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As part of the 2022 federal budget, the government passed the new Underused Housing Tax Act. This legislation creates a new 1% tax on the value of ‘underused housing’. While the underused housing tax (UHT) is intended to target foreign ownership, many Canadians through partnerships, trusts and small businesses will be required to file an annual return (Form UHT-2900) even though there are many exemptions from the tax itself. If you own residential property other than your principal residence, it will be essential to review any filing obligations.
Residential property of is defined as one of the following:
Unaffected property includes properties with 4 or more dwellings such as 4-plexes and apartments.
There are two types of owners in regard to the UHT. Type of ownership is based on December 31 of the calendar year.
These are owners that DO NOT have to file the UHT-2900 and include:
These are owners that MUST FILE the UHT-2900 regardless of tax obligation and include:
All Affected Owners MUST file a separate return for EACH property even if they are exempt from the tax. Similarly, EACH member of a partnership MUST file a separate return for EACH property.
***Rental properties owned jointly with spouse (common-law partner). There is a possible obligation to file returns for personally owned property including property owned jointly with your spouse. Depending on circumstances, this arrangement can be considered a partnership. We encourage you to consult with your Fulcrum Group advisor to determine your filing obligations.
****Property held in trust (cosigning and estate planning). There is an obligation to file a return when you are listed as the legal owner of a property but do not have beneficial ownership and are then deemed to own the property in trust. Below are two common examples of this but other do exist. Please consult Fulcrum staff if you might be a trust owner.
Scenario 1
A child is unable to qualify for a mortgage and a parent cosigned. Banks requires cosigners to be on title so now the parent is listed in fact as a legal owner. The child is the beneficial owner. The parent owns the property in trust and is deemed to be a trustee. The parent must file a UHT-2900 return (but will generally be exempt from tax). The child does not have a filing obligation for their personal residence.
Scenario 2
An aging parent is now the sole owner of their home. In order to simplify the estate a child/children are added to the title of the home. This is often done so the property can avoid probate. The child/children are now legal owners of the property but beneficial ownership is still solely that of the parent. The child/children have become trustees and must file a UHT-2900 return (but will generally be exempt from tax). The parent does not have a filing obligation for their personal residence.
Affected owners have several exemptions that will remove any tax obligations. However, even where exemptions apply, the affected owner will still be required to file the UHT-2900 return. The exemptions are classified in 3 parts as defined on Form UHT-2900.
The property must be the primary place of residence for any of the following:
The property must have one or more qualifying occupancy periods totaling at least 180 days where each day is part of increments of at least 1 month. (Short term rentals do not qualify for this exemption).
You will need to provide the total number of days on UHT – 2900 if claiming one of the following exemptions.
For individual owners who are neither Canadian citizens nor permanent residents, if between you and your spouse you own multiple residential properties, your ownership may not qualify for Part 4 or Part 5 exemptions. You and your spouse must each file an election with the CRA to designate only one property (the same property) for the purposes of the Part 4 and Part 5 exemptions.
If you qualify for any one of the part 4, part 5 or part 6 exemptions, then there is no tax obligation.
If you do not qualify for an exemption, you must calculate the tax owing for the calendar year.
Taxable value of the residential property x 1% x ownership %
Taxable value of the property is determined as follows:
Greater of:
Assessed value (obtain from property tax assessment)
OR Most recent sale price on or before December 31 of the calendar year
A Fair Market Value election can also be done to use the fair market value of the property rather than the taxable value. The amount reported as the fair market value of the residential property must be supported by a written appraisal prepared by an accredited real estate appraiser that was done specifically for the purposes of the UHT. This appraisal must be prepared between January 1 and April 30 of the following year.
The filling deadline for all UHT-2900 forms is April 30th of the year following; however, an extension was granted for all 2022 returns to October 31, 2023. For future years, the deadline will remain April 30th.
Several pieces of information are needed to file your UHT return, including a valid CRA tax identifier number (such as Social Insurance Number or Business Number). Corporations will also need to register for an Underused Housing Tax (RU) program account identifier code.
