2023 federal budget: tax and benefit highlights for individuals
By ATB Wealth 29 March 2023 3 min read
The 2023 federal budget was tabled on March 28, 2023. In this article, we highlight proposed changes to Registered Education Savings Plans (RESPs) and Registered Disability Savings Plans (RDSPs), and discuss tax and benefit highlights for individuals including the Grocery Rebate, Canadian Dental Care Plan and proposed changes to the alternative minimum tax.
Increase to RESP withdrawal limits
Currently, the maximum amount for an Educational Assistance Payment (EAP) from an RESP is $5,000 in the first 13 weeks of study for full-time students and $2,500 for part-time students. Budget 2023 proposes to increase these limits to $8,000 and $4,000, respectively. The budget also proposes that divorced or separated parents will now be able to open an RESP as joint account holders.
RDSP - qualifying family members
Currently, a temporary measure allows a qualifying family member, who is a parent, spouse or common-law partner, to open an RDSP and be the plan holder for an adult with mental disabilities whose ability to enter into an RDSP contract is in doubt and does not have a legal representative.
Budget 2023 announces the government’s intention to both extend the qualifying family member measure from Dec. 31, 2023 to Dec. 31, 2026, and expand the definition of a qualifying family member to include an adult sibling. A qualifying family member who becomes a plan holder by Dec. 31, 2026 will be able to remain the plan holder after 2026.
Other tax and benefit highlights for individuals
Grocery Rebate for lower-income Canadians
In the lead up to the release of the budget, the federal government announced its focus on affordability measures to combat inflation. One benefit that targets this objective is the new Grocery Rebate. Though phrased as a grocery-focused benefit, this rebate is built on top of the existing GST/HST credit and does not require the funds to be spent on groceries.
The grocery rebate will only be available to individuals and families that receive the GST/HST credit. The amount of the rebate and your eligibility will depend on your family structure and income level. Information on GST/HST income level eligibility can be found here.
The rebate will be paid as a single, one-time, lump-sum amount with the timing still to be determined. The maximum rebate is as follows:
- $153 per adult;
- $81 per child; and
- $81 for the single supplement.
Canadian Dental Care Plan
Budget 2022 proposed funding to Health Canada for dental care, beginning with children under 12 in 2022 and expanding to children under 18, seniors, and persons living with a disability in 2023, with full implementation by 2025. In September 2022, the Canadian dental benefit was announced, providing dental coverage for uninsured Canadian families earning less than $90,000 for children under the age of 12. Budget 2023 confirms plans to expand the program by the end of 2023 with details to be released later in the year.
Changes to the alternative minimum tax (AMT)
The Department of Finance previously indicated its intention to reconsider the AMT system for high-income earners. The AMT system was originally designed to ensure high-income earners cannot take advantage of special tax benefits to reduce their personal taxes below a minimum level. Under the current rules, AMT imposes a tax of 15 per cent on net-adjusted taxable income, which is calculated separately from regular income.
Individuals must pay the higher of AMT and “regular” taxes in a given year. Where AMT applies, the amount paid in excess of “regular” taxes can be used to reduce taxes for the next seven years.
Budget 2023 proposes the following changes to the AMT calculation beginning in 2024:
- Increasing the AMT rate from 15 per cent to 20.5 per cent;
- Increasing the AMT capital gains inclusion rate from 80 per cent to 100 per cent while maintaining the 30 per cent rate for capital gains eligible for the lifetime capital gains exemption;
- Including 100 per cent of the benefit associated with employee stock options in the AMT base;
- Including 30 per cent of capital gains on donations of publicly listed securities in the AMT base and similarly 30 per cent of the full benefit associated with employee stock options that have been donated;
- Disallowing 50 per cent of certain deductions from the AMT base;
- Limiting the use of most non-refundable tax credits to reduce the AMT to 50 per cent; and
- Increasing the basic AMT exemption from $40,000 to approximately $173,000 and therefore increasing the income level necessary for AMT to apply.
Tradespeople’s Tool Deduction
Budget 2023 proposes to double the maximum employment deduction for tradespeople’s tool expenses from $500 to $1,000 beginning in 2023.
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