Show Transcript
In its latest budget, the federal government has included new tax initiatives and several measures to address affordability. Kim Parlee speaks with Nicole Ewing, Director, Tax and Estate Planning at TD Wealth, about what it could mean for your personal finances.
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Speaker 1 [00:00:03] The federal budget is out and there's something for everybody in this budget we're going to be running through right now. What is in it for high income earners, businesses, family businesses, students as well as families? Affordability, help, housing and investors. And here to detail everything that we're going to be talking about is Nicole Ewing. She's director tax and estate planning from TD Wealth. Of course. Nicole, it's great to see you. Can we just start by reading through the list? We'll start with I'll call high income earners. We have some changes to the alternative minimum tax. AMT So what what happened?
Speaker 2 [00:00:36] We do and this has been a topic of discussion. We've been really looking forward to seeing the details here because we were it was mentioned in the past couple of years that we might see a change to the alternative minimum tax. And finally we have those details. So currently an alternative minimum tax applies in certain situations where the government considers you have used excessive credits or deductions or tax strategies to reduce your income down. And the limit now is $40,000 and the tax of 15% will apply. What's changing now is we're going up to a 20.5% tax, but it is only going to apply to those who are at the beginning of the top federal rate of tax. So it's about 173,000. So this is much more, I think, targeted to those who are the high income earners and perhaps a bit of a reprieve for some of those who are caught by this in the middle income earning. But yeah, it's it's nice to have the details on this, but there are going to be some real changes to what's included. So, for example, look, we're going to have an inclusion of 30% on donated public securities that would typically not be included into that's going to be in there. We're going to increase of the capital gains from 80 to 100% inclusion rate. So a lot of details that we're going to need to work our way through.
Speaker 1 [00:01:56] We also had some changes. You and I were texting back and forth about Bill c208. So demystify this for us. Who should be paying attention to this and what is it?
Speaker 2 [00:02:06] So this is the bill again. For a number of years we've been looking forward to the details that's come out and there's been a couple of amendments. And so here we are now where the government is essentially trying to get to what it was originally intended to do, which is for to even the playing field between family members and strangers, arms length people with respect to how a transfer of a business is taxed. And previously those who were in families and have the intergenerational transfer and we're actually at a disadvantage. So there's been a number of things in the last couple of years that have really aimed to change that. And now we have a lot more details on that front as well. So there's a couple of new different regimes that have been put into place for those who are the immediate intergenerational business transfer and the gradual intergenerational transfer, it will be a different set of rules that apply apply there as well. So a lot of details that we have been waiting some time for and that will probably allow people to plan their affairs with more certainty.
Speaker 1 [00:03:08] Now I'm going to mix up some of the big ones with some of the smaller ones to just stay with the business theme. But there's something about lowering credit card transaction fees for small businesses. More to come on that.
Speaker 2 [00:03:17] More to come on that. Look forward to the details. I'm sure that will be good news to our small business owners. Yep.
Speaker 1 [00:03:22] And then employee owned businesses. New rules about employee ownership trust. Now I know a lot of these are complex, but maybe just give us top of the waves on this and what you think is happening.
Speaker 2 [00:03:30] It's essentially a trying to allow for the transfer of to it to open up the options for the succession of a business, make it an easier process to have employee ownership, a trust to allow the employees essentially own the business. And there will be some of the rules that would normally prohibit that, make that difficult with a trust with a 21 year deal disposition rule, for example, that won't apply, and there'll be other rules that are modified to encourage this option for employees to essentially take over the ownership of a business via an employee ownership trust.
Speaker 1 [00:04:02] And then finally, I said, mixing things up a bit better for proprietors, for individual tradespeople as well too. There's a little more money in there for helping them for things like total expenses.
Speaker 2 [00:04:11] Exactly. So it's doubling. It's going from $500 to $1000 for tradespeople to deduct the expenses of their tools.
Speaker 1 [00:04:19] Okay, let's shift gears a bit in terms of families, and we'll start on the education front. Some changes to the RSP. There have been some changes in the last budget in terms of a little more leniency in terms of debt for students and such, but they've coming up with a number of things in this budget as well, too.
