The federal government released Canada’s 2023 Federal Budget update (Budget 2023) in March, which has three main focuses: making life more affordable, stronger public health and dental care, and growing a green economy.
As a business owner, it’s important to stay up-to-date with changes in the Canadian federal budget that can impact your operations. Here are a few highlights you should be aware of:
Budget 2023 Programs and Incentives for Small Business Owners
- Lowering credit card transaction fees for small businesses
Through efforts to secure lower fees from Visa and Mastercard for small businesses, it’s estimated that more than 90% of businesses that accept credit cards will have their interchange fees reduced by up to 27% on average.
- Deduction for tradespeople’s tool expenses
Budget 2023 will double the employment deduction that tradespeople receive on tools they purchase as a condition of employment from $500 to $1000, effective in 2023 and subsequent taxation years.
Budget 2023 Tax Credits for a Green Economy
- Clean Electricity Investment Tax Credit
A 15 percent refundable tax credit for investments in specific electricity generating activities and equipment for the transmission of electricity between provinces. New projects and refurbishment of existing projects will be eligible. The credit will be available for projects that begin after March 28, 2023 (Budget Day) and will cease to be available after 2034.
- Clean Technology Manufacturing Credit
A 30 percent refundable tax credit for the cost of investments in new machinery and equipment used to manufacture or process key clean technologies and extract, process, or recycle key critical minerals. The credit would apply to property that is acquired and becomes available for use on or after January 1, 2024. The credit will be phased out starting in 2032 and will be fully eliminated in 2034.
- Clean Hydrogen Investment Tax Credit
A refundable tax credit of between 15 percent and 40 percent of eligible project costs that produce clean hydrogen and a 15 percent tax credit for certain equipment.
- Clean Technology Investment Tax Credit
Eligibility for the existing 30 percent credit is expanded to include geothermal systems eligible for capital cost allowance under Classes 43.1 and 43.2. In addition, the phase-out will begin in 2034 (previously 2032) and will not be available thereafter.
Budget 2023 Impacts for Individuals
- Launching First Home Savings Accounts (FHSA)
Financial institutions will begin to offer FHSAs, which allow individuals to contribute $8000 per year to a maximum of $40K. Contributions are tax-deductible and withdrawals are tax free, and savings and gains from an FHSA help individuals with the purchase of their first home.
- Grocery rebate
To help relieve the financial burden of rising grocery costs, the federal government proposes a one-time grocery rebate in addition to the existing GST/HST credit for modest and low-income families. The rebate will be a maximum of $234 for a single individual and $306 plus $81 per child for a family household.
- Changes to Registered Education Savings Plan (RESP)
To improve affordability of education for students, Budget 2023 increases the withdrawal limit for RESPs. Students in full-time programs will see an increase in Educational Assistance Payment (EAP) withdrawals from $5000 to $8000 per 13-week period of enrollment. Students in part-time programs will see an increase in EAP withdrawals from $2500 to $4000 per 13-week period of enrollment. Additionally, divorced parents will now be able to open a joint RESP account for their children.
Support for Navigating Budget 2023 Updates Impacts
Our goal is to provide information that helps you stay informed about these changes and take advantage of any opportunities they provide.
Learn more and review additional updates to the 2023 Canadian Federal Budget here.
For advice and guidance curated to your unique needs and goals, book an introductory meeting with KWB Accountants & Advisors here.