2025 Federal Budget Highlights

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2025 Federal Budget Highlights

On November 4, 2025, the budget was delivered by the Honourable François-Philippe Champagne, Minister of Finance and National Revenue.

The 2025 Federal Budget focuses on stability, simplicity, and long-term growth. There are no broad tax increases or major new spending programs. Instead, the government is emphasizing restraint, modernization, and productivity.

For individuals and business owners, the goal is clear: help Canadians access benefits more easily, encourage investment in innovation and clean energy, and update trust and estate rules to maintain fairness across the system.

Economic Overview

Canada’s federal deficit is projected at $78.3 billion for 2025–26. The government aims to stabilize the debt-to-GDP ratio while maintaining funding for priorities such as housing, defence, and clean energy.

Spending will focus on programs that improve productivity, while efficiency reviews across departments are expected to reduce overlap and administrative costs. This marks a shift toward sustainable fiscal management and practical, targeted investments.

Personal and Family Tax Measures

Several measures are designed to make life more affordable, particularly for first-time home buyers, caregivers, and lower-income households.

Eliminating the GST for First-Time Home Buyers

First-time home buyers will not pay the 5 percent federal GST on new homes priced up to $1 million. For new homes between $1 million and $1.5 million, a partial GST reduction applies. This change provides meaningful savings and makes new construction more accessible for Canadians entering the housing market.

Home Accessibility Tax Credit

Starting in 2026, expenses can no longer be claimed under both the Home Accessibility Tax Credit and the Medical Expense Tax Credit. The rule prevents duplicate claims but continues to support renovations that make homes safer and more accessible for seniors or individuals with disabilities.

Top-Up Tax Credit

To balance the reduction in the lowest federal tax bracket—from 15 percent to 14.5 percent in 2025, and 14 percent in 2026—the government introduced a Top-Up Tax Credit to preserve the value of non-refundable credits such as tuition, medical, and charitable amounts. This temporary measure, available from 2025 through 2030, ensures Canadians receive the same credit value even as rates decrease.

Personal Support Workers (PSW) Tax Credit

A new refundable tax credit equal to 5 percent of eligible income, up to $1,100 per year, will be available for certified personal support workers beginning in 2026. The measure acknowledges the importance of care professionals and provides direct relief to those in long-term and community-care roles.

Automatic Federal Benefits

Starting in 2025, the Canada Revenue Agency will begin automatically filing simple tax returns for eligible Canadians who do not normally file. This will allow low-income earners and seniors to receive benefits such as the Canada Workers Benefit, GST/HST Credit, and Canada Carbon Rebate automatically. Those with more complex financial situations will continue to file regular returns.

Registered Plans, Trusts, and Estate Planning

The budget introduces several changes affecting trusts and registered plans—key tools in long-term financial and estate planning.

Bare Trust Reporting Rules

Implementation of new bare trust reporting requirements has been delayed. The rules will now apply to taxation years ending December 31, 2026, or later. This postponement gives individuals, trustees, and professionals more time to prepare for the new filing obligations.

The 21-Year Rule for Trusts

Trusts—particularly most personal or family trusts—are generally considered to have sold and repurchased their capital property every 21 years (a “deemed disposition”). This rule prevents indefinite deferral of capital-gains tax on assets that grow in value.

When property is moved on a tax-deferred basis from one trust to another, the receiving trust normally inherits the original 21-year anniversary date so that tax timing does not reset.

Some estate-planning arrangements have transferred trust property indirectly—for example, through a corporation or a beneficiary connected to a second trust—so that the transfer did not appear to be trust-to-trust. These arrangements effectively extended the period before capital gains would be recognized.

Budget 2025 broadens the anti-avoidance rule to include indirect transfers. Any transfer of property made on or after November 4, 2025, that effectively moves assets from one trust to another will retain the original 21-year schedule.

For families that use trusts in estate or business-succession planning, this change reinforces the importance of reviewing structure and timing. Trusts remain valuable for asset protection, legacy planning, and income distribution—this update simply ensures consistent application of the 21-year rule.

Qualified Investments for Registered Plans

Beginning January 1, 2027, all registered plans—RRSPs, TFSAs, FHSAs, RDSPs, and RESPs—will follow a single harmonized list of qualified investments. Small-business shares will no longer qualify for new contributions, though existing holdings will remain grandfathered. The update simplifies compliance and clarifies which assets can be held in registered accounts.

Business and Investment Incentives

For business owners, Budget 2025 provides opportunities to reinvest, innovate, and modernize operations, with emphasis on manufacturing, research, and clean technology.

