The Federal
Jobs and Growth Act was introduced on March 29, including key elements of
Budget 2010. The Act, Bill
C-9, received Royal Assent on July 12, 2010.
Draft
legislative proposals were released for consultation on August 27,
2010. These proposals are to implement tax measures from Budget 2010 as
well as several previously announced tax initiatives. Comments should be
provided to the Tax Policy Branch by September 27, 2010.
Medical expense tax credit (METC) - cosmetic
procedures
The Budget proposes to change the wording of the Income
Tax Act in order to make it clear that medical or dental services or
related expenses which are provided for purely cosmetic purposes are not
eligible medical expenses for purposes of the medical expense tax
credit, unless the services are necessary for medical or reconstructive
purposes. This is effective for expenses incurred after March 4,
2010.
The Budget proposes to allow two eligible individuals
who share custody of a child to each receive 50% of
Canada Child Tax Benefit
Universal Child Care Benefit, and
GST/HST credit
This policy will apply when a child lives more or less
equally with two individuals who live separately. It will apply to
benefits payable commencing July 2011.
Single parents and Universal Child Care Benefit (UCCB)
The Budget proposes to allow a single parent the option
of including the UCCB income in the income of the dependent for whom an
eligible dependent credit is claimed. If the single parent is unable
to claim an eligible dependent credit, the UCCB income can be claimed in
the income of one of the children for whom the UCCB is received.
This measure will apply to the 2010 and subsequent tax
years.
RRSP rollover to an RDSP
Budget 2010 proposes to allow a rollover of a deceased
individual's RRSP proceeds to the Registered
Disability Savings Plan (RDSP) of a financial dependent infirm child
or grandchild. This will be effective for deaths occurring on or
after March 4, 2010.
Carry forward of RDSP grants and bonds
RDSP beneficiaries are currently unable to carry
forward unused Canada Disability savings Grants (CDSGs) and Canada
Disability Savings Bonds (CDSBs) to future years.
Budget 2010 proposes to amend the Canada Disability
Savings Act to allow a 10-year carry forward of CDSG and CDSB
entitlements. The carry forward will be available starting in
2011. Plan holders will receive annual statements of CDSG
entitlements.
to clarify that post-doctoral fellowships will be
taxable. A post-secondary program consisting primarily of
research will only be eligible for the education tax credit and the
scholarship exemption if it leads to a college or CEGEP diploma, or a
bachelor, masters or doctoral degree or equivalent.
that an amount will be eligible for the scholarship
exemption only to the extent that it is received in connection with
enrolment in an eligible educational program for the duration of
the period of study related to the scholarship.
that the scholarship exemption will be limited, in
the case of part-time programs, to the amount of tuition paid for the
program plus the costs of program-related materials. There would
be an exception to this for a student entitled to the disability tax
credit, or a student whose medical or physical impairment prevents
them from being enrolled on a full-time basis.
These measures will apply to the 2010 and subsequent
taxation years.
Employee Stock Options
Stock option cash outs
Budget 2010 proposes that the stock option deduction
will only be available to employees
when they exercise their options by acquiring
securities of their employer, or
when stock option rights are cashed out to the
corporation, as long as the employer makes an election
to forgo the deduction for the cash payment.
The Budget will also clarify that when stock option
rights are disposed of to a non-arm's length person, this results in an
employment benefit at the time of disposition (including cash out)
These measures apply to dispositions of employee stock
options occurring after 4pm EST on March 4, 2010.
Stock option tax deferral election repealed
Currently, the taxable employment benefit from the
acquisition of securities under stock options can be deferred under
certain conditions, until the disposition of the optioned securities.
Budget 2010 proposes to repeal the tax deferral
election, and to ensure that withholding tax is remitted by the employer
based on the value of the employment benefit related to the acquisition of
securities under stock options.
The repeal of the tax deferral election will apply to
employee stock options exercised after 4pm EST on March 4, 2010.
The clarifications to remittance requirements will not
apply until 2011.
Relief for taxpayers who have made stock option
deferral elections
For taxpayers who have made tax deferral elections on
stock options, Budget 2010 is proposing a special elective tax treatment
which will ensure that the tax liability on a stock option benefit will
not exceed the proceeds of disposition of the optioned securities, taking
into account tax relief resulting from the offsetting of the capital
losses on the securities against capital gains from other sources.
For more information on all employee stock option
measures, see Employee
Stock Options in the Budget 2010 web site.
Budget 2010 proposes to expand Class 43.2 to include:
heat recovery equipment used in a broader range
of applications; and
distribution equipment used in district energy
systems that rely primary on ground source heat pumps, active solar
systems or heat recovery equipment.
Class 43.2 provides accelerated capital cost allowance
at a rate of 50% per year on a declining balance basis. Class 43.1
also provides accelerated CCA, at the rate of 30% per year, for assets
acquired before February 23, 2005. A higher efficiency standard is
required for Class 43.2 than for Class 43.1 Systems that only meet
the lower efficiency standard are eligible for Class 43.1.
These measures will apply to eligible assets acquired
on or after March 4, 2010 that have not been used or acquired for use
before that date.
Distribution Equipment of a District Energy System
Budget 2010 proposes to broaden Class 43.1 and Class
43.2 to include certain specified distribution equipment which is part
of a district energy system used by the taxpayer to provide district
heating or cooling through the use of thermal energy.
Canadian Renewable and Conservation Expenses -
Principal-Business Corporations
Budget 2010 proposes that the definition
"principal-business corporation" be amended to clarify that
flow-through share eligibility extends to corporations the principal
business of which is one, or any combination, of:
A simplified GST/HST accounting method was proposed in
Budget 2009 for network sellers employing the commission-based
model. Budget 2010 proposes enhancements and clarifications to the
previously announced measure, which will apply for fiscal years of a
network seller that begin after 2009. For more information on the
Budget 2010 website, see Tax
Measures: Simplification of the GST/HST for the Direct Selling
Industry.
Vehicle and Equipment Financing Partnership
The Government is creating the Vehicle and Equipment Financing
Partnership as part of the Business Credit Availability Program (BCAP),
in order to expand financing options for small and medium-sized finance
and leasing companies, increasing the availability of credit at market
rates for dealers and users of vehicles and equipment. For more
information on the Budget 2010 website, see Tax
Measures: Extending Access to the Financing Needed to Support the
Recovery.
The information on this site is not intended to be a
substitute for professional advice. Each person's situation differs, and
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site to your best advantage.
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