2023 federal budget: highlights and insight

Retirement savings and pensions

• Improving retirement security: The government proposes to amend the Pension Benefits Standards Act, 1985 and the Pooled Registered Pension Plans Act to improve retirement security for plan members and retirees through new frameworks for variable payment life annuities.
  

• Crypto assets in pension plans: Federally regulated pension funds will need to disclose their crypto-asset exposures to the Office of the Superintendent of Financial Institutions. The government will also work with provinces and territories to discuss crypto-asset or related activity disclosures by Canada’s largest pension plans to help protect Canadians’ savings.
  
• Retirement Compensation Arrangements (RCAs): The budget proposes to amend the Income Tax Act so that fees or premiums paid for the purposes of securing or renewing a letter of credit (or a surety bond) for an RCA that is supplemental to a registered pension plan will not be subject to the refundable tax. This change would apply to fees or premiums paid on or after budget day. The budget also proposes to allow employers to request a refund of previously remitted refundable taxes in respect of fees or premiums paid for letters of credit (or surety bonds) by RCA trusts, based on the retirement benefits that are paid out of the employer’s corporate revenues to employees that had RCA benefits secured by letters of credit (or surety bonds). Employers would be eligible for a refund of 50% of the retirement benefits paid, up to the amount of refundable tax previously paid.
• Financials sector oversight: The government also wants to modernize the federal financial framework to address emerging risks to Canada's financials sector.
  
• Updates on previously announced pension measures: The government intends to proceed with the following previously announced measures:
  • Borrowing by Defined Benefit Pension Plans.
  • Reporting requirements for Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs).
  • Fixing contribution errors in Defined Contribution Pension Plans.

Tax 

• There are no changes to the federal personal or corporate tax rates.
  
• Alternative Minimum Tax (AMT) for high-income individuals: The government wants to broaden the base on which the tax is calculated, raise the AMT exemption to approximately $173,000, and increase the AMT rate to 20.5%. 
  
• Taxation of dividends: The budget proposes to amend the Income Tax Act (Canada) to treat dividends received on Canadian shares held by financial institutions in the ordinary course of business as business income. This measure only applies to financial institutions (e.g., banks and insurance companies) and will affect Canadian shareholders of financial institutions. The budget also provides details on the 2% tax on the net value of share repurchases by public corporations in Canada (e.g., a tax on share buybacks).
  

Affordability

• Grocery Rebate: The government plans to introduce a one-time Grocery Rebate for Canadians with lower incomes. Eligible couples with two children could receive a payment of up to $467, a senior could receive $225, while a single person could receive $234 through the GST rebate system.
  
• Registered Education Savings Plans (RESPs): The budget proposes to increase limits on Educational Assistance Payments (EAPs) withdrawals from $5,000 to $8,000 for full-time students, and from $2,500 to $4,000 for part-time students. These changes come into force on March 28, 2023. The government also proposes to allow divorced or separated parents to open a joint RESP for their children.
  
• Registered Disability Savings Plans (RDSPs): The government intends to extend the qualifying family member provision until December 31, 2026. The government also expands the provision to include adult siblings of an RDSP beneficiary.
  
• Tax-Free First Home Savings Account: Financial institutions will be able to start offering the Tax-Free First Home Savings Account, first announced in the 2022 federal budget, to Canadians as of April 1, 2023. Like an RRSP, contributions will be tax deductible, and withdrawals to purchase a first home—including from investment income—will be non-taxable, like a Tax-Free Savings Account (TFSA).
  
• Help for Canadians with existing mortgages: The federal government, through the Financial Consumer Agency of Canada, is publishing a guideline to protect Canadians with mortgages who are facing “exceptional circumstances” to give them the right to work with their mortgage lender to explore mortgage relief options. 
  
• Work-Sharing agreements: the government is committing funding to ensure that the Work-Sharing Program, which provides income support to staff during temporary decreases in business activity, continues to help workers and businesses. 
  

Healthcare

• Public healthcare funding: The budget lays out the previously announced plan to provide an additional $195.8 billion over 10 years in health transfers to provinces and territories. 
  
• Dental care: The government will introduce legislation to support the implementation of the new Canadian Dental Care Plan, which will provide dental care to uninsured Canadians with family income less than $90,000 annually.
  • The government also wants to introduce reporting requirements for employer-provided dental coverage. Employers will have to report dental coverage offered to their employees and plan members through T4/T4A reporting.
• Federally regulated employees: Changes to the Canada Labour Code will require federally regulated employers to extend a leave of absence to workers who experience a pregnancy loss and also for workers on the death or disappearance of their child.
  

Clean economy

• Tax credits to support a clean, green economy: The government has prioritized building Canada’s clean economy so Canadian companies can be competitive in global markets. The budget introduces new tax credits to encourage the development of renewable power sources like wind and solar. Highlights include a new refundable Clean Hydrogen Investment Tax Credit, a Clean Technology Investment Tax Credit–Geothermal Energy, and a Clean Electricity Investment Tax Credit.
  

Next steps

The budget will be debated this week in the House of Commons. 

Budget implementation legislation will need to be passed through Parliament. 

1 Federal budget, 2023.