This blog outlines tax measures announced in the November 4, 2025, Federal Budget that the Adams + Miles team considers most relevant to our clients. Overall, the current government seems to be showing greater awareness of the impact legislation and compliance has on taxpayers than the previous government. On the other hand, there is nothing in this budget that suggests the government intends to prioritize major tax reform, which many in the tax community suggest is long overdue.
Underused Housing Tax (“UHT”)
The UHT is eliminated for the 2025 calendar year. UHT compliance for 2022 to 2024 remains.
Our comments
The UHT was ill-conceived and poorly executed legislation that never came close to fulfilling its purported mandate of increasing the supply of housing in Canada. Like many housing taxes, the UHT program was also rumoured to have cost more to administer than it took in. The elimination of the UHT is a welcome announcement.
Bare Trust Reporting
Bare trust reporting has been deferred again. Bare trusts will have to file trust returns commencing with taxation years ending on or after December 31, 2026.
Our comments
The current government is listening to the public and taking the time to get it right. Many argue there are still innocuous family arrangements caught by the bare trust rules and we hope further bare trust exemptions will be announced in the coming months.
Immediate Expensing of M&P buildings
Budget 2025 proposes immediate expensing of the cost of buildings with at least 90 per cent floor space used for manufacturing and processing goods for sale or lease. The 100 per cent deduction would be allowed for eligible buildings acquired on or after November 4, 2025, and put in use before 2030. A first year 75 per cent/55 per cent deduction would be allowed for eligible buildings put in use in 2030/2031 and 2032/2033, respectively. The government is also proceeding with other previously announced accelerated write-offs for capital assets.
Our comments
This proposal is definitely business-friendly and reflects the government’s commitment to support and increase manufacturing in Canada.
Increase to the SR&ED expenditure limit
The annual expenditure limit on which the enhanced 35 per cent refundable Scientific Research and Experimental Development (SR&ED) tax credit can be claimed is being increased to $6 million, effective for taxation years that begin on or after December 16, 2024. The lower and upper limits of the phase out range, which is based on prior year taxable capital, is also being raised to $15 million and $75 million, respectively.
Our comments
This is further evidence of the government’s publicly stated goal of creating a more self-reliant economy. The increase in the phase out range will open the door to more eligible SR&ED claimants.
Legislating the $1,250,000 capital gains exemption
The increase to the capital gains exemption to $1,250,000 will be made law.
Our comments
This was never a controversial proposal and there is no surprise that the increased exemption will be enacted. Many taxpayers thought it was already law.
Reporting by small non-profit organizations
Draft rules expand annual NPO information reporting to include NPOs with more than $50,000 gross revenue. Additionally, it is proposed that small NPOs which are below any filing threshold must file a simplified annual report. These measures, which were to be effective for fiscal years starting in 2026, have been deferred to the 2027 fiscal year.
Our comments
The draft rules cast a wide net that can technically capture a local knitting club of retirees that collects a few hundred dollars to pay for yarn and needles. It is encouraging that the government recognizes the need for further study of the rules. We doubt the $50,000 revenue test for reporting will be eliminated because this amount matches the $50,000 GST small supplier exemption for NPOs and is presumably intended to provide the CRA with a first level screening for review of GST compliance.
Other measures
A previously announced change to allow capital losses incurred in the first three taxation years of a graduated rate estate to be carried back to offset capital gains realized in the final taxation year of a deceased taxpayer is presumably being enacted as part of the August 12th, 2024, draft legislation. This is a welcome change that estate planners and executors have been waiting for, but it is curious this well-received change was not specifically mentioned in the Budget papers. Our team will continue to monitor the changes to this carryback rule.
New rules suspend a corporation’s dividend refund when an intercorporate dividend is paid to an affiliated corporation with a tax remittance due date that is later than the refund date. These rules apply to taxation years beginning on or after November 4th, 2025.
When a taxpayer’s personal credits exceed the first tax bracket (e.g., due to high medical expenses), a glitch in the new 14 per cent low bracket tax rate could cause the decrease in value of the taxpayer’s credits to exceed the value of the decrease in the tax rate. A new “top-up tax credit” fixes this problem.
New rules will better align Canada’s international transfer pricing rules with OECD transfer pricing guidelines.
The 10 per cent luxury tax on certain aircraft and boats costing more than $100,000 and $250,000, respectively, is being repealed effective November 4th, 2025.
A variety of initiatives have been announced to combat non-compliance and fraud in certain sectors.
The budget confirms the government’s intention to proceed with numerous previously announced tax measures, including the capital gains rollover for small business investments, substantive CCPC rules, excessive interest and financing expense limitation rules, and technical amendments to the global minimum tax.
Glen MacMillan, Tax Partner
Contact your Adams + Miles partner if you have any questions about the 2025 Federal Budget announcements or any other matter.
The above content is not complete, does not address all scenarios and is intended for general information purposes only. This memo should not be used or relied on as a substitute for consultation with your Adams & Miles professional advisor.
