On March 22, 2017, Finance Minister Bill Morneau delivered his second budget. Below are the key items that will impact you and your small business.
It should be noted that CRA is getting another $520 million to their budget. I would expect more CRA inquires and audits, especially if you are a small business owner.
Personal Tax Items
The big surprise is that there are no real significant changes to personal taxation given all the speculation leading up to the budget. For example, no change to tax rates, income splitting, to the principal residence exemption, the capital gains inclusion rate or taxability on employer provided health plans.
Nurses can now certify individuals for the disability tax credit.
Nurses are added to list of medical professionals that can certify an individual’s disability for the credit. Any help in getting qualified individuals the credit is always welcome.
Expansion of eligible medical credits for families trying to conceive a child
Use of reproductive technologies, even if not medically indicated because of a medical infertility condition will be allowed for 2017 and subsequent years and the ability to go back for the 10 preceding years at your choice. Going back 10 years is unusual, but claiming this credit could generate some significant tax savings.
Consolidation of Caregiver Credits
There are currently three types of caregiver credits: infirm dependent credit, caregiver credit, and the family caregiver credit. These will be consolidated into the new Canada Caregiver Credit for 2017 and later years. The big change to this credit is that parents who live with their children who are not infirm will no longer qualify for the consolidated credit.
You can receive your T4 by email
Before certain requirements had to be met before your employer could email your T4 slip. The requirements have been relaxed but you can demand to get a paper copy from your employer.
More institutions qualify for the tuition tax credit
Given Ontario’s lead in eliminating all post-secondary tax credits and last year’s elimination of the education and textbook amount by the federal government, I thought that this credit would be eliminated. Keeping this credit does show some commitment in education.
Elimination of Public Transit Tax Credit
Elimination of this credit is surprising given how much the country needs transit infrastructure. The elimination of this credit takes effect July 1, 2017. While, I won’t miss looking at Presto travel logs to figure out the correct amount of the credit, it is unfortunate for the credit to disappear because this credit could deliver some real tax savings, unlike many of the other former and existing tax credits.
Watch for mutual fund corporations to disappear
The government has made it easier for mutual fund corporations to change to mutual fund trusts.
Business Tax Items
The good news here is that there no major tax changes. After the last two budgets, this is very good news indeed!
Factual Control of a corporation
The government is making it easier for them to assert that you have control over someone else’s corporation even with no documentation. This is relevant for the small business tax rate.
Taxation of derivatives
The government is allowing an election to mark all derivatives owned to market if they choose. Once you elect in, you cannot elect out with the government’s approval. As well, straddle transactions are being curtailed. Losses on the “losing legs” cannot be recognized until the “winning leg” is recognized for tax purposes.
Billing for Professionals
Professionals must value their work-in-process at the end of the year and include that amount in income. To help facilitate the change for those taxpayers who currently exclude their work-in-progress, there is a one year transition period. This changes takes effect for the first taxation year after today.
This analysis is intended as a brief overview and does not include all the details to ensure you can take advantage of these rules as applicable. Please contact me to see how these changes can impact you and your business.
William Khalilieh is a Chartered Professional Accountant, based in Burlington, Ontario, who provides practical tax and accounting solutions to individuals and their businesses in the Greater Toronto Area.