Immediate Expensing for Manufacturing and Processing Buildings

Businesses can now claim a 100 percent deduction for eligible manufacturing and processing buildings acquired after Budget Day and available for use before 2030. This full write-off improves cash flow and encourages earlier expansion. The benefit will gradually phase out after 2033.

Scientific Research and Experimental Development (SR&ED)

The refundable SR&ED tax credit limit has increased from $3 million to $6 million per year, effective for taxation years beginning after December 16, 2024. This expansion strengthens support for small and medium-sized Canadian businesses investing in innovation and technology.

Tax Deferral Through Tiered Corporate Structures

To prevent deferrals of tax on investment income, new rules will suspend dividend refunds for affiliated corporations with mismatched fiscal year-ends. This ensures consistent taxation within corporate groups and aligns refund timing with income recognition.

Agricultural Co-operatives

The tax deferral for patronage dividends paid in shares has been extended to December 31, 2030, continuing to support agricultural co-operatives and their members.

Clean Technology and Clean Electricity Investment Credits

Clean-technology and clean-electricity incentives have been expanded to include additional critical minerals—such as antimony, gallium, germanium, indium, and scandium—used in advanced manufacturing and renewable energy production. The Canada Growth Fund can now invest in qualifying projects without reducing the amount of credit companies can claim, keeping the incentive structure attractive for green investment.

Canadian Entrepreneurs’ Incentive

The government has confirmed it will not proceed with the previously proposed Canadian Entrepreneurs’ Incentive. The existing Lifetime Capital Gains Exemption remains unchanged and continues to apply to the sale of qualified small-business shares.

Tax Simplification and Repealed Measures

To simplify administration and reduce complexity, two taxes are being repealed:

– Underused Housing Tax, beginning in 2025

– Luxury Tax on aircraft and vessels for purchases made after November 4, 2025

In addition, the Canada Carbon Rebate will issue its final household payment in April 2025, with no rebates available for returns filed after October 30, 2026. These changes are meant to streamline compliance and eliminate programs that were costly to administer.

Government Direction and Spending Priorities

Beyond taxation, the budget sets out the government’s broader policy priorities.

Downsizing Government: A comprehensive efficiency review is underway to eliminate duplication across departments and generate long-term savings.

Cuts to Immigration: To ease pressure on housing and infrastructure, temporary-resident levels will be reduced by about 20 percent over two years, while maintaining pathways for essential workers.

Defence Spending: Canada will invest an additional $7 billion over five years to strengthen NATO participation, Arctic defence, and cybersecurity. By 2030, defence spending is expected to reach 1.8 percent of GDP.

Oil and Gas Emission Cap: A phased-in cap starting in 2026 will allow companies to meet targets through carbon-capture and clean-tech investments rather than penalties.

Final Thoughts

For individuals, the most relevant updates include GST relief for first-time home buyers, improved benefit access, and continued tax relief for caregivers and support workers. For business owners, the focus remains on productivity—through immediate expensing, expanded SR&ED credits, and clean-tech investment incentives. For families using trusts or inter-generational structures, the clarified 21-year rule reinforces transparency in estate planning.

If you’d like to review what these changes mean for you or your business, please get in touch. We can look at your goals and make sure you’re well prepared for the year ahead.

5 Emerging Trends in Group Benefits Every Employer Should Know

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Employee expectations are shifting, and group benefits are no longer one-size-fits-all. Employers across Canada are recognizing that competitive compensation extends beyond salary. A strong benefits package can make the difference between attracting top talent and losing them to competitors. So, what’s new in group benefits, and why should employers pay attention?

How Group Benefits Are Evolving

Traditionally, group benefits focused on basics like health, dental, and life insurance. While these remain important, employees are now looking for flexibility, mental health support, and programs that reflect their diverse needs. The COVID-19 pandemic accelerated many of these changes by highlighting the importance of health, security, and work-life balance. As the workplace continues to evolve, organizations must ensure their benefits keep pace with these expectations.

Employers that adapt can improve retention, boost morale, and reduce turnover costs. Ignoring these shifts could leave organizations struggling to keep up in a competitive hiring market. With skilled workers in high demand, especially in certain industries, a forward-looking approach to group benefits is becoming just as important as compensation.

Why It Matters for Employers

Employees increasingly view benefits as a reflection of company culture and values. Offering modern benefits demonstrates care for employee well-being while also positioning the company as progressive and people-focused. In today’s workplace, benefits are no longer a “perk” but an expectation.

Research shows that employees who feel supported in their overall wellness are far more likely to remain with their employer over the long term. This means a strong group benefits package is not only about attracting new hires but also about retaining existing talent. Employers who stay ahead of these trends can stand out as attractive places to work, while those who fall behind may face higher turnover, lower engagement, and increased costs associated with rehiring and training.

