On April 19, 2021, Minister of Finance Chrystia Freeland presented the 2021 Budget titled “A Recovery Plan for Jobs, Growth, and Resilience.” The Budget focuses on supporting Canadians through the ongoing pandemic and setting the path for economic recovery.
Budget 2021 extends initiatives started in 2020 and includes $101.4B in new spending in a wide range of areas, including COVID-19 and health support, emergency support for businesses, social benefits, childcare, supporting an environmentally sustainable economy, infrastructure, housing, and Indigenous communities.
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The federal government will provide $43.1 billion in support to provincial and territorial health care systems through the Canada Health Transfer.
National Mental Health Service Standards
Budget 2021 proposes to provide $45 million over two years, starting in 2021-22, to help develop national mental health service standards in collaboration with provinces and territories, health organizations, and key stakeholders.
Mental Health and COVID-19
The government proposes to support projects for mental health interventions for populations disproportionately impacted by COVID-19, including health care workers, front-line workers, youth, seniors, Indigenous people, and racialized and Black Canadians, with $100 million in funding over three years, starting in 2021-22. It also proposes to provide $50 million over two years, starting in 2021-22, to Health Canada to support a trauma and post-traumatic stress disorder (PTSD) stream of mental health programming for populations at high risk of experiencing COVID-19 trauma and those exposed to trauma brought about by COVID-19.
Investments in Long-term Care and Supportive Care
Budget 2021 proposes to provide $3 billion over five years, starting in 2022-23, to support provinces and territories in ensuring standards for long-term care are applied and permanent changes made to improve the quality of life of seniors in long-term care. The federal government will work collaboratively with provinces and territories while respecting their jurisdiction over health care, including long-term care.
Age Well at Home Initiative
$90 million over three years, starting in 2021-22, will be invested to launch the Age Well at Home initiative. Age Well at Home would assist community-based organizations in providing support to low-income and otherwise vulnerable seniors with services such as matching them with volunteers who can help with meal preparations, home maintenance, daily errands, yard work, and transportation. This initiative would also support regional and national projects that help expand services that have demonstrated results in helping seniors stay in their homes.
Contributions to Specified Multi-Employer Pension Plans (SMEPPs) for Older Members
Budget 2021 includes confirmation of the government’s intent to follow through with changes announced in the 2019 Budget for SMEPPs. At that time, the Federal Government announced its intention to make changes to the Income Tax Act, which would prohibit contributions to a SMEPP in respect of members after the end of the year the member attains 71 years of age, and to defined benefit provisions of a SMEPP if the member is in receipt of a pension from the plan. Details or timing of the changes to the ITA were not expanded on.
Revised Framework for Negotiated Contribution Multi-Employer Pension Plans
In the Budget, the government announces upcoming amendments to the Pension Benefits Standards Act, 1985 to establish a revised framework for federally regulated multi-employer negotiated contribution pension plans that strengthens plan governance, transparency, and sustainability of benefits. No additional details were provided.
Fixing Contribution Errors in Defined Contribution Pension Plans
Budget 2021 announced changes to facilitate the correction of under- and over-contribution errors in a defined contribution pension plan. Under-contribution errors made in the past five years will be corrected via additional contributions to an employee’s account, subject to a dollar limit. Excess contributions made in any of the preceding five years will be refunded to the contributor. Rather than amend T4 slips, plan administrators will need to file a prescribed form for each affected employee.
Additional contributions made to correct an under-contribution error will reduce the employee’s RRSP contribution room for the taxation year following the year in which the retroactive contribution is made. Refunds of over-contributions will restore the employee’s RRSP contribution room for the taxation year in which the refund is made.
This measure would apply in respect of additional contributions made and over-contributions refunded in the 2021 and subsequent taxation years.
Old Age Security (OAS)
The government proposes to increase Old Age Security for seniors 75 and over. The government plans to implement this commitment in two steps.
- First, by providing a one-time payment of $500 in August 2021 to OAS pensioners who will be 75 or over as of June 2022.
- Then, by introducing legislation to increase regular OAS payments for pensioners 75 and over by 10 percent on an ongoing basis as of July 2022. This would provide additional benefits of $766 to full pensioners in the first year and indexed to inflation going forward.
Group Tax-Free Savings Account offered by the Service Employees International Union Healthcare
Ottawa proposes to provide funding of $27.6 million over three years for “my65+”, a Group Tax-Free Savings Account offered by the Service Employees International Union Healthcare, to support incentives for worker participation. The Service Employees International Union Healthcare will work with other unions and employers across the country to make this portable savings tool available to other workers in the elder care sector.
The government also announced that it remains open to engaging with other interested unions and employer sponsors who wish to come forward with other targeted, kick-start options to strengthen retirement security for those involved in senior care.
