TOPICS COVERED

• Tax Tidbits
• First-Time Home Buyers’ (FTHB) GST Rebate
• Action Needed: Automatic Change to Electronic Mail for Businesses
• Caution: Electronic Correspondence with CRA
• CRA Enforcement: Electronic Payments
• Transfer of Property to Shareholders: Tax Consequences

TAX TIDBITS

Some quick points to consider…

• The government has proposed to reduce the tax rate on the lowest bracket to 14% (from 15%) effective July 1, 2025, resulting in reduced tax for many individuals. This change would be implemented as a 14.5% rate for 2025 and 14% for 2026 onwards. However, the rate for personal tax credits would likewise be reduced, resulting in lower tax credits. Employers were expected to implement this change on a best effort basis for the first pay of July 2025.
• Applications for the new Canada disability benefit are now open and can be made through an electronic application portal, by phone or in person at a Service Canada centre. This is an income-tested benefit intended for working-age people who are approved for the disability tax credit.
• CRA launched a new self-evaluation and learning tool link (SELT) to help taxpayers assess eligibility for penalties and interest relief due to financial hardship, circumstances beyond the taxpayer’s control, actions of CRA or other reasons.
• The government has reiterated that the Canada carbon rebate for small businesses should be tax-free, retroactive to the start of the program (available in AB, SK, MB, ON, NB, NS, PEI and NL). Draft legislation has been released. Once it receives Royal Assent, CRA will be authorized to process amended T2 corporation income tax returns for businesses that previously included the rebate in their taxable income.

FIRST-TIME HOMEBUYERS’ (FTHB) GST REBATE:

Relief for New Home Purchases

The government has proposed to provide GST relief on the purchase of new homes valued at up to $1.5 million by first-time home buyers. Eligible purchases would be entitled to a 100% GST rebate on homes valued at up to $1 million. The rebate would be phased out in a linear manner for homes valued between $1 million and $1.5 million. For example, a $1.25 million home would get a 50% rebate on the lesser of $50,000 (i.e. the GST on $1 million) and the actual GST paid.

Eligible acquisitions
The FTHB GST rebate would be available on purchases from a builder, owner-built homes and on shares of cooperative housing corporations. It would generally be available in respect of a detached or semi-detached single-unit house, a duplex, a condominium unit, a townhouse, a unit in a co-operative housing corporation, a mobile home (including a modular home) and a floating home.

First-time home buyer
At least one of the purchasers must be a first-time home buyer who is not only acquiring/building the new home for use as their primary place of residence but also must be the first to occupy it as a place of residence. To be a first-time home buyer, the taxpayer would need to meet the following conditions:

• be at least 18 years of age;
• be either a Canadian citizen or a permanent resident of Canada; and
• not have lived in a home, whether inside or outside Canada, that they owned or that their spouse or common-law partner owned in the calendar year or in the four preceding calendar years.

Acquisition date
For those acquiring the home from a builder, the purchase agreement must have been entered into between May 27, 2025 to December 31, 2030, inclusive. For owner-built homes, construction must begin no earlier than May 27, 2025. In both cases, construction must begin before 2031 and be substantially completed before 2036.

Limitations
A taxpayer would not be permitted to claim an FTHB GST rebate if they or their spouse or common-law partner had previously claimed an FTHB GST rebate. If the home was acquired pursuant to an assignment sale, the original purchase agreement cannot have been entered into before May 27, 2025. There is also an anti-avoidance measure that prevents the cancellation of an agreement before May 27, 2025 and a replacement agreement entered into on or after that date.

AUTOMATIC CHANGE TO ELECTRONIC MAIL FOR BUSINESSES

As of June 16, 2025, CRA changed the default correspondence method for most businesses to online only (i.e. not delivered by paper mail). As business correspondence is presumed received on the date that it is posted online to CRA’s My Business Account, it can be problematic if correspondence requiring action goes unnoticed.

