Five Tax Developments Canadian Taxpayers Should Know This Month
Canadian tax rules continue to evolve, and several recent developments could have important consequences for business owners, investors, homeowners and individuals receiving federal benefits.
This month, we look at five developments: the proposed Productivity Mega Deduction, the new $150 supplemental Canada Disability Benefit payment, GST/HST exposure when renovating and selling homes, a significant U.S. court decision affecting Canadians subject to U.S. tax, and the consequences of ignoring a CRA Requirement to Pay.
Accelerated CCA: The Proposed Productivity Mega Deduction
What property would qualify?
The proposal is broad, but it is not universal. The government specifically excludes several categories, including:
- most Class 1 and Class 3 buildings and additions;
- Classes 14 and 14.1 property, which can include franchises, licences and goodwill;
- Class 51 property;
- certain Class 10 and 10.1 vehicles; and
- certain property subject to Schedules V and VI of the Income Tax Regulations. [canada.ca], [canada.ca]
There are also restrictions involving previously used property and transactions between non-arm’s-length parties. For individuals and partnerships containing individual members, immediate expensing generally cannot be used to create or increase a loss from the relevant business or property source. [canada.ca], [canada.ca]
Canadian development expenses incurred on or after September 15, 2026 would also receive immediate expensing treatment under the proposal, subject to the detailed rules. [canada.ca], [canada.ca]
Why it matters
Timing could become particularly important for businesses contemplating equipment, technology and other capital purchases. A qualifying asset acquired after September 15, 2026 could potentially produce a much larger first-year deduction than under ordinary CCA rules. Assets excluded from the new measure may nevertheless continue to benefit from the existing Accelerated Investment Incentive. [canada.ca]
Keep in mind: this measure was introduced as a proposal accompanied by draft legislation. Taxpayers making investment decisions should therefore distinguish between the government’s announced policy and legislation that has completed the parliamentary process. [canada.ca], [canada.ca]
Supplemental Canada Disability Benefit: Who Gets the Extra $150?
There is also an important update for recipients of the Canada Disability Benefit (CDB).
The federal government has introduced a one-time $150 supplemental payment intended to help eligible CDB recipients offset costs associated with obtaining the Disability Tax Credit (DTC) certificate, which is required to qualify for the CDB. [canada.ca]
The good news is that qualifying recipients do not need to apply separately for the supplemental payment. Payments are being issued automatically. [canada.ca]
When will recipients receive it?
The payments are being delivered in phases:
- September 17, 2026: Eligible CDB recipients who received a CDB payment during the period from July 2025 through June 2026 were scheduled to receive the supplemental amount. [canada.ca]
- Winter 2027: Individuals who became eligible for a CDB payment at any point beginning in July 2026, as well as individuals approved for a new DTC certificate through recertification, are scheduled to receive their supplemental payment during this second phase. [canada.ca]
Interestingly, eligibility can extend to someone who received the CDB previously but is no longer eligible. The government’s example confirms that a person who received only one previous CDB payment could still qualify for the supplemental payment. [canada.ca]
For taxpayers and their families, the practical takeaway is simple: if you qualify, watch for the payment, but there should be no separate supplemental-payment application to complete. [canada.ca]
Quick Flips and GST/HST: When Does a Renovator Become a “Builder”?
Buying a home, renovating it and selling it can create more than an income tax issue. Depending on the circumstances, the owner may also be considered a“builder” for GST/HST purposes, potentially making GST/HST applicable to the sale.
The CRA makes an important distinction: the term builder has a specific meaning for GST/HST purposes and is not limited to someone who physically constructs a home. Generally, a person who owns or has an interest in real property and constructs a new home, substantially renovates an existing home, or constructs an addition to multiple-unit housing can be a builder. This includes situations where the owner hires someone else to perform the work. [canada.ca]
However, there is an important exception for individuals. An individual generally will not be considered a builder merely because they constructed or substantially renovated a home if the activity was not carried out in the course of a business or an“adventure or concern in the nature of trade.” [canada.ca]
That distinction can become particularly important for a so-called quick flip.
Someone who buys a run-down property, substantially renovates it and quickly sells it for a profit may face a very different GST/HST analysis from a homeowner who substantially renovates a long-term family residence and later sells because of a change in personal circumstances.
What does CRA look at?
There is no single fact that automatically determines whether an individual is a builder. The circumstances surrounding the acquisition, renovation, use and eventual disposition of the property need to be considered.
For example, the CRA’s guidance distinguishes between a person carrying on a business or an adventure or concern in the nature of trade and an individual undertaking construction or renovation outside such an activity. It also recognizes that acquiring certain interests in housing with a primary purpose of resale can result in builder status. [canada.ca]
This means taxpayers should be prepared to support the commercial or personal nature of the transaction with the underlying facts.
Why does being a builder matter?
