Explanatory Notes Relating to Bill C-46, An Act to amend the Federal-Provincial Fiscal Arrangements Act and the Income Tax Act

Preface

These explanatory notes describe proposed amendments to the Income Tax Act in Bill C-46, as tabled in Parliament on March 29, 2023. These explanatory notes describe these proposed amendments, clause by clause, for the assistance of Members of Parliament, taxpayers and their professional advisors.

The Honourable Chrystia Freeland, P.C., M.P.
Deputy Prime Minister and Minister of Finance

These notes are intended for information purposes only and should not be construed as an official interpretation of the provisions they describe.

Income Tax Act

Clause 3

ITA
122.5(3.003)

Existing subsection 122.5(3) provides for the calculation of the Goods and Services Tax/Harmonized Sales Tax (GST/HST) Credit. To receive the GST/HST Credit for a taxation year, subsection 122.5(3) provides that an eligible individual must file a return of income for the year. The amount of the GST/HST Credit depends on an eligible individual's family circumstances.

New subsection 122.5(3.003) provides a one-time, extra GST/HST Credit payment equal to twice the amount of an eligible individual's January 2023 entitlement.

ITA
122.5(3.04)

Subsection 122.5(3.01) provides a formula for the computation of the credit if an eligible individual is a "shared-custody parent" at the beginning of a month. The definition "shared-custody parent" is in section 122.6 (the Canada Child Benefit rules). If an eligible individual is a shared-custody parent of a qualified dependant, that parent will be entitled to one-half of the credit with respect to that qualified dependant that the parent would have received if the parent were the only eligible individual of that qualified dependant. 

New subsection (3.04) applies the shared-custody parent rule to the computation of the one-time, extra GST/HST Credit payment provided under new subsection 122.5(3.003).

ITA
122.5(4.3)

GST/HST Credit amounts are paid for specified months based upon an eligible individual's family income for the relevant taxation year. New subsection 122.5(4.3) provides that, for the one-time, extra GST/HST Credit payment provided under new subsection 122.5(3.003), the specified month is January 2023 and the reference taxation year for measuring income is the 2021 taxation year.

Clause 4

ITA
152(1)(b)

Subsection 152(1) lists certain refunds and deemed payments on account of tax that are to be determined in the course of assessing a taxpayer's tax. Paragraph 152(1)(b) refers to the specific provisions under which amounts are deemed to be paid on account of tax.

Consequential on the introduction of new subsection 122.5(3.003), this paragraph is amended to add a reference to new subsection 122.5(3.003). This subsection relates to the GST/HST Credit  and deems an amount to have been paid on account of tax payable by an eligible individual in respect of January 2023.

ITA
152(1.2)(d)

Subsection 152(1.2) generally provides for the application of paragraphs 56(1)(l) and 60(o) and Divisions I and J of Part I of the Act as they relate to assessments and to various determinations and redeterminations made under Part I of the Act. Exceptions are made as to how certain provisions in the Act apply to those determinations and redeterminations.

Subsection 152(1.2) applies to a determination by the Minister of National Revenue of eligibility for and the amount of a GST/HST Credit under section 122.5. Essentially, an individual has objection and appeal rights with respect to the Minister's determination of their GST/HST Credit entitlement. Paragraph 152(1.2)(d) provides that where the Minister determines the amount deemed by subsections 122.5(3), (3.001) or (3.002) or 122.8(4) to have been paid by an individual for a taxation year to be nil, the Minister is not required to send the individual a notice of determination unless the individual requests a notice of determination from the Minister.

Consequential on the introduction of new subsection 122.5(3.003), paragraph 152(1.2)(d) is amended to provide that it also applies to a nil determination made under new subsection 122.5(3.003).

ITA
152(4.2)(b)

Subsection 152(4.2) contains rules relating to the reassessment of tax, interest and penalties payable by a taxpayer and to the redetermination of tax deemed to have been paid by a taxpayer. This subsection gives the Minister of National Revenue discretion to make a reassessment or a redetermination beyond the normal reassessment period when so requested by an individual (other than a trust) or a graduated rate estate.

Consequential on the introduction of new subsection 122.5(3.003), paragraph 152(4.2)(b) is amended to add a reference to new subsection 122.5(3.003).

Clause 5

ITA
160.1(1.1)(b)

Subsection 160.1(1.1) provides that, where a person is a qualified relation (that is, a cohabiting spouse or common-law partner) of an individual who is a GST/HST Credit recipient, both the person and the individual are jointly and severally liable for any excess GST/HST Credit paid or credited to the individual. 

Consequential on the introduction of new subsection 122.5(3.003), paragraph 160.1(1.1)(b) is amended to add a reference to new subsection 122.5(3.003). This would provide for joint and several liability for any excess payment made under the one-time, extra GST/HST Credit provided under that subsection.