Tax Measures 

CGA-Canada's 2005 Federal Budget Response

Personal income tax measures

Basic personal amount to increase to $10,000 by 2009

• $100 in each of 2006 and 2007, then $400 in 2008, and the greater of $600 or the amount to bring the limit to $10,000 in 2009

RRSP changes

• RRSP limits to rise by about $1,000 in 2007, with no change to the 18 per cent contribution limit
• 2007 will go from an indexed $18,000 to $19,000, and then $1,000 per year up to $22,000 by 2010
• Foreign content rules to be eliminated in 2005
• Gold bullion added as a qualifying investment

Disability credits changed

• Clarification of the wording so that the legislation and form agree
• Multiple conditions added, so that the cumulative effect of these conditions represents a marked restriction in the activities of daily living, whereas each individual condition does not
• Physiotherapists can now certify a restriction in the ability to walk
• Changes to what qualifies as life-sustaining therapy

Disability supports deduction

• More qualifying expenditures
• Refundable medical expenses supplement increased from $571 to $750 for 2005

RESPs

• Time limits extended for people with disabilities

Children with disabilities

• Child disability benefit increased from $1,681 to $2,000 for 2005 – 06 for low-income families

Medical expenses

• Several new expenditures, including medical marijuana have been added
• New rules for home renovations

Caregivers

• The maximum amount of medical and disability-related expenses that caregivers can claim on behalf of their disabled dependents is doubling, from $5,000 to $10,000 effective this year
  

Adoption expense costs

• Non-refundable tax credit to be introduced for eligible adoption expenses
• Claimable in the year in which the adoption is approved
• Maximum of $10,000, including expenses from when the adoption file was opened

Automobile standby charges

• Emergency medical services vehicles now excluded (as are ambulances, fire trucks, and police cars)
• EMS vehicles include clearly marked vehicles designed to carry paramedics and their emergency medical equipment

Patronage dividends

• Share dividends (paid in shares) of eligible agricultural cooperatives will no longer be taxable when issued, but will be taxable when the shares are sold

Corporate tax measures

Corporate surtax

• To be eliminated by January 1, 2008
• Represents a 1.12 per cent reduction in the corporate tax rate
• Simplifies the corporate tax return

Corporate rate reductions

• Rate will be reduced from 21 per cent to 19 per cent between January 1, 2008 and January 1, 2010
• This will not apply to Canadian-controlled private corporations, credit unions, mutual fund corporations, investment corporations, and mortgage corporations

Improvements to capital cost allowance

• Transmission pipelines and related equipment
• Combustion turbine generating equipment
• Electricity transmission and distribution assets
• Specified energy property rules
• Cable for telecommunications infrastructure
• Efficient and renewable energy generation equipment
• High-efficiency and renewable energy generation equipment

Scientific research and experimental development (SR & ED)

• Offshore zone extended from 12 miles to 200 miles (19km to 322km)

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Sales and excise tax measures

Excise tax on jewellery

• Current 10 per cent excise tax on jewellery will be phased out over a five-year period (by March 1, 2009), by two per cent per year rate reductions

GST / HST health care rebate

• 83 per cent rebate extended to certain provincially-recognized and funded NFPs or charities that provide health related services
• Includes:
  • ambulatory care hospitals
  • day surgery clinics
  • cancer clinics
  • community health centres
  • facilities offering high-level therapeutic care
  • organizations providing in-home medical care
  • regional health authorities
  • lab and diagnostic service organizations

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Tax administration

International tax enforcement

• $30 million annual investment in enhanced audit and collection activities in international tax evasion

Tobacco taxation compliance and enforcement

• Better markings to indicate whether or not tax has been paid
• More enforcement officers
• Better control over raw tobacco

Directors’ liability for GST / HST refunds

• Liability extended to incorrect refunds from unpaid amounts

GST registrant Web registry

• ITCs are only refundable if paid to a legitimate registrant
• A Web-based registration data base will be established so that taxpayers can determine if a supplier is registered

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Taxation update

Interest deductibility

• New rules re-written and will be released for public comment soon

Cross-border share-for-share exchanges

• A discussion draft to be released soon

Other outstanding legislative proposals

• Government intends to introduce legislation at an appropriate date
• Will include:
  • Foreign investment entities and non-resident trusts
  • Various technical amendments
  • Sales tax initiatives

Income trusts

• The implementation of the 2004 budget provisions limiting the investment by pension funds in income trusts has been delayed
• Similar issues arise for limited liability partnerships
• Stakeholders will be consulted

Taxation agreements with First Nations

• Government will continue to consider taxation agreements with First Nations

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