Dec 27, 2021 | Tax

The 2022 Federal Budget came out on April 7th, 2022. Learn how it affects you and your business.

As far as accounting and tax liability is concerned, the most important thing the federal government does every year is pass the budget, and the 2021 Federal Budget is no exception to this rule. Every business owner needs to be aware of the changes in each federal budget because they directly affect their bottom line. The more you understand what’s going on with the new budget, the more able you will be to work with your accountant to maximise your benefits from the changes to the budget and associated tax laws.

The Pandemic

You cannot understand the changes in the 2021 Federal Budget without considering the context under which it was passed, and that means the COVID-19 pandemic. The pandemic and the associated lockdowns has had a massive impact on every economy in the world and Canada is no exception. Businesses have suffered significant losses, which will translate directly into a reduction of the Federal Government’s tax revenue. However, rather than doubling down to try and claw back more revenue, the Federal Government has decided to accept further reductions in tax revenue in order to help the economy recover from the effects of the pandemic. Thus, many of this budget’s provisions are designed to provide a temporary boost to businesses and the economy.

Highlights of the Budget

In the following sections we will look at some of the highlights of the 2021 Federal Budget as it applies to small businesses in Canada.

Changes to Capital Expensing

In order to help drive the economy, the 2021 Federal Budget has introduced a new $1.5 million immediate expensing allowance for eligible purchases made after April 18, 2021 that will become available for use before 2024. This property must be subject to Capital Cost Allowance rules, and the benefit can only be applied in the taxation year in which the property becomes available for use.

It is impossible to understate the importance of this benefit. It helps level the playing field against foreign competition by ensuring that you can continue to grow your business despite the challenges of the current economic and health care situation.

Note that not all properties are eligible so it is important to discuss any such purchases with your accountant or tax advisor in order to make the best use of it.

More Mandatory Reporting

One thing the Federal Government is doing, is changing the rules around reporting. It only makes sense that in a taxation year when ever more Federal support is available the government is going to take steps to monitor business financial activity more closely. It’s all part of a general push to strengthen the CRA’s anti-avoidance policies.

Reportable Transactions

Traditionally, transaction reporting has been required when the transaction displays two of the hallmarks of an “avoidance transaction,” which basically refers to any transaction that is entered into for the specific purpose of reducing the associated tax burden. It does not mean that you cannot enter into transactions that will reduce your tax burden, only that the transaction must have a primary business purpose other than simply reducing tax liability. The new proposals require reporting when only one of the three traditional hallmarks are present.

These transactions will have to be reported within 45 days of either entering into the transaction or entering into a contract for the transaction. Both the taxpayer and any promoter or advisor who might benefit from the transaction are subject to these rules.

Notifiable Transactions

The new category of notifiable transactions refers to transactions that are either a type that has previously been seen as abusive, or are seen as “transactions of interest.” These are types of transactions that have been previously identified as being worth further investigation for possible tax avoidance abuse.

It’s important to note that these particular transactions are being highlighted in order to provide information to the CRA so that a proper determination can be made. The same reporting rules that apply to reportable transactions also apply here.

Uncertain Tax Treatments

At the present time, there is no requirement to report uncertain tax treatments to the CRA, but the new budget is implementing new requirements to report these treatments when certain conditions are met. Most small businesses do not have to worry about this, as it is only applicable to corporations with over $50 million in assets, but larger corporations do have to pay attention to these new rules.

The best way to deal with these new and more stringent requirements is to ensure that your accountants and tax professionals are kept in the loop throughout the year. You should also be aware that the reassessment period does not start until the transaction has been reported.

Capital Cost Allowances

The 2021 Federal Budget also includes a number of changes to CCA eligibility for various kinds of energy generation and storage equipment. These changes generally reflect the Federal Government’s support of clean energy policies. In most cases, new clean energy generation equipment is being added to Classes 43.1 and 43.2 of the CCA regime while new fossil-fuel equipment is being removed from the same classes.

Other Aspects

There are a large number of other changes in the 2021 budget that reflect the pandemic and the worldwide response to it on both a personal and business level. Some industries have been harder hit than others and the budget contains a number of elements to try and offset those issues as well as others that reflect the current focus on tax avoidance.

For example, the budget contains an additional twelve-month timeline extension for various production tax credits for the film and television industry, often extending the timeline from twenty-four to thirty-six months.

The budget also includes new provisions to clarify the authority of CRA officials in the course of their official duties. Taxpayers are now required to answer questions in the form the officials require and also provide all reasonable assistance to them.


A reading of the 2021 Federal Budget shows a focus on two complementary areas of the economy. On the one hand, the federal government is actively working to provide more resources to businesses to help the economy recover from the ravages of the pandemic. On the other hand, the government is also strengthening its audit policies to help ensure that these tax benefits are not taken advantage of.

This is why it is so important to work with your accountant to develop an effective tax strategy that will allow you to get the most out of these programs without exposing yourself to any unnecessary liabilities.

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