On March 28, Deputy Prime Minister and Minister of Finance Chrystia Freeland delivered the 2023 Federal Budget titled "A Made-in-Canada Plan." This budget includes proposals to address education, the rising cost of living, and changes to the current tax system.

The items in this budget do not take effect until they receive parliamentary approval. However, we anticipate that some of these proposals could directly impact investors and businesses if approved. Below are the highlights of those items.

  1. Proposals for individuals
  2. Proposals for businesses
  3. Our perspective: The economy, the Bank of Canada, and the financial markets

1. Proposals for individuals


To address the increasing cost of education, the budget proposes the following:

  • Provide increased access to Education Assistance Payments (EAPs) from Registered Education Savings Plans (RESPs). Currently, in the first 13 weeks of post-secondary education, full-time students are limited to withdrawing $5,000, and part-time students are limited to $2,000 as an EAP. The budget proposes to increase these limits to $8,000 and $4,000 respectively. Funds withdrawn in the first 13 weeks over and above this amount would then come from original capital contributions to the RESP. Note: This limit exists only in the first 13 weeks of post-secondary education, after which there is no limit on EAP amounts withdrawn from an RESP.
  • Allow divorced or separated parents to open a joint RESP for their children. Previously, only spouses or common-law partners were able to jointly open RESPs.
  • Enhance student financial assistance for the school year starting August 1, 2023, by:
    • Increasing Canada Student Grants by 40%; providing up to $4,200 for full-time students,
    • Raising the interest-free Canada Student Loan limit from $210 to $300 per week of study,
    • Waiving the credit screening requirement for students over 22 years of age to qualify for federal student grants and loans for the first time.
  • Continue the support for First Nations to ensure that First Nations children will continue to receive timely, high-quality health, social, and educational support services.

Health care

The budget proposes the following measures to address health care:

  • Increased funding to improve the quality and timeliness of care. Provide an additional $195.8 billion over ten years in health transfers to the provinces and territories, and $2 billion over ten years for Indigenous health priorities to be distributed through the Indigenous Health Equity Fund.
  • Amendments to Canada Labour Code. Create a new stand-alone leave for workers in federally regulated sectors who experience a pregnancy loss. This leave would also apply to parents planning to have a child through adoption or surrogacy, and improve eligibility for leave related to the death or disappearance of a child.
  • Create a 988 suicide prevention line. A suicide prevention line will be created effective November 30, 2023, for all Canadians to call or text for immediate mental health crisis support.
  • Expand the dental care plan. Provide coverage by the end of 2023 to all uninsured Canadians with family income of less than $90,000, with no co-payment for those with family incomes under $70,000. The dental benefit provides tax-free payments up to $1,300 over two years.

Cost of living

The budget proposes to help Canadians address the cost of living by:

  • Introducing a grocery rebate. To address grocery inflation, Canadians with low-to-modest incomes will receive a one-time grocery rebate of $225 for seniors, $234 for single Canadians without children, and up to $467 for couples with two or more children. Approximately 11 million Canadians will receive this payment as an enhanced GST credit that can be applied to any expense – not just groceries.
  • Cracking down on predatory lending. To address the vulnerable in society including low-income Canadians, newcomers, and seniors, the budget proposes to change the Criminal Code of Canada to lower the maximum allowable interest rate from 47% Annual Percentage Rate (APR) to 35% APR. Payday lenders will be capped at $14 per $100 borrowed.
  • Reducing or eliminating "junk fees." Hidden fees can add up quickly. To ensure businesses are transparent with their prices, the budget addresses unexpected fees like roaming charges, event and concert fees, excessive baggage fees, and unjustified shipping and freight fees. This builds on recent steps including amendments to the Competition Act, the Bank Act, and new policy direction to the Canadian Radio-Television Commission (CRTC) to ensure affordability and allow Canadians to easily change, downgrade, or cancel services.
  • Standardizing device chargers. The federal government intends to standardize the charging port type for electronic devices such as phones, tablets, cameras, etc., to reduce electronic waste and costs to Canadians.

Alternative Minimum Tax (AMT) for high-income individuals

AMT ensures that taxpayers in a high tax bracket who claim significant tax incentives, such as capital gains exclusions and dividend tax credits, still pay a minimum level of tax. The budget proposes several changes to current AMT rules:

  • Raise the AMT rate from 15% to 20.5%,
  • Increase the amount of income included in the AMT calculation by limiting certain deductions,
  • Increase the AMT exemption from $40,000 to approximately $173,000 (indexed annually to inflation),
  • Increase the capital gains inclusion rate from 80% to 100%, and apply a 50% rate to capital loss carryforwards and allowable investment losses,
  • Include 30% of capital gains on charitable donations of publicly listed securities.

Extending the qualifying family member provision for Registered Disability Savings Plans (RDSPs)

RDSPs allow a qualifying family member to open an RDSP account on behalf of an individual adult with a mental disability (the RDSP beneficiary) in situations where they are incapable of doing so themselves. Currently, a "qualifying family member" is limited to a parent, spouse, or common law partner of the RDSP beneficiary. The budget proposes to expand this definition to include adult siblings. 

Crypto asset exposures

The Office of the Superintendent of Financial Institutions (OSFI) will consult with federally regulated financial institutions on guidelines for publicly disclosing their exposure to crypto assets. Additionally, federally regulated pension funds will be required to disclose their crypto asset exposures to OSFI. 

2. Proposals for businesses

Clean technology incentives for businesses

The budget proposes up to a 30% refundable tax credit for businesses that invest in various types of clean technology, and a tax credit ranging from 15% to 40% of equipment costs related to clean hydrogen production. 

