Proper Planning and your 2023 Canadian Budget

It was only a couple of days ago that our Federal government announced their new budget and as a result, the dust is still settling.

Many are not surprised to hear that we as a country are still operating in a deficit which simply means that our Government is spending more then they earn. After record spending throughout the pandemic and the highest inflation we have see in years, a massive new deficit is not good for our Country and its residents. Just like any Canadian family, spending more then you make is a recipe for disaster and sadly, that will prove to be the case for our country.

To put this in context, the Government provided a fiscal update in 2022 which projected a budget surplus of $4.5B, not a budget deficit of $40B. This year will see a $43B deficit as of the end of March 2023, with a $40.1 deficit by March 2024 and a hope and dream that the deficit will only be $14B by March 2028.

The real question however is how does this impact you, our client, partner or friend.

In short, this budget is focused on three core priorities:

  1. Health and dental care
  2. Alleviate the cost of living for lower income Canadians
  3. Providing tax credits to improve investment to our low-carbon future

Most of us can agree that improving health and dental care is and should be a priority in Canada, as should supporting those in need of assistance just to afford the life they live.

The irony is that rising inflation as a result of too much government spending is exactly why cost of living has increased, and why so many Canadians are feeling a true threat to their financial well being across the country.

Robin Hood Lives

When spending increases and taxes decrease in areas like creating a low-carbon future, that lost revenue needs to come from somewhere. In this budget, that lost revenue will be replaced by increased revenue from tax increases to wealth individuals and corporations.  In fact, the budget suggests that revenues will raise revenues by $21.5B over the next five years.

The biggest and most obvious tax change involves the Alternative Minimum Tax (or AMT) which hasn’t been updated since the late 80’s. This tax will rise from it’s current 15% to a new 20.5% going forward. In short, the AMT “is a parallel tax calculation that allows fewer deductions, exemptions and tax credits then under the ordinary income tax rules”.  With the changes attached to the AMT, more then 99% of the AMT that will be paid will be funded by individuals who more then $300,000 and more then 80% being paid by those earning more then $1M. In the end, someone has to make up for the excess spending in this case, it’s a true Robin Hood story.

Going forward

Thankfully we didn’t see an increase in the capital gains inclusion rate or a suggestion that principal residences would now be taxed, but that does not mean we won’t see that prior to the budget one year from now.

One positive however is that many of the strategies we use with our clients remain untouched and untaxed. We would be happy to discuss how we will continue to protect our clients from losing their wealth to tax erosion which we believe, is the single largest threat to building wealth.


Chris Karram

Chris is a Co-Founder and Financial Advisor at SafeBridge Financial Group, the originators of Mortgage Centered Financial Planning, and is passionate about serving his clients and empowering the incredible team to “Be Better. Be Inspiring.” EMAIL | Facebook | Twitter