The 2019 federal budget (Budget 2019) was tabled on Tuesday, March 19, by federal Finance Minister Bill Morneau. It did not introduce any new tax measures that will significantly impact a physician’s practice—whether incorporated or not.
Highlights for Physicians:
Canada Training Credit and Employment Insurance Training Support Benefit
Budget 2019 proposes the introduction of a refundable Canada Training Credit to allow eligible Canadians to accumulate a credit balance of $250 per year, starting in 2019, that can be refunded in the years when you have qualifying educational and training courses up to 50% of the cost of your training. Only those with earnings between $10,000 and $147,667 (in 2019) will be eligible to earn the annual tax credit, which will start accumulating at the age of 25 and expire at age 65, up to a maximum lifetime limit of $5,000.
In addition to the Canada Training Credit, Budget 2019 proposes an Employment Insurance (EI) Training Support Benefit to provide up to four weeks of income support, every four years, to assist with living expenses during eligible training.
Students and residents could benefit from the new Canada Training Credit, as a career in medicine requires many years of post-secondary study, with eligible tuition fees past the age of 25. Early and mid-career physicians with earnings below the prescribed income threshold may also accumulate the yearly $250 credit to be used for future skills development.
Changes to the Home Buyers’ Plan
Budget 2019 proposes that, effective March 19, 2019, eligible first-time home buyers can withdraw up to $35,000 from Registered Retirement Savings Plans (RRSPs) under the Home Buyers’ Plan (HBP), up from the previous limit of $25,000. This change means that early-career physicians and their family members who are planning to buy a home may want to fund their RRSPs (respecting RRSP contribution limits) before other savings vehicles. This allows for the individual to use the HBP to fund a greater portion of a first-time home purchase while benefiting from an RRSP deduction, from the additional contributions (certain conditions apply).
Additionally, beginning in 2020, the HBP is also being amended to help individuals purchase a home after the breakdown of their marriage or common-law partnership by waiving the first-time home owner requirement.
Changes to Registered Disability Savings Plans
Budget 2019 proposes changes to the treatment of a Registered Disability Savings Plan (RDSP) when the plan beneficiary is no longer eligible for the Disability Tax Credit (DTC).
Under the new rules, the previous requirement to close the RDSP when the beneficiary loses the DTC has been waived. As a result, physicians who have established an RDSP for a family member may keep the RDSP open in the event that the family member is no longer eligible for the DTC. Note that although an RDSP can remain open once the beneficiary loses the Disability Tax Credit, contributions can no longer be made to the plan after that point in time nor is the plan eligible to receive further government grants.
Permitted Annuities Under Registered Plans
Currently, annuities purchased with registered funds are required to begin paying income to the annuitant by the end of the year in which the annuitant turns 71. Beginning in 2020, Budget 2019 proposes that an individual may use registered funds to purchase an “Advanced Life Deferred Annuity” (ALDA), which allows them to defer the start of payments to the end of the year in which the annuitant turns 85. When planning for retirement, this adds another option to develop a tax-efficient plan for withdrawing funds from registered plans.
Other Points of Interest to Physician Clients
- Lower interest rates for Canada Student Loans: Budget 2019 proposes to lower the floating interest rate for Canada Student Loans to prime (from its current rate of prime plus 2.5%), and to lower the fixed interest rate to prime plus 2% (from its current rate of prime plus 5%). In addition, interest will no longer accumulate during the six-month period after a student loan borrower leaves school.
- Support for Students and Postdoctoral Fellows: Budget 2019 proposes to provide significant funding to federal granting councils to expand parental leave coverage (from six to 12 months) for students and postdoctoral fellows who may receive funding. Budget 2019 also announces increased funding for scholarships and awards aimed at increasing access to graduate studies.
- GST/HST Health Measures: Budget 2019 proposes GST/HST relief to certain health-related services and products—including supplies of foot-care devices by a licensed podiatrist and chiropodist, fertility-related medical expenses, and services rendered by a multi-disciplinary team of health professionals.
MD will continue to monitor any new developments with respect to the changes proposed in the 2019 federal budget. If you have questions about how you, or your financial plan, may be affected, please contact your MD Advisor* for more information.
* MD Advisor refers to an MD Management Limited Financial Consultant (Investment Advisor in Quebec) or your MD Private Investment Counsel Portfolio Manager.