November 2025 - Federal Budget 2025 – Adapt and Refocus Your Plan

Federal Budget 2025 – Adapt and Refocus Your Plan

The 2025 Federal Budget is said to be “Meeting the Moment, Building Canada Strong” with a focus on long-term productivity and infrastructure investments, while maintaining significant commitments to health transfers and system modernization.

Despite deficit pressures of approximately $78 billion, healthcare remains mainly insulated from major cuts due to its political and economic importance. While the budget stops short of new universal health programs, it is intended to inject funding aimed at modernizing facilities, supporting research and innovation, and stabilizing provincial delivery systems under fiscal constraint.

The following outlines the key-measures proposed in Budget 2025, some of which (if passed) could impact future corporate and personal financial planning. 

Trust 21-year rule

Budget 2025 proposes to broaden the anti-avoidance rule for trust-to-trust transfers that result in further deferral of gains on capital assets that would be required under the 21-year rule. This would apply to transfers of property occurring on or after budget day, November 4, 2025.

It is important to note that life insurance is not a capital asset for the purposes of the 21-year rule.

Deferred Bare Trust Reporting

There is continued relief for the filling requirements of bare trusts. Trust reporting rules will now apply to bare trusts with a taxation year ending on or after December 31, 2026.

Elimination of Luxury Tax and Underused Housing Tax

Budget 2025 proposes the elimination of the luxury tax on aircraft and vessels, as well as the underused housing tax. The luxury tax on motor vehicles valued above $100,000 will be maintained.

It is important to note that previous years underused housing tax requirements, including penalties and interest, continue to apply for taxation years 2022 to 2024.

Reduced Bank Fees

A review is to be launched in 2026 of how banks and other financial institutions charge fees, including Interac e-transfer and ATM fees. Draft regulations are expected to be published in spring of 2026 to prohibit fees on investment and registered account transfers, ensuring that Canadians have greater control of how their finances are being managed.

There are also plans to improve transparency of cross-border bank transfer fees, foreign exchange costs and to simplify the transferring of accounts between Canadian financial institutions. Amendments to the Retail Payment Activities Act is proposed to allow the inclusion of stablecoins (a type of cryptocurrency whose value is linked to a specific amount of a traditional currency) in retail transactions.  

Infrastructure Funding

A proposed $51 billion over 10 years has been pledged to support local infrastructure projects including housing, transportation and health facilities. A dedicated $5 billion has been earmarked for a dedicated Health Infrastructure Fund, scheduled to be available as early as next year. To receive funding, provinces must agree to match the received capital.

This health care focus extends into the research labs where an emphasis has been placed on recruiting more than 1,000 researchers to Canada. A new research chair initiative has been launched in collaboration with several research councils, including the Canadian Institutes of Health Research. There is also a plan to attract top international doctoral students to Canada, by emphasizing partnerships between universities, hospitals, and private innovators.

Increased Canada Health Transfers

The Canada Health Transfer, which provides federal funding to provinces and territories for health care services, is currently $54.7 billion, will receive a 5% increase for the next 5 years to $65 billion in 2029-30.

Ottawa’s focus is on capital spending rather than ongoing operational costs. This means that provinces will continue to bear the burden for staffing and daily delivery of care. However, new funding for research, training, and AI integration in healthcare supports modernization and technology-driven care models.

Productivity Super Deductions

Budget 2025 proposes expedited capital cost allowance deductions for equipment, including computers, used in manufacturing, processing and clean energy generation.

A proposed immediate expensing (100% CCA) for manufacturing and processing buildings acquired on or after budget day and first used for manufacturing or processing before 2030. Enhanced expensing is available between 2031 and 2032 at a declining rate, and the program is scheduled to terminate as of 2033.

Proposed enhancements to the 35% tax refund for Scientific Research and Experimental Development (SR&ED) program include an increased qualified expenditure limit and increased prior year capital phase out. There is also an extension of credit for Canadian public companies, and capital expenditures have been added back into the program. This represents the potential for significant private funding in this area.

Flow-through Shares

The Critical Mineral Exploration Tax Credit, which is equal to 30% of specified expenses incurred in Canada and allocated to flow-through share investors, is available from budget day until March 31, 2027. The list of eligible minerals has been expanded to include 12 additional minerals primarily used in the production of energy related technology.

