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New small business support efforts, luxury tax and more: A look at the 2021-22 federal budget

Ottawa, Ontario ⁠— The Liberal government unveiled its federal 2021-22 budget on Monday. 

Despite numerous promises regarding small business recovery, vehicle electrification, EV battery initiatives and even a luxury tax on high-priced vehicles, the budget does not include any scrappage programs or incentives to purchase new vehicles, EVs or otherwise.

Collision Repair has compiled a list of the top budget supports affecting the autobody repair industry and the general Canadian automotive landscape. 

Small Business Support

The small business budget supports will begin with extending the wage subsidy and the rent subsidy to Sept. 25.

The extension of the wage subsidy and rent subsidy with lockdown top-ups is expected to cost $10.1 billion and $1.9 billion, respectively. The rate of both will gradually be decreased starting in July, as vaccinations become more widespread.

As the government winds the federal wage subsidy winds down, it plans to introduce the Canada Recovery Hiring Program to offset the cost of increasing worker hours or hiring additional staff as businesses reopen. The new program is expected to cost $595 million and will involve a subsidy of up to 50 percent between June 6 and Nov. 20 for a maximum of $1,129 per employee, per week.

Eligible employers will be able to claim either the hiring subsidy or the current wage subsidy for a particular qualifying period, but not both, and the hiring subsidy will not apply to furloughed staff.

According to the budget, employers eligible for the Canada Emergency Wage Subsidy would generally be eligible for the hiring subsidy. However, a for-profit corporation would be eligible for the hiring subsidy only if it is a Canadian-controlled private corporation, including a cooperative corporation that is eligible for the small business deduction. Other eligible employers would include individuals, non‑profit organizations, registered charities, and certain partnerships.

Electrification and Battery Incentives

Canada plans to spend billions in green manufacturing over the next seven years via the Strategic Innovation Fund and Net-Zero Accelerator. 

Launched in 2017, the Strategic Innovation Fund will receive $7.2 billion over the next seven years on a cash basis. The money will support modernization in projects across the automotive, aerospace, agricultural and life sciences industries.

The Net-Zero Accelerator features an $8-billion dollar promise to support projects aimed at reducing Canada’s greenhouse gas emissions by expanding decarbonization projects, scaling up clean technology and accelerating Canada’s industrial transformation.

In addition, the federal government announced manufacturer tax breaks, should companies make green vehicles and parts. The budget allots $36.8 million over three years, with $10.9 million in remaining amortization for federal research and development to advanced critical battery mineral processing and refining expertise, according to Natural Resources Canada.

The budget also proposes to reduce general and corporate business tax rates for businesses that manufacture zero-emissions technologies. That includes the manufacturing of EV charging systems as well as batteries and fuel cells for EVs.

Finally, the feds plan to expand the capital cost allowance for clean energy equipment, which will now include hydrogen refuelling equipment, EV charging stations capable of supplying more than 10 kW of continuous power, as well as stations that are capable of supplying at least 90 kW of continuous power.

Luxury Tax

The federal government said it will be implementing a luxury tax on new cars and private aircrafts worth more than $100,000 and pleasure boats more than $250,000.

The tax would be calculated at 20 percent of the threshold ($100,000 for vehicles and aircraft; $250,000 for boats) or 10 percent of the full value of the luxury car, boat, or personal aircraft, whichever is smaller,  according to the budget. The measure would come into force on January 1, 2022, and Ottawa estimates the tax will result in revenues of $604 million over four years.

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