Major Canadian Tax Changes Coming in 2024

| 1/15/2024

Crowe MacKay’s tax experts share insight on Canadian tax changes announced by the Federal Government impacting individuals, families, and businesses.

Alternative Minimum Tax (AMT) Changes

The calculation of alternative minimum tax is complex, and, generally speaking, it is in place to help ensure that an individual pays less than what is termed “base tax,” an additional amount of tax is levied. Several changes to the calculation of AMT are proposed to take effect in 2024, increasing the amount of adjusted taxable income that will be subject to AMT.

Short-term Rentals Including Airbnb

Measures are being proposed to prevent short-term rental operators from deducting expenses against their rental income in situations where they are not compliant with the short-term rental regulations of their local municipality. The proposed measures would deny all expenses against income that has been sourced from a short-term rental. These measures would take effect as of January 1, 2024.

Trust Reporting Requirements

There are new reporting requirements for trusts requiring most trusts to file a T3 return, regardless of income or activity levels (with some exceptions; see below). The new reporting requirements were first proposed in the 2018 Federal Budget, and the implementation has been delayed to apply to trusts with taxation years that end on or after December 31, 2023. They will be required to disclose information about the settlor, trustees, and beneficiaries (including contingent beneficiaries), such as their name, address, date of birth, jurisdiction of residence, and taxpayer identification number (e.g., SIN).

Certain trusts are excluded from these new rules, including:

  • Trusts that have been in existence for less than three months
  • Trusts that hold assets with a maximum of $50,000 in fair market value throughout the year (these assets are limited to deposits, government debt obligations, and listed securities)
  • Graduated rate estates
  • Qualified disability trusts

There are significant penalties for non-compliance, so you should start gathering the required information if these rules apply to you.

Scenery Colourful Apartments

Underused Housing Tax (UHT)

Owning a residential property through a trust, private corporation, or partnership requires filing a UHT return. The Federal Government has proposed changes to relieve these types of owners from this filing requirement.

The current proposal by the government expands the definition of “excluded owner,” i.e., an owner who is not obligated to file the UHT return - to include specified Canadian corporations, partners of specified Canadian partnerships, and trustees of specified Canadian trusts. 

Therefore, if the trust, corporation, or partnership is substantially or entirely Canadian, they will be exempted from filing a UHT return. The proposed changes would be effective as of 2023. 
The government also proposes to cut the penalties associated with failure to file a UHT return. The government has proposed a penalty reduction to $1,000 for individuals from the current $5,000 and $2,000 for a corporation from the current $10,000. This change would be effective for 2022 and subsequent years. 

Additional changes have been proposed, including that “condominiumed” apartment buildings should not be considered residential property for UHT purposes. Draft legislation is expected early in 2024.  

This article has been published for general information. You should always contact your trusted advisor for specific guidance pertaining to your individual tax needs. This publication is not a substitute for obtaining personalized advice.

If you are looking for Tax Services, Crowe MacKay provides personalized support. Our tax professionals will help you maximize tax-planning opportunities and ensure the minimum amount required by law is paid.

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