Budget 2026: What's Changing for Canadian Investors? — Transcript

Full transcript

1. 0:00Yesterday, the government of Canada
2. 0:02released their budget for 2026, which
3. 0:05will always include a bunch of new
4. 0:07spending, potentially some new credits,
5. 0:09and some things like that. And so,
6. 0:11>> [music]
7. 0:11>> we are going to cover our initial
8. 0:13reactions to what we've seen in the
9. 0:15budget right here on the podcast. This
10. 0:17is coming in pretty quick, um but we
11. 0:19hope to have more analysis as time goes
12. 0:21on, but this is our initial reactions to
13. 0:23budget 2026. Thanks for being here for
14. 0:25this special episode of the Canadian
15. 0:27Money Roadmap.
16. 0:30All right, Sam. We got to make this
17. 0:31quick,
18. 0:32>> [laughter]
19. 0:33>> but I think that's all we need because
20. 0:35uh in the budget, there weren't too many
21. 0:38crazy things that affect us on a
22. 0:40personal level. There's lots of spending
23. 0:41and investing things at the
24. 0:43um you know, big picture government
25. 0:45level, uh but at the personal finance
26. 0:49level,
27. 0:50um there's a few things that came up
28. 0:51that were kind of interesting. So, we'll
29. 0:52get into some of those today.
30. 0:55Um
31. 0:55I was thinking we could probably start
32. 0:58with the Canada Strong Fund if you
33. 1:01uh wanted to discuss that and some of
34. 1:03the things that came up in that. This
35. 1:04was announced in the middle of the year,
36. 1:06and they gave us a few more details. I'm
37. 1:09not going to say um an overwhelming
38. 1:11amount of uh specificity here, but we
39. 1:14got a few more details to go through.
40. 1:15>> Right. And so, yeah, earlier in the
41. 1:17year, we heard about kind of the the
42. 1:19plan to roll out the Canada Strong Fund,
43. 1:22which would
44. 1:22be some version of a sovereign wealth
45. 1:25fund for Canada that um
46. 1:29uh the government invest in to invest in
47. 1:30projects and and build, ideally build
48. 1:33wealth for the country. Uh but one
49. 1:34interesting thing about that initial
50. 1:37um
51. 1:37press release was that they were talking
52. 1:39about wanting to allow Canadians to
53. 1:41invest in this themselves.
54. 1:44And so, this budget provided a bit more,
55. 1:46and I'll say a bit more uh detail about
56. 1:49what that might actually look like. But
57. 1:51what's particularly interesting is that
58. 1:52they want to roll this out quite quickly
59. 1:54in 2027, some of these investment
60. 1:56products.
61. 1:57And so, the budget for 2026 talked about
62. 2:00what they call uh Canada Strong Notes
63. 2:04and provide some small detail or some
64. 2:07details about what that might look like.
65. 2:08So, essentially, these would be a
66. 2:11version of principal protected notes,
67. 2:14which are an investment vehicle
68. 2:18where you basically put in a certain
69. 2:20amount of principal, certain amount of
70. 2:21money,
71. 2:22for a certain amount of time, and they
72. 2:24promise to give you that
73. 2:26um that money back at maturity. And
74. 2:28then, if the fund does well in that time
75. 2:30or if the company that you're investing
76. 2:32with does well at that time in that
77. 2:33time, you might get some bonuses.
78. 2:36Um
79. 2:36And so,
80. 2:38this is interesting because the Canadian
81. 2:40government is seemingly using this uh
82. 2:43this vehicle
83. 2:45to provide an opportunity for Canadians
84. 2:48to invest in the Canada Strong Fund.
85. 2:50>> Yeah, it seems um it's it's a little bit
86. 2:53different than anything else that's
87. 2:54available out there for Canadians to
88. 2:57participate. Like, I always take the
89. 2:59approach of un- unless we have a lot of
90. 3:03specific details on something, I'm going
91. 3:05to take the approach of cautious
92. 3:07optimism. Like, huh,
93. 3:10sounds interesting, for sure. Now, is
94. 3:13this a sovereign wealth fund then or is
95. 3:16it something different, right? Like, my
96. 3:19understanding of sovereign wealth funds
97. 3:21is typically it's a it's where royalties
98. 3:24from natural resource extraction,
99. 3:26typically, um get invested.
100. 3:29Norway has a very interesting program
101. 3:31where they invest in anything other than
102. 3:33Norwegian uh products uh projects,
103. 3:36pardon me.
