Posted December 08, 2023.

The 2023 Fall Economic Statement (FES), introduced on November 21, 2023, by Deputy Prime Minister and Minister of Finance Chrystia Freeland, brings several significant changes and proposals that Chartered Professional Accountants (CPAs) should be aware of.

While federal government aims to avoid a recession, it anticipates a significant slowdown in economic growth. It reiterated commitment to support the economy through initiatives such as investing in new home construction and enhancing workforce in construction, imposing stricter measures on short-term rentals to alleviate the shortage of affordable housing, and introducing tax credits for green investments.

Included in the government’s 2023 FES is its intention to modify the Underused Housing Tax (UHT), change certain tax provisions intended to curb the profitability of short-term rental properties considering the housing crisis, and enhancements in healthcare affordability.

New Underused Housing Tax Changes Announced

The Underused Housing Tax Act (UHTA), effective for 2023 and years thereafter, will now exclude specified Canadian corporations, trustees of specified Canadian trusts and partners of specified Canadian partnerships relieving them of a filing obligation by expanding the “excluded owner” definition in the UHTA.

The minimum penalty for failing to file an Underused Housing Tax return by the deadline is now reduced, effective from 2022 and subsequent taxation years to $1,000 for individuals and $2,000 for corporations who fail to comply with reporting obligations.

Employee Ownership Trusts (EOT)

The 2023 budget includes measures for EOTs, aimed at facilitating business ownership transfers to trusts benefiting employees. This move is designed to encourage employee ownership and offer succession alternatives for business owners. Proposed exemptions could significantly impact capital gains limits for shares sold to EOTs from 2024 to 2026.

Sales Tax Measures

Notable changes include the expansion and refinement of the GST/HST joint venture election regime. This is important for CPAs to note as joint ventures are not considered persons for GST/HST purposes, affecting how each participant must register and account for their share.

Short-term Rentals

The government will intensify its focus on short-term rental properties listed on platforms like Airbnb and VRBO in an effort to alleviate the current housing shortage affecting Canadians. Of note, deductions claimed against rental income will be denied in cities where short-term rental restrictions exist or for non-compliant short-term rental operators, effective from January 1, 2024.

GST Rebate on New Rental Construction

A 100% GST rebate will be applied to the construction of newly built rental housing, including co-op housing projects offering long-term rental accommodation.

For CPAs, these changes bring both challenges and opportunities. Staying informed and adapting to these developments will be crucial for providing accurate and strategic advice to clients. At AJAG we continually update our course library to reflect the latest updates in the areas of Tax, Accounting, Assurance, Ethics, and other topics relevant to CPAs in Canada. You can view our full course library of over 120 courses HERE.