If you engage Fulcrum group to file the UHT 2900 on your behalf we will need the following for each property you or your spouse or common-law partner own:
A separate UHT-2900 return will be required for each property in which you have affected ownership. The forms can be submitted to CRA either through your CRA My Account or by mail to your designated tax centre (Winnipeg Tax Centre for Alberta residents).
[i] Fair rent is 5% of the taxable value of the residential property for the calendar year
[ii] A specified Canadian partnership is where all partners are either an excluded owner, and would be an excluded owner if they were not part of a partnership, or specified Canadian corporations (below)
[iii] A specified Canadian trust is a trust were each beneficiary on December 31 of the calendar year is either an excluded owner or a specified Canadian corporation.
[iv] A specified Canadian corporation is a corporation incorporated under federal or provincial laws in Canada and at least 90% of the equity and voting shares are owned by Canadian citizens, permanent residents or specified Canadian corporations.,
Danielle Smith announced that seniors, families with children under 18, and Albertans on benefit programs may be eligible for a non-taxable benefit of up to $600 per person (or per child in the case of families) to help with the rising cost of living. This will be paid out at $100/month over six months.
Application opens January 18th and will remain open until June 30, 2023. To be eligible for these benefits, you must sign up for a verified Alberta.ca account. The following information will assist you in finding out if you are eligible and whether you need to apply or if you will automatically be enrolled:
We have become aware that AFSC discovered a glitch in their process where they send batches of financial information to the AgriInvest Administration. This has resulted in thousands of applications submitted from June 2022 being delayed until December.
AFSC has now forwarded the application backlog and these are being keyed in manually by AgriInvest Administration. Warning letters were sent out by AgriInvest Administration on December 5 to farmers for whom they had not yet received 2021 financial information. If you received one of these letters, it is possible that AFSC did receive your information but it is just now being keyed in late by AgriInvest Administration.
A sample of the letter is as follows:
This glitch should not affect farmers who file Form T1163 (sole proprietors and partnerships with individual partners), as this information is filed directly with AgriInvest Administration via CRA when personal taxes were filed.
If you received one of these warning letters:
AFSC has confirmed that there will be no late filing penalty for applications submitted to AFSC prior to the September 30 deadline, even if not received by AgriInvest Administration until after that date.
For your information – the AgriInvest application process is normally supposed to work as follows:
If you have any further questions, please contact our office.
Happy Holidays from Fulcrum Group! If you are considering giving your employees a gift this Christmas, it is important to ensure your gifts meet the criteria set out by CRA, so that it is not considered a taxable benefit to the employee.
In order for a gift or award to your employee to be tax-free, it needs to meet the following criteria:
Prior to this update, CRA always deemed gift cards to be a taxable benefit when gifted or awarded to employees. Under recent changes, gift cards will not be considered a taxable benefit if all of the following apply:
This includes gift certificates, chip cards, and electronic gift cards. If the gift card meets all these conditions, it is considered non-cash for the purpose of the CRA’s administrative policy and is not a taxable benefit to the employee. If the card does not meet these conditions, it is considered a near-cash benefit and is taxable.
For more information visit: CRA Policy on Gifts and Awards
Staff post by Sarah Penner, CPA
Did you know that certain capital expenditures can be completely written off under CRA’s immediate expensing incentive?
All capital cost allowance (CCA) classes qualify with the exception of classes 1 through 6, 14.1, 17, 47, 49, and 51 (these exceptions are generally long-lived assets such as buildings, other structures, parking lots, and intangible assets like goodwill or trademarks). This means that purchases of vehicles and trailers (Class 10) and other equipment (Class 8) can be fully deducted in the year of purchase.
Canadian Controlled Private Corporations: For purchases made after April 18, 2021, and available for use before 2024
Canadian resident individuals and partnerships: For purchases made after Jan 1, 2022 and available for use before 2025 (or available for use before 2024 for partnerships where not all partners are individuals)
Up to $1.5 million per year, shared between associated corporations, persons, or partnerships. This limit cannot be carried forward to another year if not used.
Under the normal rules, the CCA claim was limited to a certain percentage per year which meant that a capital purchase was written off over several years. With the immediate expensing incentive, there are tax planning options available such as offsetting high-income years with capital purchases.
