On the personal taxation front, 2013’s budget contains little good news, says Jamie Golombek, managing director of tax and estate planning for CIBC Wealth Management.
“They’re closing a lot of loopholes, particularly for the sophisticated, high-net-worth individual,” he says. “A lot of the stuff we’ve seen in the last number of years has been eliminated.”
He notes wealthy Canadians, executives, and sophisticated tax planners will be unhappy with elimination of tax rules that allowed so-called monetization transactions, as well as changes to the dividend tax credit.
Small business owners, though, will be pleased with a change in lifetime capital gains exemptions.
Starting next year, capital gains on the sale of the first $800,000 of what Ottawa calls Qualified Small Business Corporation Shares, or on a qualified farm or fishing property, will be tax-free. And the rate will be indexed to inflation after 2014.
“This is long overdue,” says Golombek. “The number’s been stuck at $750,000 for as long as I can remember.”
For most Canadians, Golombek says one of the only pieces of good news is the First-Time Donor’s Super Credit. Under current law, donors get a 15% nonrefundable federal tax credit on the first $200 a year, and a 29% credit on anything above that.
The budget proposes to change that for people who haven’t donated in the past five years. They’ll be considered first-time donors and get a credit of 25%; so on the first $200, they’d actually get 40%; and on anything above that up to $1,000, the top-up results in a 54% federal credit.
The downside is that donors can only capture the credit once every five years.
The budget also unveiled crackdowns on tax evaders with changes to offshore reporting forms and introduction of the Stop International Tax Evasion Program.
“They’re encouraging people to tell on people,” says Golombek. And there will be rewards for people who provide information to CRA if it results in collection of taxes.
He notes in most cases advisors would not be aware of such holdings, but would have to be careful under the ethics rules not to aid or abet the arrangements.