Unclaimed Assets Regime
The government proposes to modernize the federal unclaimed assets regime by increasing the information available and use of electronic communication to match Canadians with their unclaimed assets and expand the scope of the regime to include unclaimed balances from terminated federally regulated pension plans and foreign denominated bank accounts by proposing amendments the Bank of Canada Act, the Bank Act, the Trust and Loans Companies Act, and the Pension Benefits Standards Act, 1985.
Budget 2021 proposes to amend the Income Tax Regulations to allow issuers of T4A (Statement of Pension, Retirement, Annuity and Other Income) to provide them electronically without having to also issue a paper copy and without the taxpayer having to authorize the issuer to do so. This measure would apply in respect of information returns sent after 2021.
It also proposes that the threshold for mandatory electronic filing of income tax information returns for a calendar year under the Income Tax Act be lowered from 50 to 5 returns in respect of a particular type of information return. This means that persons or partnerships that file more than 5 T4As for a calendar year would be required to file them electronically. This measure would apply in respect of calendar years after 2021.
Employment Insurance (EI)
Budget 2021 proposes $3.9 billion over three years, starting in 2021-22, for a suite of legislative changes that will:
- Establish a 420-hour qualifying threshold, with a 14-week minimum entitlement for regular benefits and a new common earnings threshold for fishing benefits.
- Ensure that all insurable hours and employment count towards a claimant’s eligibility if the last job separation is found to be valid.
- Simplify rules around monies paid on separation, such as severance and vacation pay.
- Extend the temporary enhancements to the Work-Sharing program.
EI Sickness Benefits
Ottawa proposes funding of $3.0 billion over five years, starting in 2021-22, and $966.9 million per year ongoing to enhance sickness benefits from 15 to 26 weeks. This extension would take effect in summer 2022 and affect approximately 169,000 Canadians every year. The Budget 2021 also proposes to make amendments to the Employment Insurance Act, as well as corresponding changes to the Canada Labour Code, to ensure that workers in federally regulated industries have some job protection while receiving EI sickness benefits.
EI Premiums Reduction for Employers with Short-Term Disability Plans
The government intends to launch consultations with employers, labour organizations and private insurers regarding improvements to the EI Premium Reduction Program. Under the Premium Reduction Program, employers who provide short-term disability plans to their employees can obtain a reduction in EI premiums.
Design of a New Disability Benefit
Ottawa proposes to provide $11.9 million over three years, starting in 2021-22, to Employment and Social Development Canada to undertake consultations to reform the eligibility process for federal disability programs and benefits. The goal will be to maximize the reach of these programs and, eventually, design a new disability benefit.
Canada-Wide Early Learning and Child Care plan
Ottawa aims to provide families with access to high-quality, affordable and flexible early learning and child care no matter where they live. The government announces its goal of bringing fees for regulated child care down to $10 per day on average within the next five years. By the end of 2022, the government is aiming to achieve a 50 percent reduction in average fees for regulated early learning and child care. These targets would apply everywhere outside of Quebec, where prices are already affordable.
Canada Recovery Benefit
The government proposes to provide up to 12 additional weeks until September 25, 2021, of Canada Recovery Benefit to a maximum of 50 weeks. The first four of these additional 12 weeks will be paid at $500 per week, with the remaining eight weeks paid at a lower amount of $300 per week claimed. There are additional potential extensions to November 20, 2021.
Canada Recovery Caregiving Benefit
Budget 2021 also proposes to extend the Canada Recovery Caregiving Benefit an additional four weeks, to a maximum of 42 weeks, at $500 per week.
Canada Workers Benefits
The Canada Workers Benefit provides low-income workers with a tax refund of up to almost $1,400 for single individuals without children and $2,400 for families. The Budget 2021 proposes to raise the income level at which the benefit starts being reduced to $22,944 for single individuals without children and to $26,177 for families.
Emergency Employer Support
Canada Emergency Rent Subsidy and Lockdown Support
Budget 2021 proposes to extend the rent subsidy and Lockdown Support that were set to end in June until September 25, 2021. It also proposes to gradually decrease the rate of the rent subsidy, beginning July 4, 2021. There are additional potential extensions to November 20, 2021.
Canada Emergency Business Account
The government recently extended the application deadline for CEBA to June 30, 2021. Budget 2021 proposes to further extend the application deadline for similar support under the Regional Relief and Recovery Fund and the Indigenous Business Initiative until June 30, 2021.
Canada Emergency Wage Subsidy
The wage subsidy program was set to expire in June 2021. Budget 2021 proposes to extend the wage subsidy until September 25, 2021. It also proposes to gradually decrease the subsidy rate, beginning July 4, 2021.