104. 3:37Um
105. 3:37in particular, oil and gas. So, they
106. 3:39take their oil and gas revenues, they
107. 3:41put it in here, and they invest it
108. 3:42everywhere else. Um they have a very
109. 3:44strong mandate within their sovereign
110. 3:47wealth fund for
111. 3:48um ESG type investing, so environmental
112. 3:51sustainability and governance factors.
113. 3:53Um
114. 3:54This seems very different. Um I saw some
115. 3:57some comments online where it's like,
116. 3:59okay, if we're comparing what we see
117. 4:01here in the Canada Strong Fund versus
118. 4:03what's available in Norway where they're
119. 4:05trying to get away from any potential
120. 4:07corruption or, you know,
121. 4:10issues where
122. 4:12if there's a mandated place to invest,
123. 4:14that might drive prices up because it's
124. 4:17like, well, this is the only game in
125. 4:18town and so we can kind of charge
126. 4:21whatever we want, right? There's There's
127. 4:23There's
128. 4:23it doesn't reek of problems, but it's
129. 4:26like,
130. 4:26there's there could be some challenges
131. 4:28there, perhaps. And again, the details
132. 4:31of which like like for the Canada Strong
133. 4:34Fund specifically are a little bit more
134. 4:37unknown at the time, but you were able
135. 4:39to dig up a little bit more of the
136. 4:41the technical details that weren't as
137. 4:44obviously present elsewhere. Can you
138. 4:46kind of explain how they're going to be
139. 4:48structuring this a little bit?
140. 4:49>> Yeah, so the structure of these Canada
141. 4:51Strong notes will be
142. 4:54um
143. 4:55basically, you can buy notes with 5, 7,
144. 4:59or 10-year maturities. So, that would
145. 5:01essentially mean you put in a certain
146. 5:03amount at the start and they promise to
147. 5:05give you that money back at that
148. 5:07maturity, whether that's 5, 7, or 10
149. 5:09years. And then in the meantime
150. 5:11they're suggesting they'll pay a coupon
151. 5:13rate, so a set
152. 5:15uh rate annually. And then also you
153. 5:18might be eligible to benefit if the fund
154. 5:21if the Canada Strong Fund goes up um you
155. 5:24may be able to benefit with annual
156. 5:27interest payments from that. So, that
157. 5:29would kind of be the broad way that it
158. 5:30would work. I think one interesting
159. 5:32thing to note is that on
160. 5:33um in the budget and in other
161. 5:36places, uh they're making the assertion
162. 5:39that these will be
163. 5:41easy to buy and sell
164. 5:43uh almost kind of presenting them as a
165. 5:45liquid thing. And I think it's important
166. 5:48to note that these do have maturities,
167. 5:49so you can buy and sell
168. 5:51principal-protected notes on a secondary
169. 5:53market. So, maybe they're going to try
170. 5:54to help facilitate that buying and
171. 5:56selling kind of before maturity. Uh but
172. 5:59these are notes that have specific
173. 6:01maturity dates when you would get that
174. 6:03money specifically back. So, you do have
175. 6:05to hold it for that time
176. 6:08to get your principal
177. 6:10back. One kind of risk of principal
178. 6:14protected notes as they're used, you
179. 6:16know, for banks issuing them is uh
180. 6:19the credit risk of a bank actually
181. 6:22defaulting and not being able to pay it
182. 6:24back. So, this isn't a you know, an
183. 6:26interesting thing where a government is
184. 6:28backing that. We're not expecting the
185. 6:29government to default on any of these
186. 6:31notes. Uh and if some
187. 6:32>> If they are
188. 6:33>> Not expecting to. If they are then
189. 6:35something is going wrong.
190. 6:36>> Yeah.
191. 6:37Uh okay. So, yeah. So, there's some
192. 6:39um
193. 6:41So, a little bit more information there.
