With the 2023 holiday season upon us, and as we move into a new year, GH&A would like to take this opportunity to wish Happy Holidays to all of our clients and your families!
This Christmas Letter, as in years past, will be our opportunity to advise you on some important personal and corporate tax matters, as well as review tax changes and developments that have happened in 2023. We have also added some valuable tips to help manage your personal and business accounting needs, and this letter will highlight some updates to our firm and community involvement.
Update on the Underused Housing Tax (UHT)
Starting with the 2022 taxation year, the new Underused Housing Tax Act created a requirement for many Canadians who own residential property under certain scenarios to file form UHT-2900 in order to disclose certain information about each applicable property. This new filing requirement was intended to target Canadian residential properties owned by non-resident individuals, and apply a 1% tax on the value of the property in certain circumstances where the property was vacant for a significant portion of the year.
Unfortunately, the underlying legislation created a filing requirement for many Canadian resident property owners. Although Canadian residents would not have a requirement to pay the UHT tax for 2022, the requirement to file form UHT-2900 can still apply for each property that was owned at December 31, 2022 through a Canadian corporation, partnership, or trust. Failure to file the UHT-2900 form prior to the filing deadline can also result in a penalty of $5,000 for owners who are individuals, and $10,000 per form for corporations. The 2022 UHT-2900 form was originally due no later than April 30, 2023; however, this deadline has since been extended to April 30, 2024 (a previous extension was also granted up to October 31, 2023).
Even if you feel that the UHT filing requirement should not apply to you, it is important to consider the nature of your ownership and whether property you own could be considered to be owned through a corporation, trust, or partnership. Most commonly, certain ownership structures can be viewed as a “trust” even where there was no intention to establish a formal trust, and the CRA has clarified that they feel that many of these scenarios create a requirement to file form UHT-2900. This can include scenarios where a person had been added to the land title for a property for estate planning purposes only (i.e. no actual transfer of beneficial ownership), or where a person has been named on joint title to a property for the purposes of co-signing a mortgage.
IMPORTANT UPDATE - As part of its recent 2023 Fall Economic Statement released on November 21, 2023; the Department of Finance announced some important proposed changes to the UHT rules. If these proposals are passed, the following changes would apply effective for the 2023 tax year:
Removal of filing requirement for specified Canadian corporations, partnerships or trusts.
Reduction of late filing penalty to $1,000 per form for individuals, and $2,000 per form for corporations.
It’s important to note that as these proposed changes would be effective starting in 2023, there would be no changes to the applicable UHT filing requirements for the 2022 tax year.
For more information on the Underused Housing Tax, visit our Important Information About the New Underused Housing Tax blog.
New T3 Trust Reporting Requirements and Implications for Jointly Owned Assets
Starting with the 2023 tax year, newly amended tax legislation will result in additional tax reporting requirements that will create a T3 Trust return filing requirement for many taxpayers that prior to 2023, did not have any trust reporting obligation. Most significantly, these new T3 Trust return reporting requirements will apply to many ownership scenarios where properties are jointly owned or owned in joint title.
These new rules were originally intended to create additional beneficial ownership reporting requirements for Canadian trusts, however, an expansion of the rules to include “Bare Trusts” has unfortunately created an ongoing T3 Trust Return filing requirement that will often apply in scenarios where assets are simply held in joint title or with one or more beneficiaries named as owners on title to the property where certain other criteria apply.
Current penalties in place prior to 2023 for not filing a T3 return when required will continue to apply. In addition, further penalties can be assessed for failure to provide information required under the new 2023 Trust reporting rules. The penalty is $25 for each day late, with a minimum penalty of $100 and a maximum of $2,500. In addition, a significant gross negligence penalty can also be applied where a failure to file the return was made knowingly or due to gross negligence. The additional penalty would be five per cent of the maximum value of property held by the trust during the relevant year, with a minimum penalty of $2,500.
The deadline for filing 2023 T3 Trust Returns is April 2, 2024. In advance of the upcoming T3 return filing season, it will be important to review your ownership of assets and identify any scenarios where a trust relationship, including a Bare Trust, may be present.
For more examples of scenarios where a “Bare Trust” could apply, and potentially create a T3 filing requirement starting in 2023, as well as additional details on this new reporting requirement, visit our New T3 Trust Reporting Rules for 2023 and Beyond blog.
Changes to the Alternative Minimum Tax starting in 2024
The Alternative Minimum Tax (AMT) rules under the Income Tax Act provide the government with a means of assessing a form of parallel, and often recoverable tax in scenarios where certain exemptions or deductions are claimed to reduce taxes payable for the year below a specified overall tax rate. As part of the 2023 Federal Budget, the department of finance proposed significant changes to the AMT rules. These proposed changes are intended to target high income earners and apply AMT in a different manner as compared to the existing legislation.
