This tax-filing season, many important changes and improvements were made to services, benefits, and credits for Canadians. Here's what you need to know:
New and improved credits
- Canada caregiver credit – This non-refundable tax credit replaces the family caregiver credit, the credit for infirm dependants age 18 or older, and the caregiver credit. It gives tax relief to eligible individuals who have a spouse or common-law partner, or a dependant, with an impairment in physical or mental functions.
- Disability tax credit (DTC) certification – Nurse practitioners across Canada can now certify the application form for the DTC.
- Medical expense tax credit – If you need medical intervention to conceive a child, you may be eligible to claim certain expenses even if you do not have a medical condition. These expenses are the same as those that would generally be allowable for individuals who have a medical condition. If you had fertility-related expenses for any of the 10 previous calendar years and you have not claimed them, you can request a change to your income tax and benefit return(s) to include these eligible expenses.
- Mailing a paper income tax and benefit return to your home - Starting this year, the CRA will mail a 2017 income tax and benefits guide and forms book to paper filers. These individuals won’t have to go to Canada Post, Caisse populaire Desjardins, or Service Canada locations to get their printed tax products. Those who want to file on paper and haven’t received a guide and forms book by February 26, 2018, from the CRA can find what they need online or order a paper copy from the CRA. An order limit of nine packages per individual will ensure all Canadians have access to what they need this filing season.
- File your taxes over the phone with File My Return – This new service lets eligible Canadians with simple tax situations file their return by answering a few questions over the telephone through an automated service.
- View transactions and pay balances with CRA BizApp – The CRA has released a new mobile web app called CRA BizApp. This app lets small businesses and sole proprietors view their business account balances and make payments by pre-authorized debit to their corporation, goods and services tax / harmonized sales tax (GST/HST), payroll, and excise duty accounts.
- Don’t wait for your notice of assessment; get an Express NOA – This service delivers a notice of assessment (NOA) directly into your certified tax software shortly after you file your return electronically. To use the service, you must be registered for online mail in My Account and file your return electronically using a certified tax software.
- ReFILE lets you adjust your return using your tax software – The ReFILE service now lets you change your return using your preferred certified filing software. Make sure you receive your notice of assessment before sending a change through ReFILE.
- Get Online mail directly in My Account – The CRA is adding more mail for individuals to receive directly in My Account. This tax season, online mail provides correspondence about tax free savings accounts, notices of assessment, benefit notices and slips, and more, including correspondence from some of the CRA’s review programs (e.g. requests for receipts).
- Pay taxes in person – You can now pay your individual tax, benefits and credits repayments, and other select payments to the CRA in person with cash or a debit card at any Canada Post outlet across the country. To pay in person, you must first create a personalized payment barcode online.
- Protect your account with Account Alerts – For added security, when a representative is added, deleted, or changed on your account, the CRA will send you an email notifying you of the recent activity on your account.
- Automatically fill in parts of your return with Auto-fill my return - The service lets you or your authorized representatives automatically fill in parts of your 2015, 2016, and 2017 income tax and benefit returns with information the CRA has available at the time of filing the return.
Changed credits and amounts
- Tuition, education, and textbook credits – As of January 1, 2017, the federal education and textbook credits were eliminated. However, you can still carry forward unused amounts from previous years. Also, with certain conditions, you may now be able to claim the tuition amount for fees you paid to a post-secondary educational institution for occupational skills courses, even if they are not at a post-secondary level.
- Children’s credits – As of January 1, 2017, the children’s arts tax credit and children’s fitness tax credit were eliminated.
- Public transit tax credit – As of July 1, 2017, this credit was eliminated. For this tax year, you can claim the cost of eligible public transit expenses only for travel taken from January 1 to June 30, 2017.
For more information contact any member of our tax team.
Below is commentary from MRSB Tax Partner, Terry Soloman on some initial thoughts on the federal government's most recent tax consultation announcement.
On Monday, October 16, 2017, the federal government provided some initial feedback on the actions they are considering resulting from the consultation period of the July 18, 2017 tax proposals. I have had numerous clients and others from my local business community ask me for my opinion on what today’s announcements mean for them. There is not enough information to make a definitive statement yet but here is a summary of what we know (or do not know):
1) A reinstatement of a previously announced plan to reduce the corporate tax rate on active business income, to be phased in by a one half of one percent decrease in 2018 followed by a further one percent decrease in 2019. This will reduce corporate tax rates on active income eligible for the small business deduction on PEI to 14.5% in 2018 and down to 13.5% in 2019.