Deduction for tradespeople's tool expenses

Proposal to double the maximum amount that Canadian tradespeople can deduct on the purchase of tools required to perform their trades, from $500 to $1,000 per year. 

Reducing credit card merchant fees

To support small businesses post-pandemic, Visa and Mastercard have committed to lowering interchange fees for small businesses by up to 27% while also protecting reward points for Canadians. 

Intergenerational transfer of business ownership

Bill C-208 previously introduced an exception to certain share transfers from parents to corporations owned by their children or grandchildren. This Bill allows for the intergenerational transfer of shares to be treated the same as the sale of shares to an arm’s length (unrelated) corporation. The budget proposes additional criteria for the transfer to qualify as a genuine intergenerational business transfer, including: 

  • an immediate intergenerational business transfer (three-year test) based on arm’s length sale terms; or
  • a gradual intergenerational business transfer (five-to-ten-year test) based on traditional estate freeze characteristics (an estate freeze typically involves a parent crystalizing the value of their economic interest in a corporation to allow future growth to accrue to their children while the parent’s fixed economic interest is then gradually diminished by the corporation repurchasing the parent’s interest).

The budget also proposes a ten-year capital gains reserve for genuine transfers that satisfy the above conditions. 

Employee Ownership Trusts (EOTs)

An Employee Ownership Trust (EOT) is a trust where shares of a corporation are held by a trust for the benefit of the corporation's employees. EOTs provide business owners with additional options for succession planning and for employees to facilitate the purchase of a business without having to pay directly for the shares. 

Proposal to include several changes effective January 1, 2024:

  • Increase the capital gains reserve from 5 to 10 years for EOTs,
  • Extend the repayment period from 1 to 15 years for EOT shareholder loans,
  • Exempt EOTs from the 21-year deemed disposition rule.

3. Our perspective: The economy, the Bank of Canada, and the financial markets

The release of the Federal budget gives a nod to fiscal discipline, likely a reaction to the deficit spending that followed the pandemic. It does contain some targeted investments aimed at inflation relief and clean energy initiatives, but overall, we don't see any significant surprises or programs that materially alter our outlook for the economy, monetary policy, or the financial markets. Here are our key takeaways from 2023's budget: 

  1. The economy: nothing to change the existing path toward a slowdown.

  • Key economic issues facing Canada include employment conditions, ongoing elevated consumer debt levels, the housing market and business investment. This budget doesn't take dramatic swings in these areas, thus we don't view this year's proposals as having a sizable impact on the near-term path ahead for the economy.
  • There are no major announcements related to raising revenue outside of an increase in the minimum tax on high-income earners as well as new taxes on corporate share buybacks and dividends from financial institutions. In sum, these proposals are expected to raise roughly $2 billion over the next few years, meaning the combination of slower economic growth and no new boost to revenue is forecasted to produce $40 billion deficits this year and in the 2023/2024 fiscal year.
  • While our broad take is that this budget seems aimed at signaling some fiscal restraint, there are a few new spending measures, including $2.5 billion this year for grocery rebates for lower income Canadians. Other items include $5 billion over this year and next for additional health care spending along with more than $5 billion in credits and incentives for clean energy investments between now and the 2027/2028 fiscal year.
  • We think this budget acknowledges an economy that is softening, which may explain the lack of sizable changes as policymakers evaluate the path ahead. We maintain our view that a mild recession in Canada and the U.S. is a reasonable outcome, but the healthy state of the labour market will play an important role in blunting a more severe downturn. We suspect this budget may leave some scope for additional fiscal support in the event a downturn requires some help from Ottawa. Outside of that, we don't see much impact on near-term GDP from this budget.
  1. Monetary policy: unlikely to alter the Bank of Canada's approach.

  • While this budget seeks to offer some relief to consumers via the grocery rebate and potential help on energy costs down the road, the current inflation environment can't be solved through the budget. Instead, softer demand stemming from a slower economy, along with moderating supply chain disruptions, will be the primary catalysts behind falling inflation levels this year.
  • As a result, we don't think this budget will have any impact on upcoming monetary policy decisions. The Bank of Canada (BoC) recently moved to the sidelines after an extended rate hike campaign, a stance we expect to be maintained as the central bank evaluates consumer price trends and the health of the economy.
  1. Financial markets: inflation, growth, and earnings – not the budget – are in the driver's seat.

  • History has shown that markets tend to look past fiscal policy changes unless they have meaningful economic spillovers. In our view the proposed budget will not materially change the near-term economic growth or inflation outlooks, and therefore is unlikely to alter the role of monetary policy or economic growth in the road ahead for financial markets.
  • With inflation moderating but still elevated, the BoC is unlikely to change course from its recent pause. And with the U.S. Federal Reserve also nearing the end of its tightening campaign in response to the recent bank troubles, last year's upward pressure on interest rates should continue to ease. This, alongside an eventual look-ahead by investors toward a rebound in corporate profits as we move through the year, should provide some support to balanced portfolios as we progress.

Contact us 

This budget is in draft form and subject to parliamentary approval. If you have questions regarding how any aspects of it may impact your financial strategy, please contact your Edward Jones financial advisor.

Important Information:

The federal budget as released is in draft form and subject to parliamentary

approval. To read the government’s full proposed budget, go to the Government of Canada’s website.

Commentary from Edward Jones does not consider your specific situation but provides a general summary of the 2023 federal budget release. Commentary is provided in relation to the released information available on the date of publication.

Edward Jones, its employees, and financial advisors are not estate planners and cannot provide tax or legal advice. Please consult a qualified tax specialist or lawyer for professional advice regarding your specific situation.