Luxury vehicle tax, DTC changes included in Budget 2022 implementation bill

The luxury vehicle tax and several holdover provisions from the 2021 federal budget could soon be enacted.

On Thursday, the federal government tabled Bill C-19 to implement certain measures in the 2022 federal budget, which also contains the luxury tax and provisions related to the Disability Tax Credit from the 2021 budget.

In March, the government released draft legislation for the Select Luxury Items Tax Act, a measure the Liberals campaigned on in the 2019 election. Bill C-19 would enact the luxury tax act, which applies to the sale of new cars and aircraft priced over $100,000, as well as new boats priced over $250,000.

The tax would be the lesser of 10% of the total price of the item and 20% of the total price of the item above the threshold. The proposed effective date is still Sept. 1, but now the tax will not apply when a bona fide, written purchase agreement was entered into for the item prior to 2022. In March’s draft legislation, that date was April 20, 2021.

Bill C-19 also would expand the criteria for the mental functions impairment eligibility and the life-sustaining therapy category eligibility for the Disability Tax Credit. This was first proposed in Budget 2021.

From the 2022 budget, Bill C-19 includes the doubling of the annual home accessibility tax credit limit to $20,000. This measure would apply to expenses incurred in 2022 and future tax years.

The bill would also enact the Prohibition on the Purchase of Residential Property by Non-Canadians Act, which would ban foreigners from buying residential property in Canada two years following the date of enactment. The act would not apply to non-Canadians who are married to or in a common-law relationship with a Canadian.

Any non-Canadian buying residential property and anyone who knowingly assists them could be fined up to $10,000. Any purchased property would also be force-sold.

Bill C-19 also included proposed amendments to the Pension Benefits Standards Act.

Lea Koiv, president of Lea Koiv & Associates Inc. in Toronto, said the Department of Finance launched a consultation in November 2020. It noted that the Canadian Association of Pension Supervisory Authorities “encouraged” plans to have governance policies in place.

“This proposal is taking things a step farther by mandating that there be one for federally regulated plans,” Koiv said in an email. “Details are still [pending] with respect to proposals relating to solvency reserve accounts. It is possible that employers may have access to surplus held within the solvency reserve account.”

Other tax-related issues addressed in Bill-C19 were allowing for the immediate expensing of eligible property by certain Canadian businesses; changing the Climate Action Incentive to a credit paid quarterly; a tax incentive for specified zero-emission technology manufacturing activities; and including postdoctoral fellowship income in the definition of “earned income” for RRSP purposes.

Major proposals from the 2022 federal budget yet to be addressed by legislation include the First Home Savings Account; the minimum tax on high earners; an anti-flipping tax; the surtax on banks and insurers; and changes to accessing the small business tax rate.

Bill C-19, An Act to implement certain provisions of the budget tabled in Parliament on April 7, 2022 and other measures, was introduced in the House of Commons on Thursday.

Melissa Shin

Melissa is the editorial director of Advisor.ca and leads Newcom Media Inc.’s group of financial publications. She has been with the team since 2011 and been recognized by PMAC and CFA Society Toronto for her reporting. Reach her at mshin@newcom.ca. You may also call or text 416-847-8038 to provide a confidential tip.