The 2013 Federal Budget included initiatives targeted at broad-based job creation, and measures designed to achieve tax simplification and to close tax loopholes.
Below is a summary of the Budget elements we identified as having the biggest impact on personal finances and investments. Fuller details can be found in our Federal Budget 2013 InfoPage available on our website.
Job Creation
Canada Job Grant – Up $15,000 or more per person for skills development; $5,000 from the federal government, plus potential matching by the province/territory and the employer
Tax relief
Enhanced ‘Super’ tax credit for first-time charitable donors – For those of you who have been wanting to donate, an extra 25% tax credit has been announced
Sports equipment and baby clothing – To recognize the price gap between Canada and the US, tariffs on baby clothing, hockey equipment, golf clubs and skis will be eliminated
Adoption expense tax credit – Time period for eligible expenses will be extended back to when an application is made, rather than the date a child is matched with his or her adoptive family
Small business
Lifetime capital gains exemption (LCGE) – The current amount of $750,000 will be increased to an $800,000 in 2014, and will thereafter be indexed to inflation
Non-eligible dividends – To address over-compensation concerns, the gross-up will be reduced from 25% to 18%, and the dividend tax credit reduced from 2/3 to 13/18
Life insurance concepts
Leveraged insured annuities – Accrued income to be taxed annually, no deduction for premiums paid, and death benefits will not increase a private corporation’s capital dividend account
10/8 arrangements – No deductibility for premiums paid or interest paid on borrowing against a policy, and a death benefit will not increase a private corporation’s capital dividend account
Communications with consumers of financial services
Comprehensive Financial Consumer Code – The government will look to streamline legislation and regulations in an effort to better protect consumers of financial products
Protecting vulnerable Canadians from predatory lending – Government will continue to work with provincial authorities to assure effective regulation of high-cost loans and payday lending
Financial literacy for Seniors – Continued commitment to protecting seniors from financial fraud, and forward-looking mention of the Financial Leader’s role in promoting financial literacy
Targeting tax simplification and tax loopholes
Charitable donation tax shelters – Allowing Canada Revenue Agency to collect 50% of disputed tax, interest or penalties, pending ultimate determination of the taxpayer’s liability
Labour-Sponsored Venture Capital Corporations (LSVCC) – No new LSVCC registrations and federal LSVCC tax credit eliminated, both to be phased-out following stakeholder consultations
Restricted farming losses – Restoring the chief source of income test after this was effectively overruled by the Supreme Court of Canada in the 2012 decision of R v. Craig
Foreign reporting – Form T1135 will be revised and more broadly promoted, and a whistleblower award is being introduced to solicit informants on evasion transactions
Character conversion transactions – Limitations placed on derivative instrument practices that produce capital gains returns within some mutual funds and exchange-traded funds
Consultation on graduated rate of taxation of trusts and estates – Government considering possible measures to limit use of graduated tax brackets, especially multiple access