The distinction matters because GST/HST generally applies to sales of new or substantially renovated housing by builders. The CRA states that builders must generally collect and remit GST/HST on taxable sales of new or substantially renovated homes, subject to specific exceptions. Significantly, GST/HST can apply to a taxable sale of real property even when the seller is not registered for GST/HST. [canada.ca]
Builder status can also trigger self-supply rules in certain circumstances. Under these rules, a builder may be treated as having sold and immediately repurchased a newly constructed or substantially renovated property, potentially creating a GST/HST liability even though there was no conventional sale to another person at that time. [canada.ca]
On the other hand, builders who are GST/HST registrants may be entitled to claim input tax credits (ITCs) for GST/HST paid on qualifying goods and services used in construction or substantial renovation. [canada.ca]
Taxpayer takeaway: If you buy properties, substantially renovate them and resell them, do not assume that the transaction is simply the sale of a residential home. Determine whether the GST/HST builder rules apply before completing the sale, particularly where renovation and resale activities resemble a commercial venture.
U.S. Tax Credit Against Investment Tax: A Setback for Canadians Subject to U.S. Tax
Canadians who are also subject to U.S. taxation should take note of an important cross-border decision.
On August 31, 2026, the U.S. Court of Appeals for the Federal Circuit decided Estate of Paul Bruyea v. United States. The case concerned a U.S. citizen residing in Canada who sold Canadian real estate, paid Canadian income tax on the gain and was also subject to the U.S. Net Investment Income Tax (NIIT) on that income. [kpmg.com], [law.justia.com]
The taxpayer argued that Article XXIV of the Canada-U.S. income tax treaty allowed Canadian income tax to be used as a foreign tax credit against the NIIT.
A lower court had sided with the taxpayer. The Federal Circuit, however, reversed that result. [kpmg.com], [law.justia.com]
The appellate court concluded that the treaty’s credit provisions remained subject to limitations under U.S. domestic law. U.S. foreign tax credit provisions apply against Chapter 1 taxes, whereas the NIIT under Internal Revenue Code section 1411 is imposed under Chapter 2A. The court therefore concluded that Canadian foreign tax credits could not be applied against the NIIT. [kpmg.com], [law.justia.com]
The Federal Circuit reached the same essential result in the companion Christensen case concerning the U.S.-France treaty. [kpmg.com], [kpmg.com]
Why Canadians should care
This is particularly relevant for U.S. citizens living in Canada who remain subject to the U.S. tax system and have investment income or capital gains potentially falling within NIIT.
The decision shows that the Canada-U.S. treaty does not necessarily eliminate every instance of economic double taxation. Cross-border taxpayers with NIIT exposure should have their foreign tax credit calculations reviewed in light of the Federal Circuit’s August 31 decision. [law.justia.com], [kpmg.com]
Requirement to Pay: When Someone Else’s CRA Debt Can Become Your Problem
Receiving a CRA Requirement to Pay, or RTP, is much more serious than receiving an ordinary request for payment.
A Requirement to Pay is a legal garnishment document that allows the CRA to intercept money that a third party owes, or will owe, to a taxpayer with outstanding government debt. Potential third parties include employers, banks and other financial institutions, customers and anyone else holding money belonging to the taxpayer. [canada.ca]
An RTP can capture considerably more than wages. According to the CRA, garnishments can apply to:
- salary, wages, commissions and bonuses;
- money held by financial institutions;
- employee expense reimbursements;
- rent or lease payments;
- certain non-arm’s-length loans;
- annuities, interest, dividends and other investment proceeds;
- accounts receivable; and
- insurance proceeds. [canada.ca]
What if you ignore the RTP and pay the taxpayer instead?
This is where an RTP can become particularly costly.
The CRA states that a third party must comply with a garnishment. If money is owed to the taxpayer and the RTP requires that money to be remitted to the government, continuing to pay the taxpayer instead can make the third party personally liable for the amount that should have been sent to the government, up to the amount of the garnishment. [canada.ca]
That means the third party could effectively end up paying twice: once to the taxpayer and again to the government.
CRA specifically states that liability can arise when a third party:
- fails to remit money when it owes money to the tax debtor;
- continues paying amounts to the taxpayer that should legally have been remitted under the garnishment;
- pays someone else, such as a relative or another creditor, on behalf of the taxpayer instead of remitting the amount; or
- in certain circumstances, loans or advances money to the taxpayer within 90 days of receiving the garnishment. [canada.ca]
“The taxpayer told me they sorted it out with CRA”
That’s not enough.
CRA specifically advises third parties that if the taxpayer says they have made arrangements with the CRA, the recipient must continue complying with the garnishment unless CRA provides written notice that it has been withdrawn. [canada.ca]
Similarly, if the third party does not currently owe the taxpayer anything, the notice should not simply be discarded. CRA instructs recipients to retain the garnishment because an amount could become payable to the taxpayer while the RTP remains effective. [canada.ca]
RTPs can remain valid for different periods depending on their terms. CRA says they generally apply for 90 days, one year, or until the debt has been paid in full, although exceptions can apply. [canada.ca]
The practical lesson
If your company receives an RTP for an employee, contractor, supplier or other person, the safest response is to immediately identify amounts currently owing, review the effective period and withholding instructions shown on the document, and redirect amounts covered by the RTP as instructed.
Do not release funds to the taxpayer simply because they say the issue has been resolved. Wait for written confirmation from CRA that the garnishment is no longer in effect. [canada.ca]
The stakes are significant: failure to comply can turn someone else’s CRA debt into a direct liability of your own. [canada.ca]
