Major Changes Coming in 2021

Insights
| 2/10/2021

The Federal Government announced new changes impacting employees with stocks and eligible families who receive the Canada Child Benefit. These changes come in effect in the 2021 calendar year.

Employee Stock Options

The Government recently clarified the proposed changes to limit the benefit of the employee stock option deduction. These rules will be effective for stock options granted after June 30 , 2021. An employee is subject to a taxable benefit if they acquire shares of their employer under a stock option agreement and the fair market value of the shares at the time of excise exceeds the amount paid by the employee to acquire the shares. A stock option deduction equal to 50% of the taxable benefit is available to employees if certain conditions are met. Under the new rules, a $200,000 annual limit is proposed on the amount of employee stock option grants that can qualify for the 50% stock option deduction. This restriction will apply to stock options in non-CCPCs and mutual fund trusts.

Employee stock options in CCPCs would generally not be subject to this $200,000 limit. Also, non-CCPC employers with annual gross revenues of $500M or less should also not be subject to these measures. Individuals employed by non-CCPCs should keep in mind the limited tax benefit of stock options over the $200,000 annual limit when negotiating their compensation packages.

Canada Child Benefit

The Canada Child Benefit (CCB) is a non-taxable benefit paid monthly to eligible families with children under the age of 18. For 2021, there will be additional support provided to families based on the number of children under the age of six and family net income. In total, there will be four supplementary payments calculated per child under the age of six, of either:

  • $300, if family net income is, or below, $120,000, or
  • $150, if family net income is above $120,000.

The first additional payment will be made after the enabling legislation has passed, and the following three payments will be made in the months of April, July, and October 2021. The family net income used to determine the 2021 first quarter and April payments will be based on family net income for 2019 while the 2021 July and October payments will be based on the family net income for 2020.

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.

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