Key tax measures that took effect Jan. 1

The ringing in of a new year also signals the effective date for new or significantly revised tax legislation.

Here’s the major tax legislation that took effect Jan. 1, 2024: 

Employee ownership trusts

The 2023 federal budget introduced tax rules to facilitate the creation of employee ownership trusts (EOTs), which allow groups of employees to purchase a business over time. While the enabling legislation to implement EOTs included in Bill C-59 has yet to pass into legislation, the effective date for the rules governing EOTs is Jan. 1.  

Family business transfer rules

Ottawa’s new framework for the “genuine” intergenerational transfers of family businesses came into effect for transfers undertaken on Jan. 1, 2024 or later. Enabling legislation was included in Bill C-59. 

Share buyback tax

In its 2023 budget, the federal government proposed a tax of 2% on the net value of equity repurchases by certain Canadian corporations, trusts and partnerships whose equity is listed on a designated stock exchange. Enabling legislation was included in Bill C-59. 

Revised alternative minimum tax

In its 2023 budget, the federal government proposed increasing the alternative minimum tax (AMT) to 20.5% from 15% while also increasing the AMT exemption to $173,205 for 2024, up from $40,000. Enabling legislation for the revised AMT was not included in Bill C-59. Nevertheless, the effective date under draft legislation released Aug. 4, 2023 is Jan. 1, 2024. 

General anti-avoidance rule

Amendments to the general anti-avoidance rule included in Bill C-59 will generally apply to transactions that occur Jan. 1 and after. However, a preamble to the GAAR, which is intended to assist in interpretation, will apply only when Bill C-59 receives royal assent. Further, a new GAAR penalty provision will apply only to transactions that occur on or after the date that Bill C-59 receives royal assent. 

Dividend received deductions

The “dividend received deduction” allows corporations to claim a deduction on dividends received from shares of Canadian corporations, effectively excluding the dividends from income. Beginning Jan. 1, the government is denying the dividend received deduction for dividends received by financial institutions on shares that are mark-to-market property. Enabling legislation is in Bill C-59.

TFSA contribution room of $7,000

In 2024, Canadians receive $7,000 in new TFSA contribution room, up from $6,500 in 2023. For someone who has been eligible for the TFSA since its launch in 2009, but who has never contributed, the total TFSA contribution room for 2024 is $95,000.  

New second earnings ceiling for CPP contributions

Starting in 2024, a second Canada Pension Plan (CPP) earnings ceiling of $73,200 will be used to determine additional CPP contributions, known officially as the year’s additional maximum pensionable earnings. As a result, earnings between $68,500 and $73,200 will subject to a second tranche of CPP contributions as part of the plan’s expansion that began in 2019. 

CRA charging 10% interest on overdue tax

Through the first quarter of the year, the Canada Revenue Agency (CRA) will charge 10% interest on overdue tax balances. The interest rate the CRA charges on current or previous overdue balances is tied to the consumer price index and may adjust each quarter.

Mandatory electronic filing threshold lowered

Beginning Jan. 1, businesses filing six or more information returns must file them electronically to the CRA. Previously, a business that filed 50 or fewer returns could file them on paper.