The proposed amendments to the AMT rules would come into effect as of January 1, 2024, and would result in the following changes to how AMT can apply:
The AMT rate is increased from 15% to 20.5%
The amount of the basic AMT exemption is increased from $40,000 to $173,000 (meaning no AMT applies if total income for the year is less than $173,000)
The AMT capital gains inclusion rate is increased from 80% to 100%
Inclusion of 30% of capital gains from the donation of publicly listed securities (currently 0% if certain criteria are met)
Capital loss carry forwards and allowable business investment losses apply at a 50% rate
Many other deductions and personal tax credits considered at Additional deductions from income considered at a rate of 50%
It should be noted that the allowable carry-forward period for the recovery of AMT of seven taxation years following the year in which AMT is paid, will remain unchanged.
Some specific scenarios where the application of AMT will differ significantly for years 2023 include (but are not limited to) the following:
Significant additional AMT can apply on large capital gains.
More scenarios where AMT will be payable (as well as difficult if not impossible to recover) for trusts.
Less tax incentive for large donations in many cases, especially in regards to planning for significant donations of publicly listed securities.
Fewer scenarios where lower income earners will be subject to AMT.
Although these changes to the AMT legislation have not yet been passed into law, they are expected to be passed in their current form. As a result, the impact of AMT for any planning or transactions to be undertaken effective after January 1, 2024 should be carefully considered.
The Intergenerational Farm Rollover Provisions – Common Traps
The Income Tax Act contains several provisions that allow for farmers to ensure that their farmland or farm corporation shares can be transferred from one generation to the next in a tax effective manner. One of the most important and most commonly relied upon provisions is referred to as the Intergenerational Farm Rollover provisions (often referred to as the “Farm Rollover”). These rules allow for qualifying assets (farmland located in Canada or Family Farm Corporation Shares) to be transferred from a taxpayer to their children or grandchildren on a tax deferred basis provided that certain criteria are met.
A transfer under the Farm Rollover provisions can be available in respect of a transfer either during a taxpayer’s lifetime, or on their passing. Ensuring that farmland or farm corporation shares meet the relevant criteria for the Farm Rollover provisions to apply, and allow for a tax deferred transfer of the asset on the taxpayers passing, can be a critically important part of a farmer’s estate plan. In order for the Farm Rollover provisions to be available in respect of a transfer of property on death, careful consideration must be made to ensure that the relevant criteria can be met.
For more information on the Farm Rollover provisions, and common estate planning traps related to these rules, check out our recent blog post.
Recent Updates and Important Deadlines for the Canada Emergency Business Account (CEBA) Loan
On September 14, 2023, the Department of Finance announced several important extended deadlines in respect of the Canada Emergency Business Account (CEBA) loan program:
The repayment deadline for CEBA loans to qualify for partial loan forgiveness of up to 33 per cent is being extended from December 31, 2023, to January 18, 2024.
For CEBA loan holders who make a refinancing application with the financial institution that provided their CEBA loan by January 18, 2024, the repayment deadline to qualify for partial loan forgiveness now includes a refinancing extension until March 28, 2024.
As of January 19, 2024, outstanding loans, including those that are captured by the refinancing extension, will convert to three-year term loans, subject to interest of five per cent per annum, with the term loan repayment date extended by an additional year from December 31, 2025, to December 31, 2026.
For more information on the CEBA program visit the governments Canada Emergency Business Account (CEBA) webpage.
For questions about the terms of your CEBA loan, including how to make a repayment of the loan, contact your financial institution.
Did You Know?
Tax Free First Home Savings Account (FHSA) Applications Now Open – As of April 1, 2023 eligible Canadians can now apply with their bank to open a new FHSA account. This new account allows for up to $8,000 of contributions to be made annually (with a $40,000 lifetime limit). Similar to an RRSP, eligible contributions are tax-deductible. However, qualifying withdrawals to purchase a first home are non-taxable. For more information on this new account and how to apply, check out our recent blog post or visit the CRA’s First Home Savings Account (FHSA).
Updates to the Disability Tax Credit (DTC) Application Process – Recent updates to the Disability Tax Credit application process now allow for the application process to be completed entirely online, with an option for Part A of the application to be completed by the taxpayer through their CRA MyAccount, and Part B completed by the applicable medical practitioner through the existing digital application. Visit the CRA’s Disability Tax Credit webpage for more information on how to apply.
Canada Pension Plan Enhancement – Starting in 2024, a second, higher earnings limit will be introduced, creating two different ranges of earnings on which to calculate CPP contributions. For 2024, employees will contribute 5.95% on earnings above the basic exemption of $3,500 up to the first earnings ceiling of $68,500, and 4% on any earnings above $68,500 up to the second earnings ceiling of $73,200. Visit the CRA’s CPP enhancement webpage for more information.