194. 6:43I will say we'll probably talk about
195. 6:45this as more detail comes out as they
196. 6:46become available. We don't know if
197. 6:48they're eligible for RRSPs or TFSAs or
198. 6:50things like that, what the rates are
199. 6:52going to be. Yeah, all sorts of stuff
200. 6:55yet to come, but I would say
201. 6:57sounds interesting enough to kind of
202. 6:59keep it on your radar. Um next kind of
203. 7:02thing that would be interesting enough
204. 7:03to keep on your radar is the fact that
205. 7:05they are hoping to push the RRSPs, so
206. 7:09the retirement
207. 7:10registered retirement savings plan to a
208. 7:13single account system, whereas currently
209. 7:17um at some point you got to convert your
210. 7:19RSP to a RIF. There's paperwork involved
211. 7:21in that. You have to get a new account
212. 7:23set up. You have to transfer assets from
213. 7:25your RSP to your RIF. There's some
214. 7:28different tax rules between the two. So,
215. 7:30for example, if you wanted to take money
216. 7:32out of the uh of each account, say
217. 7:35you're 65 years old, um if you took
218. 7:38money out of an RSP, it's different than
219. 7:41if you were to take money out of a RIF
220. 7:43because um RIF income after 65, you can
221. 7:47share up to 50% of that with your spouse
222. 7:50uh for tax purposes. And that can be
223. 7:52very advantageous, whereas in RSP, they
224. 7:54can't. So,
225. 7:55my reading of the proposal suggests that
226. 7:58they want to harmonize the tax system
227. 8:01between the two account types and then
228. 8:03just keep it as an RSP. The language
229. 8:05they used in the budget was an RRSP for
230. 8:08life. And on the surface, I like
231. 8:10simplicity. I really like this. Um a
232. 8:13fellow advisor in the Financial Planning
233. 8:15Association forum
234. 8:17mentioned that this is almost exactly
235. 8:19the way that the IRA account works in
236. 8:21the United States.
237. 8:23And so there is some precedent for
238. 8:25understanding how the structure works.
239. 8:27However, we are moving from a system to
240. 8:30that. And so within that, there could be
241. 8:33some complexity.
242. 8:34Um so some things that we don't know yet
243. 8:36is how withholding taxes work. Again,
244. 8:38withholding taxes are just the
245. 8:39prepayment of taxes you're likely to owe
246. 8:41anyways. There are different rules
247. 8:43between RRSPs and RIFs. At the very
248. 8:46least, the withholding taxes, however
249. 8:48they're applied, if it's based on the
250. 8:50minimums or just any withdrawals, I hope
251. 8:53that the brackets will get adjusted cuz
252. 8:55they haven't been adjusted since the
253. 8:57'70s.
254. 8:58Um and believe it or not, we've had a
255. 9:00pile of inflation since the '70s. And so
256. 9:02the dollar figures there are virtually
257. 9:04irrelevant
258. 9:06to anything that we have right now. And
259. 9:08so if there's no minimums, cuz there's
260. 9:09typically no withholding taxes on the
261. 9:11minimums, there's just withholding taxes
262. 9:12on the amounts above that, there could
263. 9:14be a situation where retirees actually
264. 9:16have to withdraw more to account for
265. 9:19that. Again, if the brackets are not
266. 9:21adjusted. We don't have any information
267. 9:23on this yet because it's going to go to
268. 9:24a consultation period.
269. 9:26And our professional association will
270. 9:28likely add some commentary there with
271. 9:31some issues.
272. 9:32Um another thing that I think might be a
273. 9:36potential problem uh is related related
274. 9:38to spousal RRSPs because when you have a
275. 9:42spousal RRSP,
276. 9:44there are issues around something called
277. 9:47income attribution. So the idea with a
278. 9:49spousal RRSP is that if you have a
279. 9:50spouse that makes a lot of money and one
280. 9:52that doesn't, the one that makes a lot
281. 9:53of money can contribute to the other
282. 9:54person's
283. 9:56account. They get the deduction, the
284. 9:58high earner gets the deduction and uses
285. 10:00up their RRSP room, but the money's
286. 10:02invested in the lower income earning
287. 10:03spouse's name. Then when they take it
288. 10:05out, in theory, it's taxable in their
289. 10:07name. But there is a holding period of 2
290. 10:10years plus a day to um
291. 10:13have that income attributed to them as
292. 10:17opposed to the higher earning spouse.
293. 10:19But, there is a fun wrinkle there where
294. 10:22if the
295. 10:24the other spouse, the receiving spouse
296. 10:26converts that to a spousal RIF there's
297. 10:29no income attribution on the minimum
298. 10:33that comes out of it. So, there could be
299. 10:35a situation where
300. 10:37you know, you make a big contribution in
301. 10:39one year, they convert it to a RIF the
302. 10:41following year, and you take it out.
303. 10:43I've done this with a client before.
