of which there is a synthetic equity arrangement.

This measure would apply to dividends received on or after January 1, 2025.

Budget 2024 proposes amendments to the Income Tax Act to preclude a corporation from qualifying as a mutual fund corporation where it is controlled by or for the benefit of a corporate group (including a corporate group that consists of any combination of corporations, individuals, trusts, and partnerships that do not deal with each other at arm's length). Exceptions would be provided to ensure that the measure does not adversely affect mutual fund corporations that are widely held pooled investment vehicles.

This measure would apply to taxation years that begin after 2024.

Budget 2024 proposes to introduce a supplementary rule to strengthen the tax debt anti-avoidance rule, applicable in the following circumstances:

• there has been a transfer of property from a tax debtor to another person;
• as part of the same transaction or series of transactions, there has been a separate transfer of property from a person other than the tax debtor to a transferee that does not deal at arm's length with the tax debtor; and
• one of the purposes of the transaction or series is to avoid joint and several, or solidary, liability.

Where these conditions are met, the property transferred by the tax debtor would be deemed to have been transferred to the transferee for the purposes of the tax debt avoidance rule.

The Income Tax Act contains a penalty for those who engage in, participate in, assent to, or acquiesce in planning activity that they know, or would reasonably be expected to know, is tax debt avoidance planning. Budget 2024 proposes to extend this penalty to tax debt avoidance planning that is subject to the proposed supplementary rule.

Budget 2024 proposes that taxpayers who participate in tax debt avoidance planning be jointly and severally, or solidarily, liable for the full amount of the avoided tax debt, including any portion that has effectively been retained by the planner.

These measures would apply to transactions or series of transactions that occur on or after Budget Day.

Legislative proposals to implement the excessive interest and financing expenses limitation (EIFEL) rules are currently before Parliament in Bill C-59. The EIFEL rules provide an exemption for interest and financing expenses incurred in respect of arm's length financing for certain public-private partnership infrastructure projects. Budget 2024 proposes expanding this exemption to also include an elective exemption for certain interest and financing expenses incurred before January 1, 2036 in respect of arm's length financing used to build or acquire eligible purpose-built rental housing in Canada. Eligible purpose-built rental housing would be a residential complex:

• with at least four private apartment units or 10 private rooms or suites; and
• in which at least 90% of residential units are held for long-term rental.

This change would apply to taxation years that begin on or after October 1, 2023.

Budget 2024 proposes to return a portion of fuel charge proceeds from a province via the new Canada Carbon Rebate for Small Businesses, an automatic, refundable tax credit directly for eligible businesses, sized in proportion to the number of persons they employ in the province.

With respect to the 2019-20 to 2023-24 fuel charge years, the tax credit would be available to a Canadian-controlled private corporation that files a tax return for its 2023 taxation year by July 15, 2024. Additionally, to be eligible for a credit in respect of an applicable fuel charge year, the corporation would need to have had no more than 499 employees throughout Canada in the calendar year in which the fuel charge year begins.

The tax credit amount in respect of an eligible corporation for an applicable fuel charge year would be determined for each applicable province in which the eligible corporation had employees in the calendar year in which the fuel charge year begins. The tax credit amount would be equal to the number of persons employed by the eligible corporation in the province in that calendar year multiplied by a payment rate specified by the Minister of Finance for the province for the corresponding fuel charge year.

The tax credit would return proceeds for future fuel charge years, including 2024-25, in a similar manner.

Budget 2024 proposes to provide immediate expensing for new additions of property in respect of Class 44 (patents or the rights to use patented information for a limited or unlimited period), Class 46 (data network infrastructure equipment and related systems software), and Class 50 (general-purpose electronic data-processing equipment and systems software), if the property is acquired on or after Budget Day and becomes available for use before January 1, 2027. The enhanced allowance would provide a 100% first-year deduction and would be available only for the year in which the property becomes available for use.

Property that has been used, or acquired for use, for any purpose before it is acquired by the taxpayer would be eligible for the accelerated CCA only if both of the following conditions are met:

• neither the taxpayer nor a non-arm's-length person previously owned the property; and
• the property has not been transferred to the taxpayer on a tax-deferred "rollover" basis.

Budget 2024 proposes to provide an accelerated CCA of 10% for new eligible purpose-built rental projects that begin construction on or after Budget Day and before January 1, 2031, and are available for use before January 1, 2036.

Eligible property would be new purpose-built rental housing that is a residential complex:

• with at least four private apartment units or 10 private rooms or suites; and
• in which at least 90% of residential units are held for long-term rental.

Projects that convert existing non-residential real estate into a residential complex would be eligible if the conditions above are met. The cost of a new addition to an existing structure would be eligible, provided the addition meets the conditions.

Budget 2024 proposes adjustments to the Clean Technology Manufacturing investment tax credit to provide greater support to businesses engaged in the production of qualifying materials at polymetallic projects.

Budget 2024 proposes to clarify that the value of qualifying materials would be used as the appropriate output metric when assessing the extent to which property is used or is expected to be used for qualifying mineral activities producing qualifying materials.

Budget 2024 proposes to modify eligible expenditures to include investments in eligible property used in qualifying mineral activities that are expected to produce primarily qualifying materials at mine or well sites, including tailing ponds and mills located at these sites. The "primarily" test would generally mean that eligible property must be used or be expected to be used for activities in which 50% or more of the financial value of the output comes from qualifying materials.

To mitigate against the effects of mineral price volatility on the potential recapture of the tax credit, Budget 2024 also proposes to provide a safe harbour rule applicable to the recapture rule.

These changes would apply for property that is acquired and becomes available for use on or after January 1, 2024.