Minister of Finance and National Revenue Francois-Philippe Champagne and Prime Minister Mark Carney make their way into the House of Commons for the tabling of the federal budget on Nov. 4.Justin Tang/The Canadian Press
The Mark Carney Liberals took a business-friendly approach to tax policy in the latest federal budget, focusing on corporate tax breaks while jettisoning Justin Trudeau-era tax programs they felt were too costly or ineffective.
Clara Pham, partner with RSM Canada LLP, says tax policy had to take a “back seat” to economic issues in the federal budget, with the Carney government limiting itself to proposing targeted tax measures rather than sweeping changes.
The budget offered little in the way of new tax breaks for individuals beyond the government’s already announced reduction to the lowest tax bracket.
“It would have cost enormously to do anything meaningful for Canadians on the personal [tax] side,” says Fred O’Riordan, national leader of tax policy with EY Canada in Ottawa. “[The Liberals] don’t have the latitude to do that with the budget deficit as high as it is.”
Although the government didn’t offer any big tax surprises, Ms. Pham says proposals such as the productivity super deduction “bring corporate taxes down by an amount that is significant enough for certain taxpayers, industries and businesses.”
Here are some key tax changes affecting clients:
Ottawa punts on bare trusts, again
The federal government said it would exempt bare trusts from having to file a trust return for 2025, deferring the application of the expanded trust reporting rules for yet another year.
Ottawa previously announced filing exemptions for 2023 and 2024 bare trusts.
In August, the Department of Finance released updated draft legislation that would revise the trust reporting rules to exempt more bare trusts from having to file a return, but that legislation has not been passed.
In Budget 2025, the government indicated it still intends to proceed with the proposed measure, with the new rules applying to 2026 and subsequent years.
Critical mineral tax break
The government proposed to expand the eligibility of the Critical Mineral Exploration Tax Credit (CMETC) to include another dozen types of critical minerals, adding to the existing group of fifteen.
The CMETC provides Canadians who invest in eligible flow-through shares an additional credit equal to 30 per cent of critical mineral exploration expenses that corporations flow out to them.
Flow-through shares allow corporations to renounce or “flow out” exploration expenses to investors, who can deduct the expenses from their own income.
The change would be effective for flow-through share agreements between budget day and March 31, 2027.
The government also said it won’t proceed with a proposal that would have allowed resource expense deductions to be 100-per-cent deductible under the alternative minimum tax (AMT). The AMT is an alternate method of calculating tax that is meant to ensure a high earner pays at least a minimum rate of tax.
Underused housing tax nixed
The Carney government proposed eliminating the underused housing tax, a 1-per-cent annual tax on underused or vacant homes that was meant to target foreign owners, but which could affect Canadians who owned homes through corporations, partnerships or trusts.
However, all UHT filing and tax payment requirements would continue to apply for the 2022 to 2024 calendar years.
Mr. O’Riordan lauds the proposal to eliminate the UHT, calling it “an administrative nightmare” and “a solution in search of a problem. There were never that many foreign investors in residential housing in Canada anyway.”
No more double-dipping on home accessibility and medical credits
The government will no longer allow taxpayers to claim both the home accessibility tax credit (HATC) and the medical expense tax credit (METC) for the same expense.
The HATC is a non-refundable tax credit that applies at the lowest personal income tax rate on up to $20,000 of eligible home renovation or alteration expenses per calendar year.
The METC is a non-refundable tax credit that applies at the lowest personal income tax rate on the amount of qualifying medical expenses in excess of the lesser of $2,834 (for 2025) and 3 per cent of the taxpayer’s net income.
The change will be effective for the 2026 taxation year.
No more Canadian entrepreneurs’ incentive
In the 2024 federal budget, the Trudeau government proposed introducing a new Canadian entrepreneurs’ incentive (CEI) that was meant to provide certain business owners access to a reduced capital gains inclusion rate on the sale of a qualifying business.
The CEI, which was proposed to be effective this year, was introduced as part of the overall proposed changes to the capital gains tax regime and meant to mitigate the effect of the previous government’s proposed hike to the capital gains inclusion rate.
In the budget document, the government indicated that cancelling the capital gains tax increase would mean foregoing about $24-billion in revenue over six years, a figure that includes the cancellation of the CEI.
Luxury tax now only on cars
The government proposed eliminating the luxury tax on aircraft and vessels as of budget day, but said it would keep the tax on cars with a cost of $100,000 or more.
The move was meant to “provide relief to the aviation and boating industries and increase the overall efficiency of the luxury tax framework,” according to the budget document.
Mr. O’Riordan says the government “did the right thing” dropping the luxury tax on aircraft and boats, adding that most of the revenue from the tax would be on cars.