No – CCA is a discretionary deduction, so you can choose to deduct less than the fully allowed amount of CCA. You can still choose to spread out the deduction for your capital purchase over a number of years in order to normalize your net income.
If you have questions about how the immediate expensing incentive will work best with your business scenario, please contact our office.
Staff post by Ian Penner
On September 13, 2022, the federal government announced new measures aimed to support Canadians in light of rising inflation. These measures include:
For a single adult receiving the full GSTC, this will amount to an additional $233.50 and for a family of four, this will provide an additional $467. These amounts will be automatically calculated by CRA and paid as a lump sum payment before the end of 2022. Eligibility is based on net income and is calculated as part of filing your annual personal tax return.
Beginning this year, the federal government announced that it will be providing dental benefits to children that do not have access to dental insurance. This will consist of up-front direct payments of up to $650 per child per year for the next two years. This is the first stage of the government’s plan to provide dental care coverage to families with annual incomes under $90,000. More detail on how to access the program have yet to be announced.
A one-time top-up will provide a tax-free $500 payment to eligible Canadian renters. Incomes must be below $35,000 for families and $20,000 for individuals to qualify and 30% of income must be spent on rent. This program is provided in conjunction with the provinces and more information can be found at https://www.alberta.ca/affordable-housing-programs.aspx.
The programs are yet to be passed into legislation, but the Government has indicated they will prioritize them when the House of Commons returns on September 15.
For more information, or to see if you may qualify for some of these proposed measures, contact our office.
The disability tax credit (DTC) is a non-refundable tax credit that helps people with impairments. If you struggle with impairments in walking, mental functions, dressing, feeding, eliminating (bowel or bladder functions), hearing, speaking, vision, or require life-sustaining therapy, you may be eligible to receive this credit. The DTC can reduce the amount of income tax you may have to pay. Application requires that your doctor complete and sign a T2201 form and there are a few ways that this can now be done.
Applicants and medical practitioners have 2 options to complete the DTC application: Digital Form or Paper Form. Find the new application for Disability Tax Credit linked below:
To avoid a possible delay, you should submit your DTC application before you file your tax return.
If you have any questions or are unsure if you should apply, contact our office.
Budget 2022 had proposed to create the tax-free First Home Savings Account (FHSA) to help first-time home buyers save up to $40,000 for their first home.
Similar to an RRSP, contributions to an FHSA would be deductible against income. However, in contrast to an RRSP, any income earned in an FHSA along with any qualifying withdrawals from an FHSA that were made to purchase a first home would be non-taxable, similar to how income and withdrawals of a TFSA are treated.
Some important features to note include:
In addition to the introduction of the FHSA, the government also announced an increase to the first-time home buyers get tax credit in Budget 2022, where first-time home buyers can now get relief of up to $1,500 on acquisitions of a qualifying home made on or after January 1, 2022. This us up from $750 prior to 2022.
Did you know that CRA will be raising its interest rates as of July 1, 2022? Much like the Bank of Canada and most financial institutions, CRA will be increasing it’s prescribed interest rates this coming year.
After holding interest rates steady for several years and even decreasing rates in the third quarter of 2020, CRA will be increasing most prescribed interest rates in the third quarter of 2022 by 1%.
These changes will apply to amounts owing both to and from CRA. Updated rates can be found in the column to the far right below on various types of balances with CRA:
| First quarter (January to March 2022) |
Second quarter
(April to June 2022) |
Third quarter
(July to September 2022) |
|
| Charged on overdue taxes, CPP contributions, EI premiums | 5% | 5% | 6% |
| Paid on corporate taxpayer overpayments | 1% | 1% | 2% |
| Paid on non-corporate taxpayer overpayments | 3% | 3% | 4% |
| Used to calculate employee taxable benefits and shareholder loans | 1% | 1% | 2% |
For more information, contact our office.
Phone: 780-532-4641
Fax: 780-532-4947
Toll Free: 1-800-422-6093
Email: office@fulcrumgroup.ca
#102, 9919 – 99 Avenue
Grande Prairie, AB
T8V 0R6
