from Chartered Professional Accounts (CPA) Canada
On Nov. 4, 2025, the Honourable François-Philippe Champagne tabled his first budget as Minister of Finance and National Revenue under the new government elected earlier this year. The budget projects a deficit of $78.3 billion for the government’s 2025-2026 year.
Some of the key tax changes announced in the budget, which take effect on varying dates, are summarized below. Please see the Department of Finance Canada’s budget documents for details of these changes and watch for detailed analysis and discussion on CPA Canada’s Tax 360.
Personal tax changes
Automatic federal benefits for lower-income individuals – The budget proposes to grant the Canada Revenue Agency (CRA) the discretionary authority to file a tax return for a taxation year on behalf of an individual (other than a trust) who meets all the following criteria:
- the individual’s taxable income for the taxation year is below the lower of either the federal basic personal amount or provincial equivalent (plus the age amount and/or disability amount, where applicable)
- all income of the individual for the taxation year is from sources for which specified information returns have been filed with the CRA
- at least once in the preceding three taxation years, the individual has not filed a return
- any other criteria, as determined by the Minister of National Revenue.
the individual has otherwise not filed a return for the taxation year prior to, or within 90 days following, the tax filing deadline for the year, and
Prior to filing a return on behalf of an eligible individual, the CRA would provide the individual with the information it has available at the time in respect of their tax return. The eligible individual would have 90 days to review the information and submit changes to the CRA. If the eligible individual does not confirm the information (with or without changes) by the end of the 90 days, the CRA could file a tax return on the individual’s behalf.
The CRA would then issue a notice of assessment, and subsequently determine and issue the individual’s credit and benefit entitlements.
The existing assessment, objection and appeal processes would apply to assessments issued under these provisions. If it is determined after a tax return has been filed by the CRA that the taxpayer did not meet the requirements for automatic tax filing, the tax return will be deemed not to have been filed.
Individuals would be able to opt out of automatic tax filing.
This measure would apply to the 2025 and subsequent taxation years (i.e., filing could begin in 2026).
Qualified investments for registered plans – A broad range of assets are qualified investments for seven types of registered plans: Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIFs), Tax-Free Savings Accounts (TFSAs), Registered Education Savings Plans (RESPs), Registered Disability Savings Plans (RDSPs), First Home Savings Accounts (FHSAs) and Deferred Profit Sharing Plans (DPSPs).
The budget proposes amendments to simplify, streamline and harmonize the qualified investment rules for these registered plans.
Small business investments – Two sets of rules apply for registered plan investments in small businesses. The first set of rules applies to RRSPs, RRIFs, TFSAs, RESPs and FHSAs, while the second set of rules applies only to RRSPs, RRIFs, RESPs and DPSPs. Neither set of rules applies to RDSPs.
The budget proposes to simplify and streamline the rules relating to registered plan investments in small businesses, while maintaining the ability of registered plans to make such investments. In particular, the more broadly applicable first set of rules would be maintained and extended to RDSPs, while the second set of rules would be repealed.
These amendments would apply as of Jan. 1, 2027. Interests in small business investment limited partnerships and small business investment trusts that are acquired before 2027 under the current rules would continue to be qualified investments.
Registered investment regime – Registered investments are qualified investments for all registered plans. Units of a mutual fund trust are qualified investments, but the mutual fund trust can also be a registered investment.
The budget proposes to replace the registered investment regime with two new categories of qualified investments, which do not involve registration.
It is generally expected that units or shares of funds that were registered investments would continue to qualify, either under existing rules or under one or both of the new categories of qualified investment trusts.
The registered investment regime would be repealed as of Jan. 1, 2027. The new qualified investment trust rules would apply as of Nov. 4, 2025.
Other changes – The budget also proposes other technical legislative amendments to simplify the qualified investment rules. Notably, the qualified investment rules for six types of registered plans (i.e., all plans except DPSPs) would be consolidated into one definition in the Income Tax Act (ITA).
