Federal Budget -> 2011 Budget

Federal 2011 Budget - June 6, 2011

See the following on the Federal Budget 2011 and Department of Finance websites: 

See also the Canada Revenue Agency questions and answers re provisions of the 2011 Budget.

All budget proposals are subject to legislative approval.

Personal Income Tax measures included in the Budget:

Business Tax Changes

Other Measures

Personal Income Tax Changes

For all personal income tax measures see the Budget 2011 website Personal Income Tax Measures.

Basic personal amount, tax brackets

There were no new changes of amounts announced for these items.  They were indexed for inflation in 2011.  See our tables of non-refundable tax credits and the marginal tax rate tables for 2011 amounts and rates.

Children's arts tax credit

Volunteer firefighters tax credit

Income Tax Act proposed s. 118.06

The Budget proposes to to provide a non-refundable tax credit of 15% of $3,000, for volunteer firefighters who perform 200 hours or more of eligible volunteer firefighting services in the year for one or more fire departments.  If requested, a written certificate from the fire chief or a delegated official of each fire department must be provided, attesting to the number of hours.

A firefighter who claims this credit will not be eligible for the existing tax exemption for the first $1,000 of income from being a volunteer firefighter.

Medical expense tax credit for other dependents

Income Tax Act s. 118.2(1)

Child tax credit eligibility

Income Tax Act s. 118(4)(b)

Currently, only one individual per domestic establishment can claim the child tax credit. If two adult siblings share a home and both have children, only one can claim a child tax credit.

The budget proposes to change the legislation so that sharing a home does not prevent otherwise-eligible parents from claiming the child tax credit for their children.  This will apply beginning in 2011.

Tax measures re education

It is proposed to amend the Tuition Tax Credit to recognize fees paid for examinations that are required to obtain a professional status recognized by federal or provincial statute, or to be licensed or certified in order to practice a profession in Canada.

Currently, courses taken outside Canada are only eligible for the tuition tax credit if the course is of a duration of at least 13 weeks.  It is proposed to reduce this required duration to 3 weeks.  It is also proposed to reduce the similar 13 week requirement for Educational Assistance Payments (EAP) from a Registered Education Savings Plan (RESP) to 3 weeks when the student is enrolled in a full-time course.

RESPs - asset sharing among siblings:  The budget proposes to allow transfers between individual RESPs for siblings, without tax penalties and without triggering the repayment of CESGs, provided that the beneficiary of a plan receiving a transfer of assets had not attained 21 years of age when the plan was opened.

These measures would apply beginning in 2011.

Kiddie tax extended to capital gains

Income Tax Act s. 120.4

The budget proposes to extend the tax on split income to capital gains realized by, or included in the income of, a minor from a disposition of shares of a corporation to a person who does not deal at arm's length with the minor, if taxable dividends on the shares would have been subject to the tax on split income (at the highest marginal tax rate).  These capital gains would be treated as dividends and thus would not benefit from the lower capital gains inclusion rates, and would not qualify for the lifetime capital gains exemption.

This measure would apply to capital gains realized on or after March 22, 2011.

Donations of publicly listed flow-through shares

The budget proposes that for flow-through shares acquired by a taxpayer on or after March 22, 2011, the capital gains exemption on donations of publicly listed securities, if any of these shares are subsequently donated, will only be available to the extent that the capital gain exceeds a threshold amount (the "exemption threshold").  Generally, the threshold amount will be the original cost of the shares, but the threshold amount will be reduced by capital gains realized after March 22, 2011, on any shares of the same class.

Registered Disability Savings Plan changes

Income Tax Act s. 146.4(1), proposed s. 146.4(1.1) to 146.4(1.4)

Allow RDSP beneficiaries with shortened life expectancies (five years or less) to make withdrawals without the requirement to repay the assistance holdback amount.  A medical doctor must certify as to the life expectancy, and the holder of the plan can elect for the RDSP to become a specified disability savings plan.

There may be certain circumstances in which the assistance holdback amount may still have to be repaid, even with a shortened life expectancy.

This would take effect upon royal assent.

Business Income Tax Changes

For all business tax measures see the Budget 2011 website Business Income Tax Measures.

Accelerated CCA

Manufacturing and processing machinery and equipment (class 29)

The temporary accelerated capital cost allowance (CCA) rate of 50% on a straight line basis (subject to the half year rule) is proposed to be extended another 2 years, to machinery and equipment acquired before 2014.

After 2013, this machinery and equipment will be included in class 43, with a 30% declining balance CCA rate.

Clean energy generation equipment (class 43.2)

Class 43.2 provides accelerated capital cost allowance at a rate of 50% per year on a declining balance basis.  

The budget proposes to broaden Class 43.2 to include equipment that generates electricity using waste heat.

These measures will apply to eligible assets acquired on or after March 22, 2011 that have not been used or acquired for use before that date.

Other Measures Proposed

The government announced the phase-out of quarterly allowances for political parties.

Guaranteed Income Supplement (GIS)

Enhance the GIS to provide a new top-up benefit of up to $600 annually for single seniors and $840 for couples, starting July 1, 2011, if the legislation is passed quickly enough for this.

Health Care

Attract health care workers to underserved rural and remote communities by forgiving up to $40,000 of the federal component of Canada Student Loans for new family physicians and up to $20,000 for nurse practitioners and nurses.

Part-time Students

Reduce the in-study interest rate for part-time students to zero, as it is for full-time students.

Excise Duties and Sales and Excise Taxes

GST/HST on Poppies

Provide a rebate for GST/HST paid by Royal Canadian Legion on purchases of Remembrance Day poppies and wreaths.

Sharing Information With Other Countries

Allow the sharing of information obtained under the Excise Act, 2001 and the Excise Tax Act with countries or jurisdictions with which Canada has entered into a tax information exchange agreement.

Sales Tax Harmonization Québec

$2.2 billion is allocated in support of sales tax harmonization with Québec.

Revised: December 21, 2011