On April 21, 2015, the Minister of Finance, the Honourable Joe Oliver introduced the 2015 federal budget.
Given the government’s frequent messages of concern about the state of the housing market, CREA did not expect our industry’s lobbying proposals for indexation of the Home Buyers’ Plan (HBP) and access to the HBP to support Canadian workers to be contained in this year’s budget. CREA will continue to press for changes to the HBP and we will ask that these proposals be part of each party’s election platform.
That said, a secondary issue on which CREA has been active is gaining traction, namely the rules surrounding small businesses and what is considered an active versus investment business, something known as the “five person rule.” The government is opening consultations on how to evolve this decades old rule. Some key elements that may be of interest:
- Amendment of the Canada Small Business Financing Act to increase the maximum loan amount for real property from $500,000 to $1 million
- Raise the small-business eligibility criteria from firms with gross annual revenues of $5 million or less to firms with gross annual revenues of $10 million or less.
The small-business deduction currently reduces the federal income tax rate from 15% to 11% on the first $500,000 per year of qualifying active business income of a Canadian-controlled private corporation. Budget 2015 proposes to reduce the 11% rate by one half of one percent per year, commencing January 1, 2016, over the next four years to a 9% rate effective January 1, 2019.
The budget increases the Lifetime Capital Gains Exemption to $1 million of capital gains (from $813,600) realized by an individual on the disposition of qualified farm or fishing property. This measure applies to dispositions of qualified farm or fishing property that occur on or after April 21, 2015. The exemption on capital gains realized on the disposition of qualified farm or fishing property will be the greater of $1 million and the indexed Lifetime Capital Gains Exemption that applies to capital gains realized on the disposition of qualified small-business corporation shares.
Also of note is a section on actions the government has taken to reinforce what it calls the “Housing Finance Framework.” It takes credit for reducing amortization periods, increasing CHMC premiums and reducing the size of CHMC’s insurance portfolio.
On a more general note, the government has increased the TFSA contribution limit to $10,000 starting this year. For seniors or persons with disabilities there is a home accessibility tax credit of 15 per cent on up to $10,000 of eligible home renovations.
Please note the budget must be passed by Parliament before it is adopted.
For more information on the 2015 Budget, please click here.