Personal Support Workers Tax Credit – The budget proposes to introduce a temporary Personal Support Workers Tax Credit, which would provide eligible personal support workers working for eligible health care establishments with a refundable tax credit of five per cent of eligible earnings, providing a credit value of up to $1,100. This measure would apply to the 2026 to 2030 taxation years.
Top-Up Tax Credit – The rate applied to most non-refundable tax credits is based on the first marginal personal income tax rate. Bill C-4, currently before Parliament, would reduce the first marginal personal income tax rate, and thus the rate applied to most non-refundable tax credits, from 15 per cent to 14.5 per cent for the 2025 taxation year, and to 14 per cent for the 2026 and subsequent taxation years.
The budget introduces a new non-refundable Top-Up Tax Credit to effectively maintain the current 15-per-cent rate for non-refundable tax credits claimed on amounts in excess of the first income tax bracket threshold.
The Top-Up Tax Credit would apply for the 2025 to 2030 taxation years.
Home Accessibility Tax Credit – The budget proposes amendments such that an expense claimed under the Medical Expense Tax Credit cannot also be claimed under the Home Accessibility Tax Credit.
This measure would apply to the 2026 and subsequent taxation years.
21-year deemed disposition rule for trusts – According to the budget, certain tax avoidance techniques have been employed to transfer trust property indirectly to a new trust to avoid both the 21-year deemed disposition rule and the anti-avoidance rule. For example, this planning may involve trust property being transferred on a tax-deferred basis to a beneficiary that is a corporation owned by a new trust.
The budget proposes to broaden the current anti-avoidance rule for direct trust-to-trust transfers to include indirect transfers of trust property to other trusts.
This measure would apply to transfers of property that occur on or after Nov. 4, 2025.
Information sharing – Worker misclassification – The budget proposes to amend information sharing provisions of the ITA and the Excise Tax Act (ETA) to allow the CRA to share taxpayer information (under the ITA) and confidential information (under the ETA) with Employment and Social Development Canada for the purposes of the administration and enforcement of the Canada Labour Code as it relates to the classification of workers as independent contractors.
This measure would come into force on royal assent of the enacting legislation.
Canada Carbon Rebate – To support the winding down of mechanisms to return fuel charge proceeds, the budget proposes amendments to provide that no Canada Carbon Rebate payments would be made in respect of tax returns, or adjustment requests, filed after Oct. 30, 2026.
Corporate and business tax changes
Immediate expensing for manufacturing and processing buildings – The budget proposes to provide temporary immediate expensing for the cost of eligible manufacturing or processing buildings, including the cost of eligible additions or alterations made to such buildings. The enhanced allowance would provide a 100-per-cent deduction in the first taxation year that eligible property is used for manufacturing or processing, provided the minimum 90-per-cent floor space requirement and certain other conditions are met.
This measure would be effective for eligible property that is acquired on or after Nov. 4, 2025, and is first used for manufacturing or processing before 2030. An enhanced first-year capital cost allowance (CCA) rate of 75 per cent would be provided for eligible property that is first used for manufacturing or processing in 2030 or 2031, and a rate of 55 per cent would be provided for eligible property that is first used for manufacturing or processing in 2032 or 2033. The enhanced rate would not be available for property that is first used for manufacturing or processing after 2033.
Scientific Research and Experimental Development (SR&ED) tax incentive program – The budget proposes to further increase the expenditure limit on which the SR&ED program’s enhanced 35-per-cent tax credit can be earned to $6 million (from the previously announced $4.5 million).
This measure would apply for taxation years that begin on or after December 16, 2024 (i.e., the date of the 2024 Fall Economic Statement in which the previous increase to the expenditure limit was announced).
Agricultural cooperatives: Patronage dividends paid in shares – The temporary deferral of income taxes and withholding obligations on patronage dividends received as eligible shares until the disposition (including a deemed disposition) of the shares is extended to apply in respect of eligible shares issued before the end of 2030 (from 2025).
