Federal Budget 2013

As you know, Finance Minister Jim Flaherty delivered his federal budget on Thursday in Ottawa. 

This year’s budget takes aim at closing some key tax loopholes in an effort to generate revenue for Ottawa.  As you can see most of the changes won’t affect the average tax payer, but here are some key points I thought you would find interesting;

• Small business owners will benefit from a $50,000 increase in the Lifetime Capital Gains Exemption to $800,000 effective 2014. The exemption will be indexed to inflation after 2014.
• Businesses owners needing to train employees will be able to take advantage of the Canada Job Grant, which will provide up to $15,000 per person for skills training.
• Philanthropy gets a boost from a Donor Super Credit which complements the existing Charitable Donations Tax Credit with an additional 25% credit for first-time donors. The existing federal charitable tax credit system provides a 15% credit on the first $200 of donations, and a 29% credit above the $200 level. The super credit adds 25% to each of those credit rates up to $1,000.
• While there were no changes to the pension system, the government plans to work with provinces and plan sponsors to promote low-cost, secure pension options.
• Sports equipment and baby clothing In recognition of the retail price gap between Canada and the U.S., tariffs on baby clothing, hockey equipment, golf clubs and skis will be eliminated.
• Criticism about the over generous nature of the dividend tax credit system has led to a reduction of the gross-up factor applicable to non-eligible dividends from 18% to 25%, and the corresponding dividend tax credit to 13/18ths of the gross-up amount, from the current 2/3.
• The government will close another loophole with measures ensuring derivative transactions can’t be used to convert fully taxable ordinary income into capital gains, which are taxed at a lower rate.  
• Tax strategies targeted Some tax-motivated life insurance leveraging strategies may not be available in future.
• Finally, the budget will give CRA new tools to reduce international tax evasion and aggressive tax avoidance, including a new Stop International Tax Evasion Program.

I hope you find these highlights useful, as always if you have any questions or would like to discuss further, don’t hesitate to give me a call.

Have a great weekend,

Tracey

 

Source:  Advisor.ca and Invesco