Canada is 150 years old.Canada Savings Bonds are 71 years old. One of these won’t survive the year.(For full details see our;next article “Answers to Help Clarify the End of the Savings Bond Program”.)
Part of Budget 2017 kills off a staple of some grandparents’ birthday giving: it’s eliminating the Canada Savings Bond program, which was introduced in 1946.
At their height, Canada Savings Bonds accounted for 45% of the total marketable debt outstanding. Now, outstanding bonds make up less than 1% of total federal market debt at $5 billion.
“This decline in the program’s popularity can be attributed to the proliferation of higher-yielding alternative retail investment instruments, such as government of Canada-insured retail products,” states Chapter 4 of the budget documents entitled Tax Fairness for the Middle Class.
The demise of the bonds is just one of the headline takeaways from Finance Minister Bill Morneau’s second federal budget. Among other highlights:
Here are details of major parts of the latest federal budget.
Review of small-business tax benefits. The government is taking aim at tax-planning strategies common to private small business corporations, often owned by the wealthy, including:
Professional practice “work in progress.” The budget eliminates the billed-basis tax accounting for accountants, dentists, lawyers, medical doctors, veterinarians and chiropractors. This tax deferral let taxpayers recognize income when the work was billed. It ends for taxation years starting on or after March 22, 2017 (Budget Day).
Employment Insurance (EI). Premiums will rise 3% — or 5 cents to $1.68 for every $100 of insurable earnings. This is the maximum allowable increase under the Employment Insurance Act that governs EI.
Discovery wells. The budget changes the treatment of the costs of drilling an oil or gas well —or other expenses related to the well — that results in the discovery of a petroleum or natural gas reserve. After 2018, these expenses will have to be treated as Canadia Development Expenses (eligible for a deduction on a 30% declining balance basis).
Mineral exploration tax credit. The eligibility for the 15% mining exploration tax credit has been extended for an additional year. It applies to flow-through share agreements entered into on or before March 31, 2018.
Public transit credit. Since 2006, Canadians have been able to claim a 15% nonrefundable tax credit on the cost of monthly or annual public transit passes. No more. The government says “available evidence suggests that this credit has been ineffective in encouraging the use of public transit and reducing greenhouse gas emissions.”
Alcohol and cigarettes. The excise duty rate on cigarettes is increasing to $21.56 for every 200 cigarettes. The excise rate on alcohol is rising 2% and will be adjusted for inflation every April 1 starting in 2018.
Uber and ride sharing services. The definition of a taxi business is being amended to include commercial ride-sharing services facilitated by Internet applications, such as Uber and Lyft. As of July 1, 2017, rides by those services will be subject to an HST/GST charge.
Tuition tax credit. This tax break is being extended to fees charged for occupational skills courses that are not at a post-secondary level. Students must be least 16 years old before the end of the tax year. The credit is available starting with courses taken in 2017.
Caregiver credit. The current caregiver, infirm dependant and family caregiver tax credits are being combined into a 15% Canada Caregiver Credit. Taxpayers can claim up to $6,883 for the care of an infirm dependant relative and up to $2,150 for a spouse, common-law partner, an infirm dependant for whom an eligible dependant credit is claimed and a sick child under the age of 18. The credit starts to be phased out (dollar for dollar) when the dependant’s income is over $16,163 net income.
EI caregiving benefit. Eligible caregivers will be able to claim up to 15 weeks of EI benefits while they’re away from work to support or care for a critically ill or injured family member. Currently, this benefit is available only if a family member is dying.
Veterans’ education. A new program will provide as much as $40,000 of education or training benefits to veterans with six years of eligible service. Those with 12 years of service would be entitled to up to $80,000 in benefits. The program will begin in April 2018 for veterans honourably released on or after April 1, 2006.
Home relocation loans. The budget eliminates the deduction from taxable income of the portion of employer loans used to relocate more than 40 kilometres for your job. The change will be effective starting in the 2018 tax year.
Tighter rules on investment products. Anti-avoidance rules will be extended to Registered Education Savings Plans and Registered Disability Savings Plans. They include:
These rules already apply to Registered Retirement Savings Plans, Registered Retirement Income Funds, and Tax-Free Savings Accounts.
Fertility treatments. Beginning with the 2017 tax year, you can claim the cost of such treatments as in vitro fertilization. You can also make a request to claim the expenses over the preceding 10 years.
Parental leave. Canadian mothers and fathers will be able to take an extended 18-month parental leave. However, EI benefits cover 55% of a salary over 12 months and that amount will have to cover those 18-month leave. Expectant mothers can claim maternity benefits up to 12 weeks before their due date, an increase from eight weeks.
In addition to what is listed above, the Budget includes many other changes that may affect your income or business tax returns. Consult with your tax advisor.