While I will never complain about tax decreases on business income, wasn’t the difference between corporate rates and personal rates on business profits one of the reasons provided by government as to why the proposals issued this summer were required? All this change does is make the spread greater. However, any reduction to the corporate rate is a deferral of tax only due to Canada’s fully integrated tax system.
The reduction in the corporate tax rate on business profit does not deal with the much larger issue of applying TOSI rules to the distribution of this profit from the corporation as a dividend to family members, especially spouses, who contribute indirectly to the business success. This tax rate reduction (deferral) is minor and is really a distraction from the real issues at hand.
2) It appears, based on today’s update, that a reasonableness test is still part of the proposals but maybe the test will be less rigorous than initially suggested. I had hoped to see spouses excluded from TOSI rules and maybe limit the TOSI to adults up to age 24. This bright line test would have eliminated the need for the ridiculous amount of red tape and uncertainly a reasonableness test will create.
3) There were some comments that the proposals to limit the availability of the capital gains exemption have been abandoned. Does this mean TOSI will not apply to arms length capital gains? Will minors and non active adults be subject to a reasonableness test and still be restricted from claiming capital gains exemption on share sales? Will family trusts allocating capital gains still be targeted? Again, no details provided.
4) There was complete silence with respect to any update on the taxation of passive income, which in my view is the largest issue of all, effecting both business decisions of the private sector in the short and medium term as well as creating uncertainty over retirement strategies of Canada’s business sector. The business sector deserves better and need certainty in the rules they operate under. Unfortunately there was no update on this issue or on timelines for more clarity on any matters.
Frankly, with the consultation period having been closed only 14 days ago, and in excess of 21,000 submissions provided by Canadians to the Department of Finance, it is surprising that Finance officials would even have had the time to read and properly consider the volume and quality of submissions in such a short time frame, considering some submissions exceeded 150 pages of arguments. As always, the “devil is in the details” and we have not been provided with the details. It was interesting today that Prime Minister Trudeau was intent on answering all questions from the media and for the most part was not allowing the media to directly question Minister Morneau.
The government has committed to further updates and clarifications in the coming days, which many in the tax and business community will be closely watching with interest very closely.
In its 2015 Economic Action Plan budget, the federal government stated, “The Lifetime Capital Gains Exemption for farm or fishing property provides an incentive to invest in the development of productive farm and fishing businesses and helps farm and fishing business owners to accumulate capital for retirement.”
Fast forward to 2017 when times have changed. In its 2017 document Tax Planning Using Corporations, the federal government is proposing to tax part of this incentive back from the family farm, the backbone of our rural communities.
A segment of the document states, “specifically, individuals would no longer qualify for the capital gains exemption in respect of capital gains that are realized or that accrue before the taxation year in which the individual attains the age of 18.” Furthermore, the document states, “the second measure would introduce a reasonableness test for determining whether the lifetime capital gains exemption applies in respect of a capital gain” and “the third measure would no longer permit individuals to claim the lifetime capital gains exemption in respect of capital gains that accrue during a period in which a trust holds the property.”
The following examples illustrate how each of these proposed changes would affect the family owners of shares of a family farm corporation or interest in a family farm partnership:
- A farmer and spouse co-own a farm through a farm partnership or corporation. On disposition of their shares or partnership interest the spouse may lose all or part of their capital gains exemption if they do not meet a reasonableness test. Whether the reasonableness test is met or not will be determined by the Canada Revenue Agency (CRA). This test is based on the amount that would have been paid to an unrelated individual considering their labour contribution, past earnings, asset contributions and business risk. To add insult to injury, any portion of the taxable gain that is not considered reasonable will be taxed at the highest PEI rate of 51.37%. It is a well-known fact that the farm spouse contributes in many ways to the family farm operation and their involvement is critical to its success. However, this contribution may not meet the reasonableness test as it cannot always be assigned a dollar value and most farms would not be tracking this information.
- Another common structure is where a family trust owns the shares of the family farm corporation. Even where the farmer is the main beneficiary of the trust, on the disposition of the shares by the family trust, capital gains exemption would no longer be allowed.
We would encourage all farmers to contact their local MP. These MPs have to stand up for the farm community who are being unfairly targeted by these proposals.