2021 Federal Budget: A Recovery Plan for Jobs, Growth, and Resilience

Budget 2021 commits $30 billion over five years to build a national $10-a-day early learning and child care system. The federal government negotiates bilateral agreements with provinces and territories to reduce average regulated childcare fees. By 2022, fees in participating provinces drop by 50%, with the goal of reaching $10 per day by 2025-26. Employers do not receive a direct tax change but benefit from increased workforce participation.

The eligibility criteria for the Disability Tax Credit are expanded based on recommendations from an expert panel. New rules make it easier for individuals with mental illness, including treatment-resistant depression, post-traumatic stress disorder, and anxiety disorders, to qualify. The CRA streamlines the application process and increases the number of eligible mental health professionals who can certify DTC applications.

The Canada Workers Benefit is enhanced and the phase-out threshold increased so more low-income workers qualify. The maximum basic CWB rises to $1,395 for single individuals and $2,403 for families. An advance payment mechanism allows eligible workers to receive half their expected CWB in advance during the year, rather than waiting for their tax refund.

A new Luxury Tax applies to the sale or importation of new cars and aircraft priced above $100,000, and new vessels (boats) above $250,000. The tax is calculated as the lesser of 10% of the full sale price or 20% of the amount above the threshold. The tax is intended to ensure that luxury consumption contributes to pandemic recovery costs.

The Canada Emergency Wage Subsidy is extended to September 25, 2021, with gradual tapering of the subsidy rate as the economy reopens. Businesses experiencing revenue declines compared to pre-pandemic benchmarks receive subsidies to retain employees rather than laying them off. Over the life of the program, CEWS provides over $100 billion in support to Canadian employers.

A new Canada Recovery Hiring Program provides a 50% wage subsidy for eligible new hires between June 6, 2021 and November 20, 2021, for employers still experiencing revenue shortfalls compared to pre-pandemic levels. Businesses can claim either CEWS or CRHP, whichever is higher. The program encourages rehiring laid-off workers and taking on new employees to support the economic recovery.

Budget 2021 extends and enhances the iZEV incentive program providing up to $5,000 off the purchase of eligible zero-emission passenger vehicles. Electric vehicles, plug-in hybrids, and hydrogen fuel cell vehicles all qualify. For businesses, the full cost of zero-emission vehicles can be expensed in the year of acquisition under an enhanced capital cost allowance rate.

Technical amendments clarify the association rules for determining which corporations must share the $500,000 small business deduction limit. Changes address planning structures that attempted to access multiple small business deduction limits through non-arm's length arrangements. The amendments are intended to be revenue-neutral and clarify legislative intent without changing the policy for legitimate separate businesses.

Canadian-controlled private corporations can immediately expense up to $1.5 million per year in eligible depreciable property purchased after April 19, 2021 and placed in use before 2024. The $1.5 million limit is shared among associated corporations. This allows CCPCs to deduct the full cost of equipment, computers, and other eligible assets in the year of purchase rather than claiming CCA over multiple years.