The annual federal budget introduces new policies, tax measures and fiscal updates that can affect household finances. Below is a clear summary of the key measures from the 2023 budget that are likely to become law and could influence your financial planning, taxes and savings strategies.
A one-time grocery rebate for GST credit recipients
To help offset rising food prices, the budget proposes a one-time grocery rebate for current recipients of the goods and services tax (GST) credit. The GST credit is paid quarterly to low- and modest-income taxpayers based on their prior-year tax return; remaining 2023 payments are scheduled for April, July and October.
Once the legislation is passed, the rebate would be issued quickly. Estimated amounts include up to $467 for couples with two children, up to $234 for single adults without children, and an average of about $225 for seniors. The rebate is tax-free but limited to those already receiving the GST credit and is modest in size. Read more about the grocery rebate.
Expanded dental care for uninsured Canadians
The budget commits to rolling out a national dental care plan in phases over the next two years. Seniors and children will be prioritized, with initial benefits likely before the end of 2023 and full implementation targeted for 2025. This new program replaces the temporary dental benefit for uninsured children under 12 announced last year.
Eligibility will be means-tested: families with incomes below $90,000 will qualify for coverage, and households earning less than $70,000 will have no co-pays. The Canada Revenue Agency (CRA) will share tax data with Health Canada and Employment and Social Development Canada to confirm eligibility. Employers will also begin reporting group dental coverage on T4 slips. Learn more about the Canadian Dental Care Plan.
RESP changes to address rising post-secondary costs
Registered education savings plans (RESPs) help families save for post-secondary education. The budget proposes increasing the maximum initial Educational Assistance Payment (EAP) withdrawal to better cover immediate costs when a student begins studies: from $5,000 to $8,000 for full-time students and from $2,500 to $4,000 for part-time students.
These withdrawal increases are intended to reflect rising tuition and living costs and would take effect this year. They do not change the Canada Education Savings Grant (CESG) annual or lifetime limits, nor the lifetime RESP contribution limit—only the initial EAP withdrawal amounts are being adjusted.
The budget also proposes allowing separated or divorced parents to be joint RESP subscribers. Currently, only spouses or common-law partners can be joint subscribers; this change would permit separated or divorced parents to open new joint RESPs or transfer existing accounts to a new institution with both as joint subscribers.
Changes to RDSP rules to expand access
Registered disability savings plans (RDSPs) are tax-deferred accounts that receive matching grants and bonds for people who qualify for the disability tax credit. While it is straightforward to open an RDSP for a child, adults who lack legal capacity must currently have a legal representative or guardian to open an account—an obstacle for some families.
A temporary measure since 2012 has allowed qualifying family members (parent, spouse or common-law partner) to open an RDSP for a beneficiary without legal representation. That measure was set to expire on Dec. 31, 2023; the budget proposes extending it to Dec. 31, 2026 and expanding it to include adult siblings as qualifying family members. Extending and broadening the provision should help more people access the significant benefits RDSPs offer, including government matching and tax-deferred growth.
Capital gains inclusion rate remains unchanged
Contrary to speculation, the capital gains inclusion rate remains at 50%, unchanged since 2000. That means half of a capital gain continues to be taxable while the remaining half is effectively tax-free. See our guide on capital gains tax for more context.
Alternative Minimum Tax (AMT) changes targeting high earners
The AMT applies an alternate tax computation that adds back certain deductions, credits and exemptions to determine a minimum tax payable. The budget proposes raising the federal AMT rate from 15% to 20.5% and expanding the add-backs to include items such as employment expenses, interest and carrying charges, limited partnership losses, and non-capital-loss carry-forwards.
Under the proposed rules, only 50% of non-refundable tax credits would be included for AMT purposes, and the dividend tax credit would be excluded from the calculation. A portion of capital gains, stock option income and capital gains on donated securities would be added back into income for AMT purposes.
The income exemption threshold would rise from $40,000 to an estimated $174,000 (roughly the start of the fourth federal tax bracket) by 2024, so the stricter AMT rules mainly affect higher-income individuals who claim significant tax-preferred items. The government estimates that 99% of AMT paid by individuals would come from those earning more than $300,000.
Assignment sales covered by the anti-flipping rules
The budget confirms that assignment sales—where a buyer sells the right to acquire a residential property before closing—will be treated under the residential property anti-flipping rules. Such assignment sales will be considered business income and fully taxable, rather than being eligible for the more favourable capital gains treatment.
On housing policy more broadly, the government is developing mortgage-lender guidelines to protect borrowers facing exceptional circumstances, plans to refine its foreign-buyer ban that began Jan. 1, 2023, and continues work on a home buyer’s bill of rights. The new tax-free first home savings account (FHSA) remains on track to launch April 1; see our FHSA overview for details here.
Consultation on expanding the general anti-avoidance rule (GAAR)
GAAR, in place since 1988, allows the government to challenge transactions designed primarily to avoid tax. The budget proposes expanding GAAR powers and held a consultation period through May 31, 2023, to consider introducing an economic substance test, extending the reassessment period, and applying a 25% penalty to the tax benefit received. The intent is to strengthen the CRA’s ability to scrutinize aggressive tax planning.
Intergenerational business transfers
Tax rules affecting transfers of family businesses have evolved since 2017. The budget proposes a change to address situations where selling or transferring shares to a family member could unintentionally trigger higher tax (dividend treatment) than selling to an unrelated buyer. Effective in 2024, the new measure aims to support genuine intergenerational transfers—either immediate transfers over three years or gradual transitions over five to ten years—provided the parent relinquishes control and the child remains actively involved and holds ownership after the transfer. Further details will be released throughout the year.
Employee ownership trusts to enable sales to employees
The budget proposes an ownership trust model beginning in 2024 to let business owners sell their companies to employees without requiring immediate or direct payment from staff. The proposal would also let selling owners deploy a 10-year capital gain reserve, bringing 10% of the capital gain into income each year. The government believes this will make employee buyouts more attractive and help employee-owned firms reinvest earnings.
Deficit, GDP and unemployment outlook
The budget projects a higher deficit for the current fiscal year—about $43 billion—followed by smaller deficits in subsequent years. Canada’s debt-to-GDP ratio peaked at 47.5% for 2020–2021, currently sits around 42.4% and is forecast to dip below 40% by 2027–2028. Real GDP growth is projected at 0.3% for 2023, rising to 1.5% in 2024 and remaining above 2% in 2025 and 2026. Unemployment is expected to peak around 6.2% in 2024.
In short, higher deficits and elevated federal debt appear likely in the near term, with a modest recovery in growth and labour markets thereafter.
Key takeaways from the 2023 federal budget
The 2023 budget balances targeted affordability measures with tax-rule tightening for high-income taxpayers and measures to curb property speculation. Notable points include the grocery rebate and a phased-in national dental care plan aimed at lower- and middle-income households, plus enhancements to RESP and RDSP access. The capital gains inclusion rate remains at 50%, while AMT reforms will tighten rules for taxpayers claiming many deductions. Assignment sales are now explicitly subject to anti-flipping rules, and new provisions should make it simpler to transfer businesses to children or to employees.
Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto. He does not sell any financial products.
Read more about federal programs:
- Budget 2022: How it may affect Canadians’ finances and investments
- Canada’s $10-a-day daycare program: A guide for families
- Best FHSAs in Canada: What to know about the new first home savings account
- Video: Buying your first home? Learn about the First-Time Home Buyer Incentive