Clean Technology Manufacturing

The Clean Technology Manufacturing Investment Tax Credit is a 30% refundable tax credit for the cost of investments in new machinery and equipment used to manufacture or process clean technologies. The critical mineral list related to these technologies has expanded to include 12 additional minerals.

Carbon Capture, Utilization and Storage

Budget 2025 proposes tax credits ranging from 37.5% to 60% for eligible carbon capture, utilization, storage equipment and related expenses from the start of 2022 to the end of 2030. A reduced tax credit is available for eligible expenses incurred between 2031 to the end of 2040.

Accelerated Business Transactions

Implantation of Real-Time-Rail, Canada’s national open banking infrastructure, is scheduled for 2026. It is anticipated that this system will streamline business transactions, such as payroll and expense reimbursements, by allowing money to move instantly between accounts.

Cancellation of the Canadian Entrepreneurs Incentive

This program was announced in Budget 2024 and has been cancelled as per a footnote on Budget 2025.

Qualified Investments for Registered Plans

A proposed harmonization of investments available to be held in the 7 different registered plans, Registered Retirement Savings Plan (RRSP), Registered Retirement Income Fund (RRIF), Tax-Free Savings Account (TFSA), Registered Education Savings Plan (RESP), Registered Disability Savings Plan (RDSP), First Home Savings Account (FHSA), and Deferred Profit Sharing Plan (DPSP), including the simplification of rules relating to investments in small businesses. This would allow all registered plans to have the ability to acquire shares of specified small business corporations, venture capital corporations and specified cooperative corporations. However, it would eliminate the qualification of specific small business limited partnerships and small business investment trusts.

Budget 2025 also proposes to amend and simplify the qualified investment rules for 6 types of registered plans, RRSP, RRIF, TFSA, RESP, FHSA, and DPSP, under one definition in the Income Tax Act. This consolidation will exclude only the RDSP.

These amendments would apply as of January 1, 2027.

Personal Support Workers Tax Credit

A proposed, temporary, refundable tax credit of 5%, up to $1,100/year, for eligible personal support workers working in eligible health care establishments. This is being introduced for personal support workers who are not residing in British Columbia, Newfoundland and Labrador, or the Northwest Territories, as those regions have previously established a program to increase the wages of eligible workers.

Top-up Tax Credit

Most non-refundable tax credits are calculated based on the first marginal personal income tax rate. Earlier this year, in May 2025, the middle-class tax cut announced a reduction in this rate from 15% to 14.5% for 2025, and to 14% for subsequent years. This would effectively reduce the amount of tax credits available for certain eligible expenses, such as personal medical expenses.

Budget 2025 proposes a temporary Top-Up Credit to maintain the current 15% rate for amounts claimed in excess of the first income tax bracket threshold. This top-up applies from the 2025 to 2030 taxation years.

It is important to note that expenses claimed under the Home Accessibility Tax Credit will not also be eligible under the Medical Expense Tax Credit as of taxation year 2026.

Automatic Federal Income Tax Filling

Budget 2025 proposes an amendment to the Act that would allow for automatic filling of personal income tax returns for lower-income individuals. This could enhance the ability for qualifying individuals to receive tax credits and income-tested benefits.

Timing of Refundable Taxes Between Related Corporations

For tiered corporate structures with different fiscal year ends, there may be an overlap between the timing of a taxable dividend payment and the refunding of Part IV tax. Budget 2025 proposes to limit the deferral of tax payable that could exists with such corporate dividend payments. Carveouts have been provided for bona fide commercial transactions, and these rules would not apply to dividend payments to unrelated corporations or individual shareholders.

Key Takeaways

- Healthcare remains a core pillar of federal investment despite overall fiscal restraint.

- The focus is future-oriented with infrastructure, innovation, and system efficiency taking centre stage.

- More funding and partnerships are available for those who align their services with digital, community and preventive health objectives.

- The real impact of this year’s budget depends on provincial implementation and private sector interest in the opportunities being made available.

We are happy to discuss how these announcements will align with your financial plans. To arrange a meeting time please reach out to info@networkwealth.com or your direct planning contact at Network Wealth Cooperative. 

The information contained in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information continues to be accurate at a future date. No one should act upon such information without appropriate professional advice after a thorough examination of their particular situation.