304. 10:45It's very unique circumstance
305. 10:47where it would be applicable or needs to
306. 10:50be accounted for, but it is something
307. 10:52that's in there. There's also situation
308. 10:55where when you convert an account to a
309. 10:57RIF, you can decide at that time to use
310. 10:59your spouse's age for calculating your
311. 11:02minimum. So, assuming you don't need the
312. 11:04money and you're trying to minimize
313. 11:06taxable income you could use a lower
314. 11:09a younger spouse's age to calculate your
315. 11:12minimums, but there's no clarity on how
316. 11:15that would work if there's no conversion
317. 11:16that's happening necessarily. There's
318. 11:18also no
319. 11:20mention of contributions stopping at a
320. 11:23certain age. I suspect probably,
321. 11:26but it's not mentioned in there yet. So,
322. 11:28this is definitely one that is as I
323. 11:31mentioned before is still up for
324. 11:33consultation, and so the details of it
325. 11:35have not been ironed out yet. There are
326. 11:37some other simplification things upon
327. 11:38like the passing of a spouse. Right now,
328. 11:40it's like it all works out, but it's a
329. 11:42bit of a song and dance and a bunch of
330. 11:45you have to include the income and then
331. 11:47you apply for a deduction.
332. 11:49>> [snorts]
333. 11:49>> A few different forms in between. It's
334. 11:52fine, but they're just trying to
335. 11:53simplify all that. I subscribe to that.
336. 11:56That would be nice. But, anyways, the
337. 11:58RSP might rule the day here in terms of
338. 12:01the only account that you actually have
339. 12:02to worry about. I've described the RIF
340. 12:05and the RSP as buckets and then buckets
341. 12:07with holes in them.
342. 12:08We might be just stuck with a bucket and
343. 12:10you and you keep the same old bucket.
344. 12:12So, we'll we'll see how this plays out.
345. 12:13>> old bucket, but it will develop a hole
346. 12:15over time due to wear and tear or
347. 12:17something.
348. 12:17>> Yes.
349. 12:18>> You'll have to have a new analogy.
350. 12:20Um
351. 12:21>> Much like our own much like our own
352. 12:23cells over time.
353. 12:24>> Yes. But so, yeah, just to reiterate,
354. 12:26basically um
355. 12:28the minimums in this new situation,
356. 12:30you'd keep the RRSP, there would be no
357. 12:31conversion to a RRIF, but the minimums
358. 12:33would just start
359. 12:34uh in the
360. 12:35uh in the year, I guess, that you turn
361. 12:3772, right?
362. 12:38>> Yeah, there's language of 71, but it's
363. 12:40like right now you have to convert your
364. 12:42RRSP to a RRIF
365. 12:44in the year that you turn 71, but you
366. 12:46only have to take the minimums out at
367. 12:47the year that you turn 72. So
368. 12:49>> So, some details to be ironed out, but
369. 12:50that's
370. 12:51but uh interesting and and it seems like
371. 12:54a theme in some of these things we're
372. 12:55talking about. I guess I some of these
373. 12:58other changes outside the Canada Strong
374. 13:00notes is this desire to simplify
375. 13:03uh the taxation and maybe update it, as
376. 13:05you're saying, some of these um
377. 13:07withholding taxes numbers haven't been
378. 13:09updated for
379. 13:1050 years. This is similar and something
380. 13:12we can just maybe mention quickly, but
381. 13:14they've also proposed to
382. 13:16um change the installment thresholds for
383. 13:20tax when you pay it. And so, right now,
384. 13:23you know, if you if you have um I guess
385. 13:25it would be outstanding tax of $3,000 or
386. 13:28more,
387. 13:30um
388. 13:31you have to pay quarterly installments
389. 13:33to pay that down.
390. 13:35>> In the following year, you kind of you
391. 13:36get subject to to quarterly installments
392. 13:39for the next year. So, uh
393. 13:41it's the government says like, "Hey,
394. 13:43you've got all this income that you're
395. 13:44not prepaying any tax on." Um next year,
396. 13:48regardless of your situation, I know
397. 13:50there's some elections that you can file
398. 13:51and whatever it's but it's it's
399. 13:53complicated. But the threshold's pretty
400. 13:54low. 3,000 bucks um
401. 13:57of taxes. So, for retirees, like um you
402. 14:00know, if if you're listening to this
403. 14:01podcast, you're not retired yet, this
404. 14:03stuff kind of starts to get a little bit
405. 14:05complicated because there's not
406. 14:06withholding taxes required on a lot of
407. 14:08your sources of income when
408. 14:10um like your CPP, your OAS, and your um
409. 14:13some of your RRIF withdrawals or your
410. 14:15minimums, they don't have withholding
411. 14:16taxes. I capital gains transactions uh
412. 14:19from an unregistered account, those
413. 14:20don't have withholding taxes. Whereas
414. 14:21your employment income, it has to, by
415. 14:23law,
416. 14:24if you earn employment income. Uh so,
417. 14:26this is all very, very different. So, to
418. 14:28find oneself in a situation where you
419. 14:30owe some taxes and need to be subject to
420. 14:32quarterly installments, pretty common.
