MARCH 22, 2017 FEDERAL BUDGET TAX HIGHLIGHTS
The highlights of the proposed tax changes of the recent Federal budget are outlined below.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. Please contact our tax group if you have any questions on the impact of these proposed changes.
- Personal income tax rates – There are no changes to the federal personal income tax rates in the budget. The maximum federal personal tax bracket will remain at the 33% rate for income over an indexed $202,800.
- Disability Tax Credit – Nurse practitioners will be allowed, effective immediately, to certify the disability tax credit application form for any disabilities that are within the scope of their practice.
- Medical Expense Tax Credit – Fertility treatments are now eligible as medical expenses even where the individual undertaking the treatments are not resulting from a medical infertility. This measure applies to the 2017 and subsequent taxation years and be able to elect for it to apply for any of the preceding ten taxation years in their 2017 return.
- Consolidation of Caregiver Credits – Budget 2017 proposes to enact the Canada Caregiver Credit which would replace three legacy credits: the family caregiver tax credit, the caregiver credit and the infirm dependant credit. The Canada Caregiver Credit will provide a non-refundable 15% credit up to, depending on qualifications, a maximum of $9,033—a value of about $1,355. The credit will be reduced dollar-for-dollar by the dependant’s net income above $16,163 (in 2017).
- Mineral Exploration Tax Credit for Flow-Through Share Investors – The budget proposes to extend the availability of this 15% tax credit to flow-through share agreements entered into on or before March 31, 2018.
- Tuition Tax Credit for Occupational Skills – Budget 2017 proposes to extend the tuition tax credit to occupational skills courses that are not at the post-secondary level. This measure is only available to where the course is taken with the purpose of providing the individual with skills (or improving the individual’s skills) in an occupation and the individual has attained the age of 16 before the end of the year.
- Public Transit Tax Credit – Budget 2017 proposes to eliminate the public transit tax credit effective July 1, 2017. That is, eligible transit passes may still qualify for the credit for transit that occurs up to and including June 2017.
- Anti-Avoidance Rules for Registered Plans – Anti-avoidance provisions that have been present in RRSP, RRIF and TFSA accounts for prohibited investments have now been extended to RESPs and RDSPs. This provision will apply to investments acquired after March 22, 2017 with the advantage rules relaxed on swap transactions undertaken before July 2017 and removal of prohibited investments before 2022.
- Accelerated CCA – Clean Energy Generation & Conservation – The budget proposes to expand Class 43.1 (30%) and Class 43.2 (50%) to include geothermal equipment that is used primarily for the purpose of generating heat or a combination of heat and electricity. This measure will apply in respect of property acquired for use on or after March 22, 2017.
- Canadian Exploration Expense: Oil and Gas Discovery Wells – Budget 2017 proposes that expenditures associated with drilling or completing a discovery oil and gas well (first well in a new reservoir) be treated as a “Canadian Development Expense” (CDE) rather than a “Canadian Exploration Expense” (CEE). CDE is deducted on a 30% declining balance basis where CEE is deducted at a 100% declining balance basis. This measure will come into effect for expenses incurred after 2018, including expenses incurred in 2019 that could have been deemed to have been incurred in 2018.
- Reclassification of Expenses Renounced to Flow-Through share investors – The federal budget proposes to no longer permit eligible small oil and gas corporations (less than $15 million taxable capital) to treat the first $1M of CDE as CEE expenditures. This measure will come into effect for expenses incurred after 2018, including expenses incurred in 2019 that could have been deemed to have been incurred in 2018.
- Timing of recognition of gains and losses on derivatives – Where derivatives are held on account of income, the federal government has introduced a proposal to elect to recognize these derivatives on a mark-to-market basis as well as introducing anti-avoidance provisions for straddle transactions engaged by businesses (whether individuals or corporations).
- Billed-basis accounting – Budget 2017 proposes that taxpayers in certain designated professions (i.e. accountants, dentists, lawyers, medical doctors, veterinarians and chiropractors) are no longer permitted to elect to have their work-in-process accounts excluded in computing their income for a particular year. This measure will apply to taxation years that begin on or after March 22, 2017. Transitional measures will be provided to mitigate the short-term effect on the affected taxpayers.
- Taxi and Ride-Sharing Services – Budget 2017 proposes that ride-sharing services will be considered a taxi business for the purposes of the GST/HST and therefore will be required to collect and remit GST/HST according to their province or municipality.