The 2023 Canadian Federal Budget was released on March 28, 2023. The Budget theme is supporting the middle class through various initiatives including affordable housing, supporting the Canadian worker, and investing in clean energy initiatives to attract investment and create jobs in the clean energy sector.
Affordable housing has been a growing concern for many years. Foreign investors sitting on vacant properties, the disproportionate development of single-family homes over rental properties, an increase in renovictions, and above-guidelines rent increases has compounded the quick rise in already large property values experienced since 2020.
The government’s response in the 2023 Budget is two-fold. It announced the introduction of the Tax-Free First Home Savings Accounts (FHSA) for Canadians as of April 1, 2023. The first-year annual contribution limit is $8000, with a lifetime contribution limit of $40,000. It is available to all Canadians 18 years or older who are first time home buyers.
Second, in an effort to counter-balance the number of rental units that are owned by large corporate investors, the government is working to increase the construction of more affordable homes through the National Housing Co-Investment Fund’s repair stream that offers low-interest and/or forgivable loans to partner organizations who are working to renovate and repair existing affordable housing.
Clean Energy Incentives and Investments
The exploding clean energy markets are quickly ramping up to meet the demands of a modernizing economy that includes cleaner, more affordable electricity, reducing emissions to a net-zero electricity grid by 2035.
The government is investing heavily into clean energy projects as a way to increase middle class jobs across the country. Clean hydrogen, green steel and aluminum are a primary focus for significant investments. The plan is to use predictable investment tax credits, abundant low-cost financing from the Canada Infrastructure Bank, and targeted electricity programs for critical projects.
Budget 2023 proposes a refundable tax credit equal to 30 per cent of the cost of investments in new machinery and equipment used to manufacture or process key clean technologies, and extract, process, or recycle key critical minerals, including:
- Extraction, processing, or recycling of critical minerals essential for clean technology supply chains, specifically: lithium, cobalt, nickel, graphite, copper, and rare earth elements.
- Manufacturing of renewable or nuclear energy equipment.
- Processing or recycling of nuclear fuels and heavy water.
- Manufacturing of grid-scale electrical energy storage equipment.
- Manufacturing of zero-emission vehicles; and,
- Manufacturing or processing of certain upstream components and materials for the above activities, such as cathode materials and batteries used in electric vehicles.
Supporting the Canadian Worker
The government has sought to ensure Canadian workers are fairly compensated for their contributions to developing a clean economy. Tax credits for investments in clean technology and clean hydrogen equipment have been tied to labour requirements that ensures workers will receive fair wages.
In addition, Budget 2023 proposes to double the maximum tax employment deduction for tradespeople’s tool expenses (from $500 to $1000). Canada’s Labour Market Development Agreements and Workforce Development Agreements are working with provinces and territories to ensure funding for a range of supports including:
- skills training
- on-site work experience
- career counselling
- job search assistance
While there is a keen interest in developing and attracting skilled labourers and tradespeople into construction to support the ambitious housing and clean energy projects, these supports are available to Canadians in a range of industries.
Automatic Filing was also introduced in 2022 to help low-income earners, who do not file their taxes, have an easy way to file taxes and not miss any valuable benefits and support they may be entitled to. The service is free and can be done over the phone. Hopefully this will encourage some of the 12% of Canadians who do not file taxes to do so through a simple process.
We are pleased that the government is tuned in to the needs of the middle class and a clean economy. Canada is positioned to do well in the clean energy sector. The introduction of new jobs is also related to the opportunity for new businesses and entrepreneurship in the growing space. For those interested in exploring whether your business qualifies for the grants and funding introduced in the 2023 Canadian Federal Budget, please reach out to our team today.