Speaker 2 [00:04:33] There are and this is really good news. So currently there is a limit on how much you can access of the employee education assistance payments. And so those are the the income and the government grant portion of the RSP, and that is currently limited to $5,000 for that first 13 week period when you're starting school. Not enough as the expenses continued to grow. So that is increasing now to $8,000. So I'm sure that will be good news. Too many of our of our students. We are also waiving the the requirement for mature students to meet certain tests when it comes to to accessing funding. And we are looking at a Oh, yes, very important here. We have divorced and separated parents will now be able to have a joint to use. And so that will make, again, the planning a much more straightforward for those families.
Speaker 1 [00:05:27] What about already spouse? And sometimes they don't get as much attention, but registered disability savings plans. There's something here about allowing the already speed to be available to more people.
Speaker 2 [00:05:39] This is what's really difficult within our DSP. Sometimes the disability will actually impair the the ability for the person to have the required capacity to enter into a banking agreement, for example. And if there is not a named personal representative, then it was very difficult to open these accounts. And so the rules have been expanded to allow for a family member, a qualified family member, to open that account and manage it on behalf of that individual. And it has expanded the definition of who is a qualified family member. So here it's expanding to brothers and sisters, which again will open up some of the options for for families, whereas previously limited to spouses and parents and a child. So brothers and sisters are very often involved in the care of of their siblings who have disabilities. So this is this is good news as well.
Speaker 1 [00:06:32] I want to shift gears a bit to more all to say general affordability help, but I'm actually going to jump in and keep the same theme in terms of, you know, the people who who need some help. Automatic tax filing. I was just personally pleased to see this because so many people who need the benefits need to file taxes, but may not be able to because of circumstances.
Speaker 2 [00:06:50] I'm so pleased to see that this is a pilot program that will be starting next year where essentially those who are vulnerable people and who don't maybe have the opportunity to file their taxes, but can really benefit from things like the GST rebate or or the security and CPP. This is these are important benefits, but you must file in order to access them. So making that easier for those individuals and hopefully we'll see the hand, the money getting into the hands of those who it's intended to be for. So that's great news. I agree. I'm really pleased to see that. Yeah.
Speaker 1 [00:07:22] The other one, of course. And affordability, which will grab a lot of headlines, is what's been termed sometimes as a grocery rebate. But this is really an extension of the GST credit mechanism, is it not, for helping those who need it? Yeah.
Speaker 2 [00:07:33] Exactly. It's similar to what was announced last year and in the fall. So we're having a doubling of the of the GST credit and that's great news and you don't have to use it for groceries despite it being referred to as the grocery rebate. So that will that will get get more money into the hands of our of our lower income folks who could really benefit from that. So that's, I'm sure welcome news for for that group.
Speaker 1 [00:07:57] Another one for affordability, a federal dental plan also being provided to people who need dental services.
Speaker 2 [00:08:03] Yes. And so this is this is what we've heard about you. It looks like things are going as as expected or hoped for by certain governments. And so we are going to have an essentially an expansion of the program over the next five or six years to make it available to those who are under under 18. And for seniors that can then access this dental care. So that's a great investment that we're seeing.
Speaker 1 [00:08:30] Nicole I've got an exhaustive list. I have three more, so let me get through them because it's one we've been hearing about these under-used housing tax that was coming through. But one thing we found is they're going to be delaying the penalties, at least for people who are who are filing their paperwork around that.
Speaker 2 [00:08:44] Exactly. And so this isn't technically part of the budget. It is a previously announced the underused housing tax. But there has been so much confusion and a lot of people putting many, many hours into trying to interpret what some of these rules mean. And some things weren't actually perhaps as well defined as they could have been. A lot of questions have come up about this over the last little while. And so it was announced today, just late last night, that there will be an extension of the that there will be no penalties or interest applying provided that you file and or pay by October 31st. So that is a welcomed news for the accountants who are listening, no doubt.
Speaker 1 [00:09:24] Last one I'll touch on is just the share buyback measures. Again, you know, we had heard in the previous economic statement that this is something they were looking at. This could be effective in 2024 in terms of allowing for companies who want to buyback their shares. You know, I would say there's probably no immediate tax perspective from yours, But from an investor standpoint, you know, share buybacks are a good thing. This is maybe has companies think twice about doing it better.
