Federal budget | The opportunity of the CELIAPP questioned

The advisability of one of the main tax measures in the budget presented Thursday by the Trudeau government, the tax-free savings account for the purchase of a first property, or TFSA, is questioned by the professor and researcher in taxation and public finance at the University of Sherbrooke Luc Godbout.

Martin Vallieres
The Press

“I’m a little critical of the CELIAPP,” said Mr. Godbout during a presentation of the highlights of the federal budget prepared by the team of professors and students of the Research Chair in Taxation and Public Finance, that he leads.

“In terms of tax policy, I have a bit of trouble with the notion of a new TFSA that combines a tax deduction (on contributions) and ‘never tax’ (on future earnings and withdrawals ) while there are already many existing savings vehicles”, indicated Luc Godbout.

“In this context, is [la création du CELIAPP] is really necessary? Wouldn’t it have been enough to find facilitating measures around the existing home ownership regime [RAP à partir d’un compte REER] ? commented Mr. Godbout following a question about his perception of the “weak points” in the federal budget.

In the analysis of the “highlights” of the federal budget prepared by the research chair, the main elements of the CELIAPP are summarized as follows:

• A new tax-free savings account that will be offered starting in 2023 and aims to help people save for the purchase of a first residential property.
• The conditions for opening a CELIAPP account: be a Canadian resident aged 18 or over; not having been an owner in the year of opening the account and the four previous years.
• The CELIAPP will be an individual account, so there is the possibility of two accounts in the same couple of future first buyers.
• Contributions to the TFSAPP will be tax deductible, up to a maximum of $8,000 per year (unused contributions will not be carried forward to another year).
• Total lifetime TFSAPP contributions will be capped at $40,000.
• The investment income of the TFSAPP will be non-taxable, as in a TFSA.
• Withdrawals of funds from the TFSAPP for the purchase of a first residential property will be tax-free.
• The CELIAPP can only be used once for life.
• It will be possible to transfer funds from the RRSP (registered retirement savings plan) as a contribution to the TFSA, without tax consequences.
• The transfer of funds between the TFSA and the RRSP will not affect the contribution room already available in the RRSP.
• The RAP (Home Ownership Plan) will continue to exist, but a choice will have to be made between the two plans: RAP/RRSP or CELIAPP.
• If not used 15 years after its opening, the CELIAPP account must be closed. Unused funds may be transferred to the RRSP without immediate tax consequences, but they will be taxable on subsequent withdrawals from the RRSP or RRIF (registered retirement income fund).