SG LLP has had a chance to review the 2025 federal budget released on November 4, 2025. While the budget is still in the process of getting approved and becoming law, we wanted to share our thoughts on a few of the inclusions / exclusions. Before diving in, as an accountant we have to note that the tagline for this budget of “spend less to invest more” is a struggle for an accountant to get behind! This is a nonsensical statement and unfortunately opens up the door to confusion with mass amounts of spending and borrowing that will cost us and generations to come an atrocious amount in interest expense (read: billions in extra cost). Sadly, this spending gets masked in the government’s format of separating the “capital budget” and the “operating budget” and allows the government to talk up “investment” in Canada as if it is not spending! This shows a frustrating lack of sense and attempts to confuse those of us who are financially literate let alone those who are not! It is disappointing that this government is unable to make its plans more plainly without obfuscating what they are doing – spending like it is going out of style.
So what does the budget actually include – here are some highlights and thoughts:
For Individuals
- Tax Rates: No new tax increases. The lowest marginal personal income tax rate drops to 14.5% in 2025 (from 15%) and to 14% in 2026 and beyond. Some employers have already been using this rate as this was announced back during the election. The estimated annual savings to a family with this rate change is $840.
- Top-Up Tax Credit: A new credit ensures individuals do not lose out on non-refundable tax credits due to the lower tax rates. Non-refundable tax credits are normally based on the lowest tax bracket, previously 15%, so this tax credit ensures that the new lower rate does not affect the amount of non-refundable tax credits you receive to reduce taxes payable.
- Personal Support Workers: If you’re a personal support worker, you could receive up to $1,100 a year in refundable credits from 2026 to 2030.
- Automatic Tax Filing: The CRA may now file tax returns for certain low-income Canadians, making it easier to access their benefits. This is one of the few ways the CRA is actually offering to simplify reporting!
- Tax Credits: Starting in 2026, you can no longer claim the same expenditure for each of the Medical Expense and Home Accessibility Tax Credits— you will need to choose the one that maximizes the credits to you.
Canada Disability Benefit: There’s a one-time $150 payment for each Disability Tax Credit certification or recertification.
For Businesses
- Immediate Expensing: Businesses can fully deduct the cost of new manufacturing or processing buildings in the first year (for property acquired after November 4, 2025, and used before 2030).
- SR&ED Program Enhancements: The enhanced 35% tax credit for research and development is now available on up to $6 million in expenditures, and some public companies are now eligible for receipt of these credits. Capital expenses are again also included in this program for credit availability.
- Tax Deferral Rules: New rules limit the ability to defer tax on investment income using corporations with staggered year-ends. Dividend refunds will be suspended if the recipient’s balance-due day is after the payer’s, unless subsequent dividends are paid within the required timeframe. Here they go with adding complexity to corporate taxation!
Trusts & Registered Plans
- Trust Rules: Anti-avoidance rules (21 year deemed disposition) for trusts are tightened to prevent indirect transfers of property to other trusts.
- Bare Trust Reporting: The deadline for reporting until the 2026 filing year for most trusts is a positive and the ongoing confusion that has been created here gets another deferral without added clarity for filers. If the government has to keep deferring the filing deadline, it illustrates how ill prepared they are for dealing with this reporting.
- Registered Plans: The rules for what investments are allowed in registered plans are being streamlined. RDSPs will be permitted to invest in specified small business corporations, venture capital corporations, and specified cooperative corporations
Other Changes
- Underused Housing Tax: The UHT is eliminated starting in 2025—no more returns or payments required for 2025 and beyond. Thank goodness!
- Luxury Tax: The luxury tax on certain aircraft and vessels ends after November 4, 2025. No elimination on vehicles which is disappointing – not many of us were in the aircraft market.
- Information Sharing: The CRA can now share information with Employment and Social Development Canada to help enforce worker classification rules. **While not a change in legislation, this will affect businesses paying individual and corporate contractors. This will also affect individuals providing services through corporations that could be deemed to be personal service businesses.**
- Crypto Reporting: New rules require crypto service providers to report transaction values and customer information to the CRA.
As someone with a small business working with young professionals and also as a parent of young children, I don’t see how this budget provides incentives for business owners or individuals and does anything other than continue to penalize future generations. This government continues to spend without checks and balances in place. At the same time, there is no accountability for how difficult it has become for tax filers to access reasonable information in a timely matter from our taxation authority. This budget is too little value for a massive amount of spending. Canadians, we deserve more from those in charge!