There are additional potential extensions to November 20, 2021.
Canada Recovery Hiring Program
Budget 2021 proposes to introduce the new Canada Recovery Hiring Program for eligible Canadian-controlled private corporations, individuals, charities, and non-profits that continue to experience qualifying declines in revenues relative to before the pandemic.
The goal of the program is to provide alternative support for businesses affected by the pandemic to help them hire more workers as the economy reopens.
The proposed subsidy would offset a portion of the cost employers take on as they reopen, either by increasing wages or hours worked or hiring more staff. This support would be available for active employees from June 6 to November 20, 2021. Eligible employers would claim the higher of the Canada Emergency Wage Subsidy or the Canada Recovery Hiring Program.
Federal Minimum Wage
Ottawa will increase the minimum wage for workers in the federally-regulated private sector, with no impact to those employed in provincially regulated sectors, to $15 per hour, rising with inflation. The measure will affect around 26,000 Canadians who currently make less than that in those sectors.
Wage Earner Protection Program
Budget 2021 proposes to eliminate the 6.82 percent deduction applied to all Wage Earner Protection Program payments. The removal of this offset would put an average of $300 more in the pockets of Canadians who have lost their job and are owed wages by their employer.
Employee Ownership Trust
The government announced that it will engage with stakeholders to examine what barriers exist to the creation of employee ownership trusts in Canada and how workers and owners of private businesses in Canada could benefit from the use of employee ownership trusts. Employee ownership trusts allow private business owners to sell portions of the company to employees without employees having to purchase their shares directly. This is done through loans that are paid off through future company profits.
Skills, Training, and Trades
Sectoral Workforce Solutions Program
Budget 2021 proposes to invest $960 million over three years in a new Sectoral Workforce Solutions Program. Employment and Social Development Canada would work primarily with sector associations and employers to deliver training that is relevant to the needs of businesses, especially small and medium-sized businesses. This funding would also help businesses recruit and retain employees.
The government proposes to provide $470 million over three years, beginning in 2021-22, to Employment and Social Development Canada to establish a new Apprenticeship Service. Small and medium-sized employers would be eligible to receive up to $5,000 for all first-year construction and manufacturing Red Seal apprenticeship opportunities to pay for upfront costs such as salaries and training. This incentive will be doubled to $10,000 for employers who hire women, racialized Canadians, and persons with disabilities.
Skills for Success Program
Ottawa proposes to invest $298 million over three years, beginning in 2021-22, in a new Skills for Success program. The program will fund organizations to design and deliver training to enhance skills such as literacy and numeracy, as well as transferable and soft skills. This could include helping employers deliver training to increase the communication and teamwork skills of their employees or community organizations looking to strengthen basic literacy and numeracy in marginalized groups. Additionally, funding will support through Employment and Social Development Canada in the creation of assessments and training resources available online to all Canadians at no cost.
Community Workforce Development Program
The Budget proposes to provide $55 million over three years, starting in 2021-22, for a Community Workforce Development Program. Funding would be delivered to high potential growth organizations through calls for proposals under two streams: A national stream focused on priority areas, like de-carbonization and supporting a transition for workers in transforming sectors like energy, and a regional stream delivered by Service Canada regional offices, in partnership with regional development agencies, and focused on regional priorities.
Strengthening the CRA
Ottawa proposes to invest $230 million over five years, starting in 2021-22, for the CRA to improve its ability to collect outstanding taxes. It is anticipated that this proposal will lead to the collection of an additional $5 billion in outstanding taxes over five years.
Access to the Disability Tax Credit
The government announced that it will update the list of mental functions of everyday life that is used for assessment for the Disability Tax Credit so that it uses terms that are more clinically relevant. It also proposes to recognize more activities when determining time spent on life-sustaining therapy and to reduce the minimum required frequency of therapy to qualify for the Disability Tax Credit. The government will undertake a review of these changes in 2023.
Taxes on Cigarettes and Vaping Products
The government announced its intention to introduce a new taxation framework for vaping products in 2022. The federal government will also work with any provinces and territories that may be interested in a federally coordinated approach to taxing these products.
The Budget proposes to increase the tobacco excise duty by $4 per carton of 200 cigarettes, along with corresponding increases to the excise duty rates for other tobacco products. This measure took effect on April 20, 2021.
It is estimated that this measure will increase federal revenues by $2.1 billion over five years, starting in 2021-22.
Digital Services Tax
Budget 2021 proposes to implement a Digital Services Tax (DST). The sales tax targets large businesses – foreign or domestic – that earn revenue from engagement with online users in Canada, including through the collection, processing, and monetizing of data and content contributions from those users. The DST would apply as of January 1, 2022.