Speaker 2 [00:09:49] It will be interesting to see how companies respond to this. But we are seeing that what had been previously announced is moving forward, and that's a 2% charge on the on the buyback. So. We'll see. No doubt that there will be people responding. Fatten. Investors should pay attention to any of those changes coming forward.
Speaker 1 [00:10:09] Nicole, great round up. Really appreciate you joining us. Thanks so much.
Speaker 2 [00:10:13] Oh, my pleasure, Kim.
Speaker 2 [00:00:36] We do and this has been a topic of discussion. We've been really looking forward to seeing the details here because we were it was mentioned in the past couple of years that we might see a change to the alternative minimum tax. And finally we have those details. So currently an alternative minimum tax applies in certain situations where the government considers you have used excessive credits or deductions or tax strategies to reduce your income down. And the limit now is $40,000 and the tax of 15% will apply. What's changing now is we're going up to a 20.5% tax, but it is only going to apply to those who are at the beginning of the top federal rate of tax. So it's about 173,000. So this is much more, I think, targeted to those who are the high income earners and perhaps a bit of a reprieve for some of those who are caught by this in the middle income earning. But yeah, it's it's nice to have the details on this, but there are going to be some real changes to what's included. So, for example, look, we're going to have an inclusion of 30% on donated public securities that would typically not be included into that's going to be in there. We're going to increase of the capital gains from 80 to 100% inclusion rate. So a lot of details that we're going to need to work our way through.
Speaker 1 [00:01:56] We also had some changes. You and I were texting back and forth about Bill c208. So demystify this for us. Who should be paying attention to this and what is it?
Speaker 2 [00:02:06] So this is the bill again. For a number of years we've been looking forward to the details that's come out and there's been a couple of amendments. And so here we are now where the government is essentially trying to get to what it was originally intended to do, which is for to even the playing field between family members and strangers, arms length people with respect to how a transfer of a business is taxed. And previously those who were in families and have the intergenerational transfer and we're actually at a disadvantage. So there's been a number of things in the last couple of years that have really aimed to change that. And now we have a lot more details on that front as well. So there's a couple of new different regimes that have been put into place for those who are the immediate intergenerational business transfer and the gradual intergenerational transfer, it will be a different set of rules that apply apply there as well. So a lot of details that we have been waiting some time for and that will probably allow people to plan their affairs with more certainty.
Speaker 1 [00:03:08] Now I'm going to mix up some of the big ones with some of the smaller ones to just stay with the business theme. But there's something about lowering credit card transaction fees for small businesses. More to come on that.
Speaker 2 [00:03:17] More to come on that. Look forward to the details. I'm sure that will be good news to our small business owners. Yep.
Speaker 1 [00:03:22] And then employee owned businesses. New rules about employee ownership trust. Now I know a lot of these are complex, but maybe just give us top of the waves on this and what you think is happening.
Speaker 2 [00:03:30] It's essentially a trying to allow for the transfer of to it to open up the options for the succession of a business, make it an easier process to have employee ownership, a trust to allow the employees essentially own the business. And there will be some of the rules that would normally prohibit that, make that difficult with a trust with a 21 year deal disposition rule, for example, that won't apply, and there'll be other rules that are modified to encourage this option for employees to essentially take over the ownership of a business via an employee ownership trust.
Speaker 1 [00:04:02] And then finally, I said, mixing things up a bit better for proprietors, for individual tradespeople as well too. There's a little more money in there for helping them for things like total expenses.
Speaker 2 [00:04:11] Exactly. So it's doubling. It's going from $500 to $1000 for tradespeople to deduct the expenses of their tools.
Speaker 1 [00:04:19] Okay, let's shift gears a bit in terms of families, and we'll start on the education front. Some changes to the RSP. There have been some changes in the last budget in terms of a little more leniency in terms of debt for students and such, but they've coming up with a number of things in this budget as well, too.
Speaker 2 [00:04:33] There are and this is really good news. So currently there is a limit on how much you can access of the employee education assistance payments. And so those are the the income and the government grant portion of the RSP, and that is currently limited to $5,000 for that first 13 week period when you're starting school. Not enough as the expenses continued to grow. So that is increasing now to $8,000. So I'm sure that will be good news. Too many of our of our students. We are also waiving the the requirement for mature students to meet certain tests when it comes to to accessing funding. And we are looking at a Oh, yes, very important here. We have divorced and separated parents will now be able to have a joint to use. And so that will make, again, the planning a much more straightforward for those families.