Mandatory Electronic Filing for Information Returns (including T4 slips) – On August 16, 2023 the CRA released a Tax Tip alerting taxpayers to recent amendments to legislation that will require businesses filing six or more information returns (slips and summaries) to file electronically through one of the CRA’s approved electronic filing methods. There are currently mandatory electronic filing penalties to businesses that file paper returns for over 50 slips. There will be a $125 penalty introduced starting January 1, 2024 to businesses who file paper information returns (including T4 slips) in the 6-50 range.
2023 Canada-Alberta Drought Livestock Assistance – On October 20, 2023 the Federal and Alberta Governments announced they are partnering on a 2023 Canada-Alberta Drought Livestock Assistance response to assist livestock producers affected by drought and extreme growing conditions. Livestock producers in specified municipalities will be able to apply until midnight January 15, 2024 for financial support to cover feed costs incurred resulting from lost grazing days for eligible breeding animals on hand as of December 31, 2023 up to $150 per head. For more information visit the AFSC AgriRecovery.
CRA Tax Tip: Crypto-Assets – On October 24, 2023, the CRA released a Tax Tip aimed at providing taxpayers with information regarding their responsibilities for reporting and record keeping in respect of crypto-assets held, and related transactions.
Personal Income Tax Indexation Adjustments – On November 16, 2023 the government announced through their webpage several important adjustments to personal income tax and benefit amounts in order to adjust for the impact of inflation using the Consumer Price Index data as reported by Statistics Canada. Some of the most significant adjustments applicable for the 2024 taxation year include:
Increase to marginal personal tax bracket thresholds.
Increase to basic personal tax credit and other non-refundable tax credit amounts.
Increase to Old Age Security (OAS) repayment threshold from $86,912 to $90,997.
Increase the annual TFSA dollar limit for contributions from $6,500 to $7,000.
Increase to Canada Training Credit (CTC) limit from $10,994 to $11,511 and increase in related maximum net income threshold from $155,625 to $165,430.
Increase to the Lifetime Capital Gains Exemption limit to $1,016,836 applicable for the disposition of either Qualified Small Business Corporation (QSBC) Shares, or Qualified Farm Property (QFP) (previously $971,190 for QSBC Shares and $1,000,000 for QFP)
New T4/T4A Reporting Requirements – On November 16, 2023, the CRA announced additional reporting requirements to assist in the administration of the Canadian Dental Care Plan. Beginning with the 2023 tax year, T4 and T4A slips will be required to report whether, on December 31st of the taxation year to which the information return relates, an employee/payee or any of their family members were eligible to access dental coverage of any kind (including health spending and wellness accounts) due to their current or former employment. This information will be provided by assigning the applicable code to Box 45 of T4 slips or Box 015 of T4A slips. The 5 code options will be:
No access to any dental care insurance, or coverage of dental services of any kind.
Access to any dental care insurance, or coverage of dental services of any kind for only the payee.
Access to any dental care insurance, or coverage of dental services of any kind for payee, spouse, and dependents.
Access to any dental care insurance or coverage of dental services of any kind for only the payee and their spouse.
Access to any dental care insurance, or coverage of dental services of any kind for only the payee and dependents.
CRA Prescribed Interest Rates – On November 24, 2023 the CRA announced the prescribed interest rates for the first calendar quarter of 2024. The rates represent a 1% increase from the last quarter of 2023, including a rate of 10% charged on overdue taxes, Canada Pension Plan contributions, and employment insurance premiums.
2023 Staff Announcements
This year we welcomed Helen Baines, Jodi Henke, Tarnbir Mundi and Donna Bates to our team.
Jenna Harriman-Fitzsimmons and her husband Matt welcomed a baby girl in 2023.
Sam Miller and his wife Brooke also welcomed a baby girl in 2023.
Greg Slemp received his CPA designation.
Amy Herbin was awarded her Diploma in Business Administration with Honors from SAIT.
Marilyn Rappel and Michael McCutcheon celebrated 10 years of employment with GH&A.
A special congratulations to Jeannie Wagemakers, who celebrates 30 years of service with GH&A on January 4th, 2024!!
The staff of GH&A are proud to be involved with the following organizations in our community:
Acme Alumni Association
Acme Hall Board
1st Bow Valley Scouts
East Wheatland Athletic Association
2nd Langdon Girl Guides
Standard & District Ag Society
Standard Municipal Library
Standard Rodeo Society
Strathmore & District Curling Club
Strathmore & Wheatland County Christmas Hamper Society
St. Rita’s Parish Council in Rockyford
Wheatland & Area Hospice Society
Be sure to follow GH&A on social media for frequent updates and information on accounting and tax changes.
The information in this publication is current as of December 20, 2023.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact Gregory, Harriman & Associates LLP to discuss these matters in the context of your particular circumstances. Gregory, Harriman & Associates LLP, its partners, employees, and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.