LaBarge Weinstein’s 2016 Federal Budget recap

The 2016 Federal Budget was tabled this week, and there were several noteworthy measures that were announced including:

  • Reinstating the Labour-Sponsored Venture Capital Corporation tax credit (for provincially formed LSVCCs) as of 2016.
  • Allowing corporations to write-off, as a current expense, up to $3,000 in start-up costs starting in 2017.
  • Eliminating the potential of doubling-up a Canadian-controlled private corporation’s small business deduction where the company provides a majority of its services to a partnership or corporation with which the company does not deal at arms-length for tax years starting on or after Budget Day.
  • Eligible capital property (“ECP”) (goodwill) will be eliminated and a new capital cost allowance (“CCA”) class will be created for intangible property starting in 2017.
  • Changes to the “closely related” test for GST/HST to limit circumstances where the election can be filed among a closely related group to be exempt from GST/HST.
  • Introduction of the Canada Child Benefit which will replace the Canada Child Tax Benefit and Universal Child Care Benefit. The new Canada Child Benefit will not be taxable, but the amount paid out will be based on family income. It will replace the existing programs in July 2016.

In addition to the above, the budget also changed or eliminated measures previously implemented or announced by the past Conservative government, namely:

  • Previously announced measures to treat capital gains realized on the sale of private company shares as exempt from tax when the proceeds from the sale are donated to a registered charity will not be introduced as planned (previously blogged here.)
  • Income splitting for families with children, the children’s fitness and art credit and education and textbook credits have all been eliminated for the 2016 and subsequent tax years.

Finally, it is also important to note are the changes that were hinted at prior to the budget, but were not included:

  • There was no change to the taxation of stock options (we had previously blogged about potential changes here.)
  • There were no changes to the inclusion rate for capital gains (there were rumours that the rate would be increased from the existing rate of 50%).

Whether the absence of these items in the budget means that the government has changed its mind about amending the taxation of these items, or has simply postponed any planned measures in these areas remains to be seen.

By LaBarge Weinstein’s Taxation, Tax Planning, and Tax Litigation team. Have tax- or estate-related questions? Feel free to contact us today.

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