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Tax Article

2011 Federal Budget Summary

Published: 2011-03-23

Personal Income Tax Measures

Children's Arts Tax Credit

This will allow parents to claim a 15-per-cent non-refundable tax credit based on an amount of up to $500 in eligible expenses per child paid in a year. The credit will be available for the enrolment of a child, who is under 16 years of age at the beginning of the year, in an eligible program of artistic, cultural, recreational or developmental activities. Effective 2011. Credit is in addition to Fitness Tax Credit.

Volunteer Firefighters Tax Credit

This will allow eligible volunteer firefighters to claim a 15-per-cent non-refundable tax credit based on an amount of $3,000 ($450 of tax savings). An eligible individual will be a volunteer firefighter who performs at least 200 hours of volunteer firefighting services in a taxation year. An individual who claims the credit will be required to obtain written certification from the chief. Effective 2011.

Family Caregiver Tax Credit

To provide new support to caregivers of dependants with a mental or physical infirmity, including spouses, common-law partners and minor children, Budget 2011 proposes to introduce a Family Caregiver Tax credit. This 15-per-cent non-refundable credit will be based on an amount of $2,000 ($300 tax savings) and will apply beginning in 2012.

Medical Expense Tax Credit for Other Dependants

To better recognize the impact that extraordinary medical expenses can have on a caregiver's ability to pay tax, Budget 2011 proposes to remove this $10,000 limit on eligible expenses that can be claimed under the Medical Expense Tax Credit in respect of a dependent relative. For this purpose, a `dependent` relative is defined as a child who is 18 years of age or older, or a grandchild, parent, grandparent, brother, sister, uncle, aunt, niece or nephew, who is dependent on the taxpayer for support. Effective 2011.

Child Tax Credit Eligibility

To ensure that sharing a home does not prevent otherwise-eligible parents from claiming the CTC in respect of their children, Budget 2011 proposes to repeal the rule that limits the number of CTC claimants to one per domestic establishment. Effective 2011.

Tuition Tax Credit - Examination Fees

Budget 2011 proposes to amend the Tuition Tax Credit to recognize fees paid to an educational institution, professional association, provincial ministry or other similar institution to take an examination that is required to obtain a professional status recognized by federal or provincial statute, or to be licensed or certified in order to practice a profession or trade in Canada. Effective 2011.

Education Tax Measures - Study Abroad

Budget 2011 proposes to reduce the minimum course-duration requirement that a Canadian student at a foreign university must meet in order to claim the Tuition, Education and Textbook Tax Credits and to receive Educational Assistance Payments from a RESP to three consecutive weeks from 13 consecutive weeks to recognize that many programs at foreign universities are based on semesters shorter than 13 weeks.

RRSPs - Anti-Avoidance Rules

Budget 2011 proposes to enhance the existing RRSP anti-avoidance rules by introducing rules similar to the anti-avoidance rules that currently apply to TFSAs to address concerns regarding the use of RRSPs in tax planning schemes, including RRSP strips.

Individual Pension Plans

Budget 2011 proposes that annual minimum amounts will be required to be withdrawn from IPPs (similar to current minimum withdrawal requirements from RRIFs) once a plan member attains the age of 72 and contributions made to an IPP that relate to past years of employment will be required to be funded first out of a plan member s existing RRSP assets or by reducing the individual s accumulated RRSP contribution room before new deductible contributions in relation to the past service may be made.

Employee Profit Sharing Plans

The Government will review the existing rules for EPSPs to determine whether technical improvements are required as these plans have increasingly been used as a means for some business owners to direct profit participation to members of their families with the intent of reducing or deferring taxes on profits and to avoid making CPP contributions and EI premiums on employee compensation.

Charitable Sector Measures

Recover Tax Assistance for Returned Gifts

Budget 2011 proposes to permit reassessments to disallow a taxpayer s claim for a credit or deduction where property is returned to a donor. The charity must issue to the taxpayer a revised receipt and send a copy of the revised receipt to the CRA.

Donations of Publicly Listed Flow-Through Shares

Budget 2011 proposes that if a share of a particular class of the capital stock of a corporation is issued to a taxpayer under a flow-through share agreement entered into on or after Budget Day, the exemption from capital gains tax on donations of publicly listed securities will be available in respect of a subsequent donation by the taxpayer of a share of that class only to the extent that the capital gain on the donation exceeds the original cost of the flow-through share.

Business Income Tax Measures

Manufacturing and Processing: Accelerated CCA

Machinery and equipment acquired by a taxpayer primarily for use in Canada for the manufacturing or processing of goods for sale or lease is currently eligible for a temporary accelerated CCA rate of 50 per cent on a straight line basis (subject to the half-year rule ) under Class 29. Budget 2011 proposes to extend this temporary incentive, for two years, to eligible machinery and equipment acquired before 2014.

Chris Bodnar, CA
Date updated: March 22, 2011

This information is provided by Crawford, Smith and Swallow Chartered Accountants LLP for informational purposes only and must not be relied upon as professional advice. Readers should not initiate any action on the basis of this information without the consultation and direction of a qualified professional advisor.

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