Critical Mineral Exploration Tax Credit (CMETC) – The budget proposes to expand the eligibility of the CMETC to include the following additional critical minerals: bismuth, cesium, chromium, fluorspar, germanium, indium, manganese, molybdenum, niobium, tantalum, tin and tungsten.
This measure would apply to expenditures renounced under eligible flow-through share agreements entered into after Nov. 4, 2025 and on or before March 31, 2027.
Clean Technology Manufacturing Investment Tax Credit – The budget proposes to expand the list of critical minerals eligible for the Clean Technology Manufacturing investment tax credit to include antimony, indium, gallium, germanium and scandium.
This measure would apply in respect of property that is acquired and becomes available for use on or after Nov. 4, 2025.
Investment Tax Credit for Carbon Capture, Utilization and Storage (CCUS) – The budget proposes to extend the availability of the full credit rates by five years, so that the full rates apply to eligible expenditures incurred from the start of 2022 to the end of 2035. Eligible expenditures that are incurred from the start of 2036 to the end of 2040 would continue to be subject to the lower credit rates.
The government will also postpone by five years the review of the CCUS investment tax credit rates that was announced in Budget 2022. Under this new timeline, the review will be undertaken before 2035 (rather than before 2030).
Clean Electricity investment tax credit and Canada Growth Fund – The budget proposes to include the Canada Growth Fund as an eligible entity under the Clean Electricity investment tax credit.
The budget also proposes to introduce an exception so that financing provided by the Canada Growth Fund would not reduce the cost of eligible property for the purpose of computing the Clean Electricity investment tax credit.
These measures would apply to eligible property that is acquired and that becomes available for use on or after Nov. 4, 2025.
Tax deferral through tiered corporate structures – The budget proposes to limit the deferral of tax on investment income using tiered corporate structures with mismatched year ends. In general terms, the proposed limitation would suspend the dividend refund that could be claimed by a payer corporation on the payment of a taxable dividend to an affiliated recipient corporation if the recipient corporation’s balance-due day for the taxation year in which the dividend was received ends after the payer corporation’s balance-due day for the taxation year in which the dividend was paid. The determination of whether the dividend payer and payee are affiliated would be based on current affiliation rules in the ITA.
The payer corporation would generally be entitled to claim the suspended dividend refund in a subsequent taxation year when the recipient corporation pays a taxable dividend to a non-affiliated corporation or an individual shareholder.
This measure would apply to taxation years that begin on or after Nov. 4, 2025.
Eligible activities under the Canadian Exploration Expense (CEE) – Canadian exploration expenses may include expenses incurred by a taxpayer for the purpose of determining the existence, location, extent or quality of a mineral resource in Canada.
CEE is a category of tax deduction that can be transferred from mining corporations via flow-through shares to equity investors, who can then claim a 100-per-cent immediate deduction on account of CEE.
The budget proposes to clarify that expenses incurred for the purpose of determining the quality of a mineral resource in Canada do not include expenses related to determining the economic viability or engineering feasibility of the mineral resource.
This amendment would apply as of Nov. 4, 2025.
International tax changes
Transfer pricing – The budget proposes to modernize Canada’s transfer pricing rules to better align with the international consensus on the application of the arm’s length principle. In addition, an interpretation rule would be added to ensure that Canada’s transfer pricing rules are applied in a manner consistent with the analytic framework set out by the OECD Transfer Pricing Guidelines. The new rules would provide more detail on how cross-border transactions between non-arm’s length persons must be analyzed. In addition, the new rules would modify certain administrative measures, which would apply to taxation years that begin after Nov. 4, 2025.
Investment income derived from assets supporting Canadian insurance risks – The budget proposes to clarify that investment income derived from assets held by a foreign affiliate to back Canadian risks is included in foreign accrual property income (FAPI) regardless of which entity holds those assets. Investment income derived from assets backing Canadian risks encompasses both income from assets held to back such risks and assets included in regulatory surplus that back such risks.
This measure would apply to taxation years that begin after Nov. 4, 2025.
