Happy Last (Full) Week of Tax Season!
As the month wraps up, we wanted to communicate a few updates in the tax world that might be relevant to you.
2024 Budget
As you may be aware, the 2024 Federal budget came out last week. There were definitely some notable items in there, but the most substantial change was to the capital gains tax rules. The gist of the new capital gains rules:
- Personal capital gains realized after June 25, 2024 in excess of $250,000 will now be taxed at an inclusion rate of 2/3 rather than 1/2
- All corporate capital gains realized after June 24, 2024 will be taxed at an inclusion rate of 2/3
Our Thoughts
- The government claims this affects a small percentage of taxpayers, and they may be partially right.
- Generally speaking, most individuals don’t realize capital gains in excess of $250,000 in any given year, unless a rental property for example, is sold, or other large assets
- Estates could be massively impacted by these changes
- The change in rate at the corporate level, may be a much bigger impact. At the end of the day, the capital gains rate still remains the cheapest investment tax rate in the system, but there may be some planning to be done around realizing gains before June 25, 2024
Click here to read the full budget
Trust Late Filing Penalties
The CRA issued a message last week indicating that there was an error in their system and it has been assessing late filing penalties on some trust filings that were filed before the April 2, 2024 deadline. The penalty has been $100 and should be reversed. If this affects you, CRA is “working on rectifying”. We’re bringing this to your attention in case you get one of these $100 penalties – please do not pay it.
Their statement [insert eye roll here]: “The CRA will be correcting the assessments and there is no need for a payment or reassessment request to be submitted in respect of these penalties when the information was filed on time.”
Proposed Changes to Underused Housing Tax (UHT) for 2023
As a reminder, the UHT was meant to affect corporations that owned residential rental properties. If you didn’t file a 2022 UHT return and you didn’t buy a corporately owned residential rental property in 2023, congratulations – you’re done reading this email!
Otherwise, in summary, most of our clients that filed 2022 UHT returns are not required to do so for 2023. The technicalities are as follows:
- The 2023 UHT returns are due April 30, 2024 for anyone that is required to file
- The Department of Finance Canada released legislative and regulatory proposals on November 21, 2023. Under the proposed changes, the definition of an excluded owner who is not required to file an annual UHT return or pay the UHT, has been expanded.
- These changes mean that specified Canadian corporations [generally, private Canadian companies], partners of specified Canadian partnerships, and trustees of Canadian trusts, as defined in the UHT Act, no longer need to file a UHT return and claim an exemption
- Although not yet legislated, the Canada Revenue Agency has included the proposed changes in the new instructions to the Form UHT-2900. Therefore, this would seem to imply that CRA is operating under the new proposed legislation where the above mentioned entities are not required to file UHT for the 2023 year onwards