48. Top 5 Things in the Federal Budget that Retirement Savers and Retirees Should Know

What are the Big Announcements?

OAS Enhancement

        a. Budget 2021 proposes a one-time payment of $500 in August 2021 for seniors age 75 and older as of June 2022. 

        b. In addition, Budget 2021 proposes to introduce legislation to increase regular Old Age Security Benefits for pensioners age 75 and older by 10% on an ongoing basis, beginning July 2022. 

        c. This is expected to provide additional benefits of $766 annually to full OAS pensioners in the first year and be indexed to inflation thereafter.

    So What? - for people planning retirement, expect a boost in guaranteed, inflation adjusted benefits for life

Home Retrofits

        a. Starting in 2021/2022, the federal government will provide interest free loans of up to $40,000 through Canada Mortgage Housing Corporation (CMHC) to assist homeowners and landlords in undertaking energy efficient retrofits, including: 

            i. Replacing oil furnaces with high efficiency furnaces 

            ii. Better wall or basement insulation 

            iii. Installing high efficiency water heater 

            iv. Replacing drafty windows and doors

    So What?  - for people planning to age in place, may be a good time to make these investments in your home using government funds at 0% interest rate (make sure you can pay back though)

Disability Tax Credit

        a. Budget 2021 proposes a broadening of qualifications for the Disability Tax Credit, starting in 2021 and in subsequent taxation years once the Budget receives Royal Assent. 

        b. Qualifications will widen the qualifications defining mental functions, as well as lifesustaining therapy. This will allow an increased number of Canadians to qualify for the Disability Tax Credit.

            i. Previously, the definition of disability was more "traditional" - ie., inability to see, walk, feed, dress, speak, hear, using the washroom

            ii. Definition will be widened to account for things like : attention, concentration, memory, judgement, perception of reality, problem solving, goal setting, regulation of behaviour and emotions, verbal and non-verbal comprehension, adaptive functioning (social skills, interpersonal activities)

    So What? - The tax credit itself isn't a huge game changer (worth $1,299 in 2021).  But, wider access to the disability tax credit opens the door to a fairly lucrative retirement program for eligible Canadians - the Registered Disability Savings Plan (or RDSP)

RDSP - a qualified person can contribute up to $200,000 lifetime and is eligible for up to $70,000 in matching grants from the government

        ○ Contributions not tax deductible

        ○ Growth and grants are taxed as income on withdrawal

Tax on Unproductive Use of Canadian Housing by Foreign Non-Resident Owners Beginning in 2022

        a. Budget proposes the introduction of a new national 1% tax on the fair market value of nonresident, non-Canadian owned residential real property that is considered vacant or underused.

    So What? - Government doing something (but not much) to curb house speculation in Canada

 What WASN'T in the budget? 

        a. Capital Gains increase

        b. Tax on Sale of Principal Residence

        c. No Wealth Tax (except new taxes on yachts and cars over $100,000)

        d. No Increase in Marginal Tax rates

        e. No Increase in consumption taxes (GST)

    So What? - either the government expects revenues in the recovery to increase, and/or for interest rates to remain super low, OR they will add more taxes next year post-election.

Mackenzie Financial 2021 Budget Overview

Sunlife 2021 Federal Budget Overview

Tax highlights from Budget 2021 | Advisor's Edge

Registered Disability Savings Plan (rdsp.com)

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