Sales and excise tax measures
Underused housing tax (UHT) – The budget proposes to eliminate the UHT as of the 2025 calendar year. As a result, no UHT would be payable and no UHT returns would be required to be filed in respect of the 2025 and subsequent calendar years.
All UHT requirements continue to apply in respect of the 2022 to 2024 calendar years.
Luxury tax on aircraft and vessels – The budget proposes to end the luxury tax on subject aircraft and subject vessels. All instances of the tax would cease to be payable after Nov. 4, 2025, including the tax on sales, the tax on importations and the tax on improvements.
Carousel fraud – Carousel fraud schemes exploit the general design of the Goods and Services Tax/Harmonized Sales Tax (GST/HST) by using a series of real or fraudulent transactions where at least one person, often known as the “missing trader”, collects GST/HST in respect of a supply of property or services but does not remit it to the government. The budget announces proposed changes to the ETA to help prevent carousel fraud and improve the overall fairness of the Canadian tax system.
Proposed new rules – The budget proposes new GST/HST rules, which include:
- Specified supplies
- Remittance requirement (reverse charge rules)
- Limited application
- Input Tax Credit eligibility
- Rebate eligibility
- Invoice requirements
- Regulations.
The federal government invites feedback on these proposed rules by Jan. 12, 2026.
GST/HST treatment of manual osteopathic services – The budget proposes to clarify the longstanding policy that manual osteopathic services rendered by individuals who are not osteopathic physicians are taxable under the GST/HST. This measure would generally apply to supplies made after June 5, 2025.
Previously announced measures
The budget confirms that the government has considered each of the outstanding tax measures announced by the previous government and confirms that it intends to proceed with the following measures, as modified to take into account consultations and deliberations since their release:
- Certain legislative and regulatory proposals released on Aug. 15, 2025
- Legislative proposals released on June 30, 2025, to ensure that all Canada Carbon Rebates for Small Businesses are provided tax-free, and to extend the filing deadline for the 2019 to 2023 calendar years
- The extension of the Mineral Exploration Tax Credit announced on March 3, 2025
- Legislative proposals released on Jan. 23, 2025 to extend the 2024 charitable donations deadline
- Certain legislative and regulatory proposals announced in the 2024 Fall Economic Statement
- Legislative and regulatory proposals to remove the GST on the construction of new student residences released on Nov. 19, 2024
- Legislative amendments to give effect to the suspension of the Agreement Between the Government of Canada and the Government of the Russian Federation for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital under domestic law as of Nov. 18, 2024
- Certain legislative and regulatory proposals released on Aug. 12, 2024
- Legislative proposals released on July 12, 2024, related to implementing an opt-in Fuel, Alcohol, Cannabis, Tobacco and Vaping (FACT) value-added sales tax framework for interested Indigenous governments
- The proposed exemption from the Alternative Minimum Tax for certain trusts for the benefit of Indigenous groups announced in Budget 2024
- The proposed increase in the Lifetime Capital Gains Exemption to apply to up to $1.25 million of eligible capital gains announced in Budget 2024
- Legislative and regulatory proposals announced in Budget 2024 with respect to a new importation limit for packaged raw leaf tobacco for personal use
- Tax measures to amend the ETA, the Air Travellers Security Charge Act, the Excise Act, 2001 and the Select Luxury Items Tax Act to give effect to the proposals relating to non-compliance with information requests and to avoidance of tax debts announced in Budget 2024
- Certain legislative and regulatory proposals released on Aug. 4, 2023
- Certain legislative and regulatory proposals released on Aug. 9, 2022
- Legislative amendments to implement the Hybrid Mismatch Arrangements rules announced in Budget 2021
- The income tax measure announced on Dec. 20, 2019, to extend the maturation period of amateur athlete trusts maturing in 2019 by one year, from eight years to nine years.
The budget also reaffirms the government’s commitment to move forward as required with other technical amendments to improve the certainty and integrity of the tax system.
This article is from the Chartered Professional Accounts (CPA) Canada
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