Joint Committee comments on the short-term rental rules

Comments of the Joint Committee on the proposed rules in s. 67.7 denying the deduction of expenses for non-compliant short-term rentals include:

  • The wording of non-compliant amount does not reflect the different timing for various deductions and instead simply refers to “outlays made, or expenses incurred, in the taxation year.”
  • It would seem inappropriate to include bad debt expenses in the non-compliant amount since the effect is to impose tax on more than the revenues collected.
  • It would seem appropriate to add the limitation that the short-term rental definition refers to short-term rentals by the taxpayer to address, for example, situations where the taxpayer leases the property on a long-term basis, but the tenant subleases it on a short-term basis.
  • Most, if not all, municipalities and provinces, that have restrictions for short-term rentals use 30 consecutive days, not the 90 consecutive days used in the “short-term rental” definition.
  • Quaere whether it was really necessary to provide no time limit on CRA assessments under s. 67.7.
  • Non-residents who are not subject to Part I tax have a tax advantage over Canadian residents regarding the taxation of non-compliant short-term rentals.

Neal Armstrong. Summaries of Joint Committee, “Subject: Proposed section 67.6 of the Income Tax Act”, 5 February 2024 Joint Committee Submission under s. 67.7(1) - non-compliant amount, short-term rental, s. 67.7(2) and s. 67.7(4).