One thing the Canadian government seemed to get right in this year’s election orientated budget was the increase in RSP allowance first time home buyers are eligible to withdraw for a down payment.
Too many hard-working younger generation Canadians are finding it near impossible to save the 10% minimum downpayment required to qualify for even a CMHC mortgage. There is just not the stability in the workforce there was 30 years ago which is making it significantly more difficult than with past generations to buy property.
Home ownership is one of the key initiatives that needs to be addressed by all governments. It’s fundamentally tied to safety, progress, family and responsibility.
Ownership is a stake in the future. Over the generations it’s become a symbol of pride that keeps younger couples going when the going gets tough.
But the cost of housing has skyrocketed due a whole host of factors so putting together a downpayment itself is a challenge. That’s why the ability to withdraw up to $35,000 of funds from an RSP is meaningful. It allows younger Canadians the ability to use their RSPs for a downpayment while retaining their non registered savings for emergency or day to day unexpected issues that inevitably come along with property ownership.
Here are some of the other budget highlights.
Additional support for first-time home buyers
In addition to the increase in RSP withdrawl allowance, Budget 2019 proposes to introduce the First-Time Home Buyer Incentive.
CMHC will administer a program to provide first-time home buyers with a shared equity
mortgage of either 10% (for a newly constructed home) or 5% (for a resale home) of the value of the home purchase. The shared equity mortgage will not require monthly mortgage payments and is repayable no later
than upon the sale of the home.
A New Canadian Training Benefit
Budget 2019 proposes a new refundable personal tax credit that can be claimed in connection with tuition fees and associated costs paid to an eligible educational institution.
The amount that can be claimed by an individual to offset taxes owing. The amount that can be added to the training account of an individual each year is $250, to a lifetime maximum of $5,000, but only if the individual:
• files a tax return for that year,
• is at least 25 years of age and less than 65 years of age at the end of the year,
• is resident in Canada throughout the year,
• has earnings of $10,000 or more in the year (subject to indexation), and
• has net income for the year that does not exceed the top of the third bracket for the year ($147,667 in 2019).
Progress on a national pharmacare strategy
It’s still way better not to get sick but if you do…
Budget 2019 indicates it intends to move forward on a national pharmacare strategy. It is to include:
• The creation of the Canadian Drug Agency, a new national drug agency that will build on existing
provincial and territorial successes and take a coordinated approach to assessing effectiveness and
negotiating prescription drug prices on behalf of Canadians;
• In partnership with provinces, territories and other stakeholders, the Canadian Drug Agency will
assist in the development of a national formulary—a comprehensive, evidence-based list of
prescribed drugs. This will provide the basis for a consistent approach to formulary listing and
patient access across the country; and
• A national strategy for high-cost drugs for rare diseases to help Canadians get better access to
effective treatments. The Government will co-develop a plan to ensure that patients with rare
diseases have better and more consistent coverage for life-prolonging treatments.
A crackdown on tax avoidance
Everybody needs to pay their fair share and so the government is beefing up the law to make it even harder to hide money offshore and in real estate. So they’re adding transparency to stop people hiding money in numbered companies.
With regards to property, taxpayers will need to report all sales of their principal residences on their tax returns;
• Any capital gain derived from a real-estate sale, where the principal residence tax exemption does
not apply, is identified as taxable;
• Money made on real estate flipping is reported as income;
• Commissions earned are reported as taxable income; and
• For Goods and Services Tax/Harmonized Sales Tax (GST/HST) purposes, builders of new residential
properties remit the appropriate amount of tax to the CRA.
Sean Schneider, BA Licensed Advisor
Sean has a B.A. in Economics and Political Science.
The ideal way of designing your finances will change from time to time. It always depends on situation, expertise and execution.
I'd like to talk to someone about this
“If you look really closely at any individual’s situation, there is almost always an optimal solution”.