421. 14:34>> Yeah, and so they hadn't updated that
422. 14:36figure of 3,000 where you meet that
423. 14:38threshold where you have to pay these
424. 14:40installments uh since 2008. And so, now
425. 14:43they've decided or they proposed to
426. 14:45update that threshold to 70 $500 or
427. 14:487,500.
428. 14:50Uh so, over kind of doubling and a bit
429. 14:52more that number, which would just
430. 14:55create more leeway for um if you do have
431. 14:57some of those outstanding numbers not to
432. 14:58be forced to pay those installments.
433. 15:01>> Yeah, this is just an an annoyance
434. 15:03minimization
435. 15:04um announcement more than it is an
436. 15:07actual reduction in taxes or or anything
437. 15:09like that. It's just
438. 15:11most people hate quarterlies, and those
439. 15:13those will still still be applicable in
440. 15:15in many cases, but for the average
441. 15:17person that just has a bit of a lump sum
442. 15:20at the end of the year because they
443. 15:21didn't withhold enough taxes from all
444. 15:22their different sources of income, it's
445. 15:24totally fine, but now you can just
446. 15:25probably pay it in a lump sum and it'll
447. 15:26be okay. Now, as far as uh the last
448. 15:29thing probably thought we'd mention
449. 15:31that's applicable to some people, uh
450. 15:33there's a whole pile of new credits. So,
451. 15:35for things like if you're an artist, uh
452. 15:38there's a going to be a
453. 15:40kind of like an income carve out here,
454. 15:42and I don't know how they're going to
455. 15:43define artist. I don't know how
456. 15:45I didn't really look into that one too
457. 15:46much, but that one seemed um a little
458. 15:48bit interesting, but
459. 15:50for those uh people that are eligible
460. 15:52for the uh
461. 15:54what used to be the GST credit, they've
462. 15:57renamed it and restructured it, so it's
463. 15:59not a I don't believe it is actually a
464. 16:01credit anymore. It is a payment. So, a
465. 16:03credit requires you to have taxable
466. 16:05income to offset against. I think this
467. 16:07is just a payment. Um so, maybe it's
468. 16:10called a refundable credit, that's also
469. 16:11another term for it.
470. 16:14But, the uh they've renamed the GST HST
471. 16:18credit as the Canada Groceries and
472. 16:21Essentials Benefit. They did that
473. 16:23earlier this year in in 2026, but now
474. 16:25that that's what the language is we're
475. 16:27referring to, so it's not anything new
476. 16:29necessarily, but the new thing for this
477. 16:31one is that you get a one-time bump if
478. 16:33you qualify for it. You can qualify for
479. 16:35up to 50% more for the 2027 year coming
480. 16:39up. So,
481. 16:40for those with modest to low incomes or
482. 16:43if you're a student or something like
483. 16:44that or your kids are
484. 16:46that would be
485. 16:48some welcome
486. 16:50changes there,
487. 16:51but most people listening to this
488. 16:53podcast probably are not going to be
489. 16:55eligible for that one, but people in
490. 16:57certain circumstances be a nice little
491. 17:00bit of help. Okay, so those were some of
492. 17:01the initial thoughts that we had here.
493. 17:03Again, we're recording this on Friday
494. 17:05morning, so this hasn't even been out
495. 17:07for 24 hours yet. By the time you listen
496. 17:10to this, perhaps some changes of or
497. 17:11clarifications have already been
498. 17:13provided, but anyways, for those of you
499. 17:15that are looking for something quick as
500. 17:17far as a reaction goes or some things
501. 17:18that might affect you, I hope this
502. 17:20episode was valuable for you. Thanks for
503. 17:22listening or watching us however you
504. 17:24found us today and we will see you on
505. 17:26Wednesday for our more regularly
506. 17:27scheduled episode of the Canadian Money
507. 17:29Roadmap. Take care.
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