What you can do
The federal government proposes to set a limit on the amount of interest that any business can claim as an expense against gross income for tax purposes. The proposed limit is 30% of the corporation’s “earnings before the deduction of interest, taxes, depreciation and amortization” (EBITDA). EBITDA is similar to net operating income less applicable administrative expenses.
You are welcome to work out if that limit would affect you.
Rental providers and others can make comments in the pre-budget consultation. You can access the pre-budget consultation at https://budget.gc.ca/2020/prebudget-prebudgetaire/index-en.html.
The survey asks for input on current government priorities (as laid out in the Throne Speech and the various mandate letters), but it leaves some room for other suggestions.
A way to address both the interest deducibility limitation and capital gains issues in the Budget survey is to say “the government should avoid tax increases on businesses or rental housing”. Or if you prefer, to say “the government should reduce taxes on businesses and rental housing, or at least avoid tax increases on businesses or rental housing.”
In addition, a written submission can be sent by email by scrolling to the bottom of the webpage at the link.
The key issues for rental housing providers are found in the survey section on “Strengthening the Middle Class”. Within that section, there are several opportunities to provide an answer in “Other”. In view of the risk of tax increases, the key message to convey is that the government should reduce taxes on businesses and rental housing, or at least avoid tax increases on businesses or rental housing.
Here are the key questions in the survey:
- “What is the most effective action the Government could take to make life more affordable?” You must choose one answer, but in “Other” you can type in (or copy in) – avoid limiting interest deductibility on rental housing.
- “How can the Government of Canada best ensure that Canadians can find and keep safe and affordable housing for themselves and their families?” You can choose as many of the three answers as you like. You can add “Other” – Expand the Canada Housing Benefit, and avoid tax increases on rental housing
- “What investment would best help Canadians get a good job?” Besides any answers you choose from the list, you could add “Other” – Avoid tax increases on businesses and rental housing to encourage investors to create jobs and housing.
Whatever sections you choose to fill out, toward the end of your survey, you will be asked, “What is your top priority for Budget 2020?” You may choose only one answer. CFAA expects readers would like “Deliver a responsible fiscal plan while continuing to move our economy forward” OR OTHER – Avoid tax increases on businesses and rental housing to encourage investors to create jobs and housing. Don’t limit interest deductibility on real estate.
Feel free to encourage others to complete the survey. Using your own words is also an excellent idea.
To see what CFAA is doing to avoid an interest deductibility limitation on rental housing. click here. (Remember to make YOUR pre-budget submission before or after you read CFAA’s).
John Dickie, CFAA President