On June 21, 2019, the Government passed bill C-97, which included changes to several income tax measures:
Corporate Tax Changes
Scientific Research & Experimental Development (SR&ED)
Removed the $500,000 taxable income limit as a factor in determining a Canadian-controlled private corporation’s CCPC) annual expenditure limit for the purpose of the enhanced SR&ED credits.
Prior to change: The annual SR&ED expenditure limit would be reduced if taxable income exceeded $500,000 or taxable capital employed in Canada exceeded $10 million
After implemented changes: The annual SR&ED expenditure limit will be reduced if taxable capital employed in Canada exceeds $10 million, regardless of taxable income
Implication: CCPCs will now be able to exceed $500,000 in taxable income without a reduction in their annual SR&ED expenditure limit as long as their taxable capital employed in Canada does not exceed $10 million. As the taxable capital begins to exceed $10 million, the expenditure limit will gradually be reduced. This change is applicable for tax years ending on or after March 19, 2019.
Accelerated CCA Rates & Tax Support for Clean Energy Equipment & Vehicles
Provided a temporary enhanced first-year CCA of 100% for eligible zero-emission vehicles and specified clean energy equipment. Tax support was also expanded for electric vehicle charging stations and electrical energy storage equipment.
Accelerated CCA Rates for Production and Manufacturing Equipment
Provided a temporary enhanced first-year CCA of 100% for machinery and equipment used for the manufacturing or processing of goods.
Tax credits for Qualifying Canadian Journalism
Provided support for Canadian journalism by introducing new refundable and non-refundable tax credits.
Canadian Film/Video Production Credits
Allowed joint projects of producers from Canada and Belgium to qualify for the Canadian film or video production tax credit
Mineral Exploration Credit Extension
Extended the mineral exploration tax credit for an additional five years;
Small Business Deduction Rules for Fishing & Farming Corporations
Eliminated the requirement that sales be to a farming or fishing cooperative corporation in order to be excluded from specified corporate income for the purposes of the small business deduction. A broader amount of income will now be eligible for the small business deduction.
Communal Organization Business Income
Ensured that business income of a communal organization retains its character when it is allocated to members of the communal organization for tax purposes.
Personal Tax Changes
Canada Training Credit
Introduced the Canada Training Credit for eligible workers between 25 and 64 to assist with the cost of training fees. The credit would cover half the cost of taking a course or enrolling in a training program. Credit accumulates at $250 per year up to a lifetime benefit of $5,000.
Home Buyers' Plan
increased the withdrawal limit under the Home Buyers’ Plan and amending how it applies on the breakdown of a marriage or common-law partnership. The Home Buyers’ Plan withdrawal limit was increased from $25,000 to $35,000.
TFSA
Extended joint and several liability for tax owing on income from carrying on business in a TFSA to the TFSA’s holder. This carries implications for individuals “carrying on business” (ex. day-trading) in a TFSA where the TFSA holder can be held liable for taxes owing on income earned within a TFSA.
Salary Overpayment Support
Support for employees who must reimburse a salary overpayment to their employer due to a system, administrative or clerical error. Prior legislation required employees to repay the gross salary paid in error. Employees can now be eligible to instead repay the net salary (gross salary less overpaid taxes and EI contributions) after which the employer can request a refund of the overpaid taxes and EI contributions withheld from the CRA directly.
Cultural Property Donations
Reduced requirements in order to qualify for the enhanced tax incentives for donations of cultural property.
Social Assistance Payments & Canada Workers Benefit
Ensured that social assistance payments under certain programs are non-taxable and do not prevent an individual from being considered a “parent” for the purposes of the Canada Workers Benefit;
Please contact your LFG Partners advisor for further details on how these federal budget changes impact you.