Five Key Trends in Group Benefits

1. Personalized and Flexible Benefits

One of the biggest shifts is the move toward customizable plans. Instead of a standard package that offers the same benefits to all employees, many employers now offer flexible health spending accounts or wellness allowances. This allows employees to choose what’s most relevant to their lifestyle, whether it’s vision care, gym memberships, or alternative therapies such as acupuncture or massage.

For example, a young professional may prioritize fitness and mental health services, while a parent with young children may value vision and dental coverage. Providing flexibility ensures employees feel supported no matter their stage of life. Employers who give choice not only meet diverse needs but also show respect for their workforce’s individuality.

2. Mental Health and Well-Being Support

Mental health has become a central focus of workplace benefits. Over the past few years, stress, anxiety, and burnout have risen significantly, with many employees seeking more support from their employers. Companies that provide access to counseling, therapy, and stress management programs are seeing stronger employee engagement and resilience.

Some employers are expanding Employee Assistance Programs (EAPs) to include ongoing counseling sessions rather than short-term solutions. Others are investing in digital platforms that connect employees to licensed therapists through apps or online services. Mindfulness subscriptions, mental health days, and manager training on how to support struggling employees are also gaining popularity.

Investing in mental health doesn’t just benefit employees—it also reduces absenteeism and improves productivity. According to the Mental Health Commission of Canada, mental health problems cost the economy billions annually in lost productivity. By prioritizing well-being, employers help create a healthier and more sustainable workplace.

3. Virtual and Digital Health Care

Virtual care has moved from being a “nice-to-have” to a standard expectation. Employees value quick and easy access to healthcare professionals through telemedicine and online consultations. This is especially beneficial for remote or rural employees who may not have easy access to clinics.

Virtual healthcare services can include online doctor visits, prescription renewals, chronic disease management, and even physiotherapy consultations. These services not only improve convenience but also reduce the number of sick days taken for medical appointments. Employers offering virtual healthcare are finding that employees appreciate the time savings and accessibility.

The rise of digital health has also led to innovations such as wearable devices and health apps that help employees track their physical activity, sleep, and nutrition. Employers who integrate these tools into wellness programs can foster healthier habits across their workforce.

4. Financial Wellness Programs

More employers are including financial literacy tools, budgeting workshops, and retirement savings programs as part of their group benefits. With rising living costs and household debt levels, employees are increasingly worried about financial security. These concerns directly impact workplace focus and productivity.

Financial wellness programs may include one-on-one financial coaching, webinars on debt reduction strategies, or tools to help with budgeting and savings. Some employers even offer employer-matching programs for retirement savings or assistance with student loan repayments. Supporting financial well-being helps reduce stress, increases employee satisfaction, and builds long-term loyalty.

In many ways, offering financial support demonstrates the employer’s recognition of real-world challenges employees face. When workers feel supported in managing their finances, they are less distracted, more motivated, and better able to contribute fully at work.

5. Non-Traditional Benefits

Beyond the usual health and dental, employees are showing interest in perks that support their lifestyle and overall happiness. Non-traditional benefits can range widely but often focus on work-life balance and unique employee needs.

Examples include:

  • Pet insurance for employees who consider pets part of the family.
  • Childcare support such as daycare subsidies or backup care services.
  • Professional development allowances that fund courses, certifications, or conferences.
  • Wellness stipends for home office upgrades, fitness equipment, or meal delivery services.
  • Extra vacation days or volunteer time-off programs that support work-life integration.
  • Fertility and in vitro treatment coverage, which has become a highly valued benefit for employees who want support in building their families.

These offerings not only stand out to potential hires but also foster loyalty among existing staff. They signal that the employer is forward-thinking and understands the broader needs of today’s workforce. In competitive industries, non-traditional benefits can be the deciding factor for a candidate weighing multiple job offers.

Bringing It All Together

Group benefits are no longer just about coverage—they are about connection. Employers who embrace these trends send a clear message: we care about your well-being, both at work and beyond. By investing in flexible, supportive, and forward-looking benefits, companies can strengthen employee loyalty and position themselves for long-term success.

As you review your group benefits program, consider which of these trends could align with your workforce’s needs. Even small adjustments—like adding flexible spending options or introducing virtual care—can have a big impact on employee satisfaction. When employees feel supported, they are more engaged, more productive, and more likely to stay for the long term.

This is for informational purposes only and does not constitute financial, legal, or tax advice. Always consult a qualified professional regarding your specific situation. We are not responsible for any actions taken based on this content.