Well, for those in the healthcare and medical professions, the federal budget 2024 may have many in these professionals wondering “What does the federal government have against me?” While there are some positives in federal budget 2024 for medical professionals (I did try to find them), there are many areas that my clients in the healthcare profession are going to be extremely unhappy about. I cover key points in the budget for healthcare and medical professionals in this video and the transcript below. I’ll be diving into more details in the coming weeks once we’ve had time to digest the related legislation.
Video Transcript: Federal Budget 2024 for medical professionals
We’ve had the opportunity now to see the federal budget 2024.
I’m George Dube, saving the world, from tax, one bow tie at a time®.
I will be focused on those elements that impact in the healthcare industry. From there, we’ll move forward. I will do my quick rant in terms of from an economic perspective, what I think is happening, and then we’ll get into some details and add it to, as I said over the next couple of weeks.
Balanced budgets…nowhere in sight
I like balanced budgets. I believe in wealth creation. I believe in productivity improvement. I do not believe enforced wealth redistribution as such. You can probably tell I was not an overall fan of the budget. I acknowledge there were some good elements, particularly on the real estate side, but a lot of negative. Everyone it seems from as long as I remember, reviewing budgets will be able to criticize any particular budget because it didn’t spend money on their particular pet project, whatever that may be. Think of all the interest expense now and will be in the future spent as compared to redirecting that and whether we’re talking provincial reallocation in terms of healthcare infrastructure, which some of it could be federal. I appreciate education, heaven forbid, federal on the defense side, which tends to be one of my pet projects, if you will. Well, for those people that are looking for their pet projects, I can assure you it evaporated with the interest.
Capital gains inclusion rate changes
One of the first parts that can’t escape attention is the changes to the capital gains inclusion rates. Those are jumping from 50% to two thirds with a couple of little idiosyncrasies. First, the government is choosing to punish corporations and trusts and saying that all of their capital gains will now be taxed at two thirds as compared to the former 50%. Although in fairness, in years before, those percentages were at two thirds and three quarters, but had been 50% for quite a while. Now, for individuals, the 50% will remain for the first $250,000 of capital gains and then jump to the same two thirds. The government assured us that this is a very, very, very small percentage of people that will be impacted. I believe they ended something to the effect of 0.13% or something of that nature. Let me tell you who it actually impacts You and your parents. Well, you’re thinking, I’m not part of the 0.13% richest of Canadians in the world in Canada, I guess. Well, in order to have a $250,000 capital gain, it doesn’t take much. If you have a cottage, for example, a mutual fund stock portfolio, an investment property, many people, when the second of the espouses has passed away, will easily have that size of a capital gain. In effect, the government has taken away an additional percentage of the inheritances otherwise going to the next generation church, cancer society, et cetera. In corporations, because of their punishing technique, they’re discouraging saving, they’re discouraging investment in real estate projects, in housing, in the economy, Canadian businesses, et cetera, et cetera, and this somehow magically is supposed to help with productivity, but whatever planning’s going to be done, I’m not confident that we will be changing a lot of our strategies in the sense of not using corporations and trusts. But certainly the math has changed slightly and the math is significant. Saw one of the bar graphs say, well, showing how such a small difference will be made with these changes. Well, let’s stop talking about bigger or small. Let’s talk numbers On a million dollar gain. Again, depending on the province territory we’re referring to, that difference in a corporate setting is about $83,000. It’s called 8% a little over. That’s a big number. And for individuals, yes, that first 250,000 is smaller. That was 8%. Again, to me, a big number and my figure by the way, on the corporate side is the initial taxes compared to the after the refundable taxes, which is a separate story. Again, talk with your advisor. These numbers are significant. Is it the end of the world? No, I don’t think it is.
10 weeks to make changes
We also have an interesting time period effectively 10 weeks before these measures are implemented.
Perhaps there’s a time to sell assets. Now, if you were otherwise going to be selling them shortly, I’m not usually a big fan of prematurely paying taxes, but perhaps it makes sense in your case, very difficult to sell to real estate in such a short period of time, but perhaps it’s possible talking with your advisors quickly will be paramount. Healthcare providers with the capital gain inclusion increase, keep in mind, there’s now more passive income, more investment income that may be in your corporate group. This is also tax code for, there may be a higher amount of small business deduction that is disallowed or clawed back as a result of the passive income, and this starts at $50,000 of investment income, which doesn’t take much portfolio to start that process. The nature of your investments within a corporate structure may require some strategic changes. Time to talk with your advisors, both on the accounting tax and of course in investment side.
More changes to come?
Perhaps more alarming than the changes to the capital gains rates announced is a little referenced towards the bottom that indicated more substantial changes are coming. I’m not as excited as I would like to be for healthcare providers ultimately selling their professional company and using the lifetime capital gains exemption.
Share sales positives for lifetime capital gains exemptions
On the positive side, well, not a big deal, but it’s still positive, the government has increased the dollar figure you can sell your shares for, and depending again on how you’re set up, perhaps your spouse. Currently it’s a hair over a million dollars come June, more precisely I guess June 25th, you’ll be able to sell it for one and a quarter million dollars and an indexation will begin again in 2026. So currently each year the lifetime capital gains exemption is increased by the government’s definition of inflation, so it’s indexed, so they’ve removed it temporarily, but boosted it. It’ll come back. Again, not a big deal, but a few more dollars potentially in your pocket, and that should be applauded.
Entrepreneur’s program NOT for healthcare
On the semi positive side, the government introduced a new concept with respect to entrepreneurs being able to sell the shares of their companies. If they were one of the original founders for up to $2 million and decrease their capital gains, otherwise payable, this is going to be accumulated in $200,000 increments beginning next year. Unfortunately, and why I’m not nearly as excited is the various provisions they have or exclusions amongst these exclusions. Professional companies used by most healthcare professionals, lawyers, accountants, real estate is specifically prevented or prohibited. And a variety of other industries. I think a shame given we’re trying to allegedly help in terms of one healthcare overall in the country and to the housing problem, and we’re giving advantages, but yet we’re taking them away. It’s contradictory legislation in my mind. It’s there though perhaps for side projects and certainly for others may be possibilities of using this and who knows over the years, perhaps some changes can be made. But again, one more example of the government specifically prohibiting or putting it to those that use professional companies and the real estate industry.
Home buyer’s plan positive changes
The home buyer’s plan is another positive to the budget. This is where qualifying individuals can acquire qualifying properties By borrowing from their RSP up to $35,000. Now, this $35,000 has been increased to $60,000. We still have to pay that back within a 15-year time period. However, instead of starting the repayments after two years, it’ll be a five-year period temporarily. Again, positives, I don’t see admittedly a lot of people using the plan and I expect there’ll be fewer people with some alternative choices that are now available, but it’s not a negative, so we’ll give the government a point on this one.
Equipment and patent deductions, among others
Continuing with some positives, the government will allow full deductions of certain purchases for the next period of time, and again, we’ll put some details in here with regards to patent acquisitions and various computer equipment software elements relating to the systems themselves. Perhaps not a big deal, but a positive.
Crypto information sharing
Nonetheless, in line with some of the OECD countries, Canada will be moving towards more sharing of information. With respect to crypto based assets, the exact nature of this is still to be determined.
More to come
I won’t pretend yet to have gone through the complete budget in terms of the detailed tax legislation, so over the next couple of weeks, as I do that, some of my opinions may be tweaked slightly and other points often are brought up after the budgets ’cause they’re buried in that legislation. But certainly we can talk in general.
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