Speaker 1 [00:05:27] What about already spouse? And sometimes they don't get as much attention, but registered disability savings plans. There's something here about allowing the already speed to be available to more people.
Speaker 2 [00:05:39] This is what's really difficult within our DSP. Sometimes the disability will actually impair the the ability for the person to have the required capacity to enter into a banking agreement, for example. And if there is not a named personal representative, then it was very difficult to open these accounts. And so the rules have been expanded to allow for a family member, a qualified family member, to open that account and manage it on behalf of that individual. And it has expanded the definition of who is a qualified family member. So here it's expanding to brothers and sisters, which again will open up some of the options for for families, whereas previously limited to spouses and parents and a child. So brothers and sisters are very often involved in the care of of their siblings who have disabilities. So this is this is good news as well.
Speaker 1 [00:06:32] I want to shift gears a bit to more all to say general affordability help, but I'm actually going to jump in and keep the same theme in terms of, you know, the people who who need some help. Automatic tax filing. I was just personally pleased to see this because so many people who need the benefits need to file taxes, but may not be able to because of circumstances.
Speaker 2 [00:06:50] I'm so pleased to see that this is a pilot program that will be starting next year where essentially those who are vulnerable people and who don't maybe have the opportunity to file their taxes, but can really benefit from things like the GST rebate or or the security and CPP. This is these are important benefits, but you must file in order to access them. So making that easier for those individuals and hopefully we'll see the hand, the money getting into the hands of those who it's intended to be for. So that's great news. I agree. I'm really pleased to see that. Yeah.
Speaker 1 [00:07:22] The other one, of course. And affordability, which will grab a lot of headlines, is what's been termed sometimes as a grocery rebate. But this is really an extension of the GST credit mechanism, is it not, for helping those who need it? Yeah.
Speaker 2 [00:07:33] Exactly. It's similar to what was announced last year and in the fall. So we're having a doubling of the of the GST credit and that's great news and you don't have to use it for groceries despite it being referred to as the grocery rebate. So that will that will get get more money into the hands of our of our lower income folks who could really benefit from that. So that's, I'm sure welcome news for for that group.
Speaker 1 [00:07:57] Another one for affordability, a federal dental plan also being provided to people who need dental services.
Speaker 2 [00:08:03] Yes. And so this is this is what we've heard about you. It looks like things are going as as expected or hoped for by certain governments. And so we are going to have an essentially an expansion of the program over the next five or six years to make it available to those who are under under 18. And for seniors that can then access this dental care. So that's a great investment that we're seeing.
Speaker 1 [00:08:30] Nicole I've got an exhaustive list. I have three more, so let me get through them because it's one we've been hearing about these under-used housing tax that was coming through. But one thing we found is they're going to be delaying the penalties, at least for people who are who are filing their paperwork around that.
Speaker 2 [00:08:44] Exactly. And so this isn't technically part of the budget. It is a previously announced the underused housing tax. But there has been so much confusion and a lot of people putting many, many hours into trying to interpret what some of these rules mean. And some things weren't actually perhaps as well defined as they could have been. A lot of questions have come up about this over the last little while. And so it was announced today, just late last night, that there will be an extension of the that there will be no penalties or interest applying provided that you file and or pay by October 31st. So that is a welcomed news for the accountants who are listening, no doubt.
Speaker 1 [00:09:24] Last one I'll touch on is just the share buyback measures. Again, you know, we had heard in the previous economic statement that this is something they were looking at. This could be effective in 2024 in terms of allowing for companies who want to buyback their shares. You know, I would say there's probably no immediate tax perspective from yours, But from an investor standpoint, you know, share buybacks are a good thing. This is maybe has companies think twice about doing it better.
Speaker 2 [00:09:49] It will be interesting to see how companies respond to this. But we are seeing that what had been previously announced is moving forward, and that's a 2% charge on the on the buyback. So. We'll see. No doubt that there will be people responding. Fatten. Investors should pay attention to any of those changes coming forward.
Speaker 1 [00:10:09] Nicole, great round up. Really appreciate you joining us. Thanks so much.
Speaker 2 [00:10:13] Oh, my pleasure, Kim.