To receive notifications that mail has been posted online, the taxpayer must provide CRA with an email address and register that address for notifications related to each applicable program (e.g. GST/HST, payroll, corporate tax, etc). Regardless of whether the business registers for notifications or even provides an email address, it will still be transitioned to online mail. The presumption of receipt applies regardless of whether the taxpayer receives notifications. Businesses should ensure to sign up for My Business Account to avoid losing access to important CRA correspondence.

Businesses can opt out of receiving online mail (thereby receiving paper mail) by changing their settings in the Profile section of My Business Account or by submitting Form RC681 Request to Activate Paper Mail for my Business to CRA. However, CRA may still provide online-only mail until they finish processing the request. Communications posted within 30 days of a request are still presumed to be received on the day of posting. As such, taxpayers should monitor their online CRA account during the transition period. Requests can only be made by an individual with signing authority, such as an owner, director or legal representative as reflected in CRA’s records.

It is important to ensure that mailing addresses are kept current as undeliverable mail will result in a change back to online mail. In addition, businesses will need to make a new request to activate paper mail every two years.

If paper mail is selected for existing business program accounts and a new account is registered, a new request for paper mail will be required for that account

ELECTRONIC CORRESPONDENCE WITH CRA

An April 29, 2025 French Federal Court case reviewed the taxpayer’s application for judicial review of CRA’s denial of a waiver of interest and penalty taxes on her excess TFSA contributions for the 2021 and 2022 taxation years (1%/month during which the excess contributions remained in the TFSA).

On July 26, 2022, CRA issued a notice of assessment outlining the excess contributions, which was delivered to the taxpayer’s online CRA account. The taxpayer, unaware of this communication, discovered the excess contribution in February 2023, when she logged in to her online CRA My Account to apply for employment insurance sickness benefits. She withdrew the excess within days.

The taxpayer argued that she had forgotten that she had changed her communication preferences from paper to electronic and, given her lack of technological expertise, she had not linked her email address with her online CRA account to receive the notifications.

CRA denied the relief, asserting that the excess must be withdrawn “without delay” for discretionary relief to be considered. Without delay has been defined administratively by CRA as a period of 30 days following the time that the individual is informed of the excess contribution. CRA asserted that this was the date that the assessment was posted electronically (July 26, 2022). As the amount was withdrawn more than 6 months after this time (February 2023), CRA’s position was that the amount was not withdrawn without delay.

Taxpayer loses
The Court found CRA’s denial reasonable, emphasizing that taxpayers who opt for electronic communication and neglect to check their account regularly cannot complain that they are unaware of CRA communications. In addition, CRA is not required to demonstrate that a taxpayer received mail; CRA must only demonstrate that the mail was posted.

ELECTRONIC PAYMENTS: CRA ENFORCEMENT

Since January 1, 2024, most remittances or payments to the Receiver General (e.g. GST/HST and income tax) in amounts exceeding $10,000 have been required to be made by electronic payment unless the payer or remitter cannot reasonably do so. A penalty of $100 can apply for each failure.

In June 2025, CRA advised CPA Canada that they will not currently enforce these penalties and will give advance notice if this changes. Meanwhile, it will focus on educating and encouraging taxpayers to make electronic payments, including those made through banks, credit unions, online banking, CRA portals or third-party providers.

TRANSFER OF PROPERTY TO SHAREHOLDERS: TAX CONSEQUENCES

In a May 1, 2025 French Federal Court of Appeal (FCA) case, the Court considered whether a taxable benefit was conferred on the transfer of real property from a corporation to its shareholder.

In 2013, a corporation owned equally (50/50) by the taxpayer and her spouse transferred a building worth $430,000 to them. CRA reassessed the taxpayer to include a taxable benefit for her portion of the building’s value ($215,000).

Taxpayer loses
Although the taxpayer argued that she had provided consideration by assuming three mortgages on the building, the Tax Court of Canada (TCC) found that she had not assumed the obligations personally. The taxpayer also argued that the benefit should be negated because she resold the building to the corporation for $1 in 2017. The FCA noted that no provision in the Income Tax Act retroactively nullifies a taxable benefit due to a subsequent transaction. As such, the FCA upheld the TCC decision that there was a taxable benefit.