Finance Minister Bill Morneau unveiled the Liberal government’s budget on Tuesday. The 2019 budget, the last to be introduced before the fall election, proposes changes aimed to improve housing affordability and some medical issues as well as reducing student loan interest rates. There are however, no small business tax breaks and no proposal in the budget to lower personal income tax.
The plan comes with new spending that would total $22.8-billion over the next five fiscal years, and the government is projecting a $19.8-billion deficit for fiscal 2019-20.
Millards Chartered Professional Accountants has released its annual Federal Budget Commentary in response to the new budget. Brad Sinclair, CPA, CA and Partner from Millards Chartered Professional Accountants in Brantford says the commentary offers a quick overview of the budget highlights as they relate to individuals and businesses in Canada.
“We encourage our clients to download and review it. The 2019 Budget offers both benefits and potential consequences for Canadian stakeholders. We’re here to help our clients understand the implications and we offer this commentary as a quick and easy read that explains how the new budget might impact our personal and business clients.”
Sinclair says that among the potential benefits of the 2019 Federal Budget is a new focus on housing.
“This budget contains new measures that the government argues will make it easier for millennials and first-time buyers to purchase a home. It’s really targeting potential home buyers in major cities facing challenging real estate markets but it may offer some relief for first-time buyers in other communities.”
The incentive program could lower mortgage payments for households making less than $120,000 per year. Under the $1.25-billion incentive program, prospective buyers with a minimum down payment for a home can apply to finance between five and 10 percent of their mortgage. First-time buyers can now withdraw more from their RRSPs, an increase from $25,000 per individual to $35,000 or $70,000 per couple.
Other winners include people with student loans.
“The 2019 budget proposes lowering the floating interest rate which most Canada Student Loan borrowers have. The current rate is prime plus 2.5 percent. That change will go into effect this year reducing student loan interest payments.”
The new budget addresses some medical concerns including spending up to $1 billion over two years starting in 2022-2023 to help Canadians with rare diseases access the drugs they need.
“The Canadian Organization for Rare Diseases has identified some 7,000 rare diseases and the new budget offers help in dealing with the costs of the medications required to treat those conditions.”
Canadians thinking about buying a zero emission vehicle or retrofitting their homes for the sake of energy efficiency or reducing their carbon footprint will appreciate this budget. The government will be spending $130 million over five years to install new recharging and refuelling stations for electric and hydrogen fuel cell vehicles.
So what does Sinclair think Canadians will not appreciate about this budget?
There are no measures in the budget to lower personal income tax rates, including for high earners. Also, small business owners hoping for a tax break are also likely to be disappointed in the budget as it doesn’t offer any relief for them.
“People with employer stock options or big earnings are not going to like this budget.”
Considered by many to be an alternate form of compensation, stock options give employees the right to get shares in their employing company at a special rate. The government is proposing to limit the use of employee stock options. They are currently taxed at the same rate as capital gains which is half the rate of employment income.
“The government does not believe that employee stock options should be used as a tax-preferred method of compensation for executives of large, mature companies which they believe to be a small number of high-income people.”
Do you have questions about the Federal Budget Commentary or the 2019 Federal Budget? Millards has 7 Southern Ontario locations to serve you. Contact us today and find out more about our wide range of accounting, auditing and assurance services.
Brad Sinclair is an experienced member of the Millards team. He delivers a wide range of services but his focus includes income tax, tax planning and reorganization work. He has specialized skills around US tax and cross border issues as well as estate planning and succession arrangements.