Tax Alerts

Click on the link above to view the entire budget commentary, a quick synopsis is as follows:

The Federal Government’s 2018 Budget touts Canada’s strong economic growth over the past two years, including real GDP growth of 3.2 per cent since the second quarter of 2016, an unemployment rate of 5.9 per cent, and significant improvements in average weekly earnings, consumer confidence, and household consumption. The Finance Minister expects similar growth in the near-term. In addition, federal revenues increased by more than 11 per cent in 2017, largely from personal and corporate income taxes.

With this positive economic activity and outlook, the government has presented an “Equality and Growth,” budget that includes tens of billions of dollars in new or increased spending over the next six years, with the goal of further growing government revenues by increasing economic participation among women, visible minority Canadians and persons with disabilities, as well as substantial long-term investments in science and technology.

The government suggests that increasing equality for women and enhancing women’s participation in the workplace (especially in technology and trades) could add $150 billion to the Canadian economy over the next decade.

Highlights include:

  • Reducing the small business tax rate to 10 per cent effective January 1, 2018 and 9 per cent as of January 1, 2019
  • Additional reporting requirements for trusts (effective 2021 tax year)
  • Extending eligibility for accelerated capital cost allowance for certain clean energy equipment
  • Enhancing and renaming the Working Income Tax Benefit (starting 2019)
  • Annual indexation of the Canada Child Benefit (starting July 1, 2018)
  • “Use it or lose it” EI parental benefits (expected availability June 2019)
  • Reducing access to the small business tax rate for businesses with high passive investment income (expected to apply 2019)
  • Applying GST/HST to management and administrative services provided
  • to an investment limited partnership by the general partner (after September 8, 2017)
  • Additional new measures to prevent tax avoidance
  • Adjusting tobacco excise duty rates annually (starting April 1, 2019)
  • Grants and funds to attract women to “Red Seal” trades and construction (starting 2018–19)
  • Pre-apprenticeship assistance for underrepresented groups (starting 2018–19)

The Finance Minister has not set a timeline for balancing the budget, but has substantially reduced the projected annual deficits through 2022–23 and expects the net debt-to-GDP ratio to decline over the period as well. The previously projected deficit for 2017–18 was $28.5 billion and now sits at $19.4 billion. Similarly, the projected deficit for 2021–22 was $18.8 billion and has been revised down to $13.8 billion. The net debt-to-GDP ratio is currently 31 per cent and is projected to decline to 28.4 per cent by 2022–23.

Virtually no one looks forward to dealing with the need to file a tax return each spring, and while some of that reluctance is undoubtedly due to the complexity of our tax system, there’s another factor at work.

Many (even most) taxpayers don’t know, until they have actually completed their return for the year, whether additional taxes will be owed. And, no matter what the taxpayer’s financial circumstances, finding out that money is owed to the tax authorities is bad news.

The reach of Canada’s system is broad – residents of Canada are taxed on their world-wide income, and the income or capital amounts that escape the Canadian tax net are few and far between.

One of the most significant of those exceptions, particularly for individual Canadian taxpayers, is the “principal residence exemption”. Plainly put, when a Canadian taxpayer sells his or her home, the proceeds of sale are not included in his or her income for the year (and therefore not taxed), no matter how much that home has appreciated in value since it was acquired. And, of course, given the real estate market conditions that have prevailed in recent years, especially in some urban centers, the difference between the original cost of the family home and its later sale price can be very substantial.

While everyone knows that the best results are obtained when tax and financial planning take place on an ongoing basis, the reality is that most Canadians focus on their tax situation only once a year, at tax filing time. And the harsher reality is that, by then, the opportunity to take steps which will make a significant difference in one’s tax liability for 2017 is lost.

The rules surrounding income tax are complicated and it can seem that for every rule there is an equal number of exceptions or qualifications. There is, however, one rule which applies to every individual taxpayer in Canada, regardless of location, income, or circumstances. That rule is that income tax owed for a year must be paid, in full, on or before April 30 of the following year. This year, that means that individual income taxes owed for 2017 must be remitted to the Canada Revenue Agency (CRA) on or before Monday, April 30, 2018. No exceptions and, absent extraordinary circumstances, no extensions.

Two quarterly newsletters have been added—one dealing with personal issues, and one dealing with corporate issues.

Two quarterly newsletters have been added—one dealing with personal issues, and one dealing with corporate issues.