Confirmed:  The CCR for Small Business is Tax Free

Ottawa has confirmed that the CCR for Small Business received by eligible Canadian-controlled private corporations (CCPCs) will be tax free for the 2019-20 to 2023-24 fuel charge years, as will the final payment for the 2024-2025 fuel charge year.  Draft legislation was released on June 30, 2025 with this announcement; and will be introduced for law making in Parliament this Fall.   Some of the more significant details are discussed below.

Statistics Canada's closely watched indicator, the Consumer Price Index (CPI) added 0.5% in January, taking inflation to 2.5% for the 12 months ended January. The Bank of Canada's core index, at 2.1% for the same period, was right on target, suggesting no policy changes are forthcoming. "The 2.1% reading on core inflation,î says Douglas Porter, deputy chief economist at Bank of Montreal, "brings us right back to where the Bank of Canada expected it to be for the first quarter in its January Monetary Policy Review. Headline inflation at 2.5% is still above its call of 2.2%, but it should drop notably by March.î The culprits driving inflation are higher gas and food prices. Gasoline prices increased 6.8% in January while food prices for food purchased from stores rose 4.9%. Year over year, food prices rose 4.2% while the cost of energy advanced 6.5%. The electricity index rose 7.3%. In fact, prices rose in seven of the eight major components in the 12 months, the exception being recreation, education and reading. StatsCan notes that, excluding food and energy, consumer prices increased 1.6% in the 12 months to January after rising 1.3% in December.   Additional Educational Resources:  Debt and Cash Flow Management and Elements of Real Wealth Management courses.  

Canadian politicians, regulators, financial institutions and lobby groups are making their voices heard in protest against the "Volcker Rule,î the U.S. legislative response to the financial skullduggery of 2008. The Volcker Rule ó Section 619 of the Dodd-Frank Act ó will prohibit U.S. financial institutions from proprietary trading, that is, trading for their own accounts, and from owning, sponsoring or having certain relationships with a hedge fund or private equity fund. There is no doubt the proposed rule is well intended but how the rule will be applied come July 21 has stirred up controversy globally about U.S. protectionism and aroused concerns about "unintended consequences.î Canadian and international leaders fear the proposed rule may undermine rather than support efforts to get the global financial system on sound footing. The Investment Funds Institute of Canada (IFIC), representing Canadian's mutual fund industry, weighed in on the eve of the deadline for comment. Its concern: the proposed rule's definitions of "covered fundsî and "resident of the United States.î IFIC wants public mutual funds clearly distinguished from hedge funds, private equity funds and covered funds, and Canadian snowbirds and other temporary U.S. residents excluded from the definition of "resident of the United States.î "As drafted, the Volcker Rule erects a barrier between the Canadian mutual fund industry and its Canadian clients,î IFIC president Joanne De Laurentiis said in a press release, "especially among our retiree, snowbird population.î In his letter to U.S. Secretary of the Treasury Timothy Geithner, federal Finance Minister Jim Flaherty reiterated De Laurentiis's concerns: "Without a change to the rule, a Canadian covered banking entity could be precluded from continuing to sponsor such a fund if it had unit holders resident in the U.S., even temporarily.î But Flaherty and Bank of Canada Governor Mark Carey also have broader concerns that centre on the liquidity and resiliency of Canadian financial markets. In his Feb. 13 letter to Ben Bernanke, chairman of the U.S. Federal Reserve, Carney pointed out: "The proposed rule appears to extend well beyond U.S.-insured depository institutions and imposes significant restrictions on Canadian banking entities by limiting their use of U.S.-based resources, personnel and market infrastructure and by preventing them from trading with U.S. counterparties.î Says Flaherty in his letter: "The Volcker rule could apply to transactions between Canadian banks that are simply facilitated by U.S.-based financial infrastructure, such as U.S. clearing houses.î Carney points out three potential consequences of the proposed rule: ï Canadian banks market-making and risk-management activities may be limited. ï Trading in Canadian government bonds may be impaired, restricting competition and liquidity in these markets. ï The use of U.S.-based global market infrastructure may be curtailed, hindering progress in implementing global initiatives to promote financial stability. He recommends two changes: ï The "solely outside of the United Statesî exception should be predicated upon whether the activity entails risk for a U.S.-insured depository institution and not incidental connections with U.S. entities or infrastructure. ï Canadian government securities, including securities issued or guaranteed by the federal and provincial governments, should be exempt from proprietary trading restrictions. Tessa Wilmott is a financial journalist and editor of Knowledge Bureau Report.   Additional Educational Resource:  2012 Distinguished Advisors Conference in Naples, Florida  

The arrival of T4 and T5 slips ó by the end of February ó signals the official start of the annual tax-preparation rush. One important rule you and your tax preparer will want to follow is completing all family tax returns together, starting with the lowest-earning family member and progressing to the highest. This will allow you to take advantage of provisions for transferring income to children and provide savings opportunities for the young. Filing returns for minors. There are many reasons to file a tax return for minors. First of all, your minor child is taxable and required to file a return if he or she earned $10,822 or more in 2011, be it income from employment (for example, working at a local restaurant) or self-employment (babysitting and lawn-care services). But even if your minor's income doesn't meet that threshold, filing a return is important. Each year, 18% of his or her earned income will go toward creating RRSP contribution room; in time, when the child does become taxable, he or she will be able to contribute to an RRSP creating a RRSP deduction that will reduce income and taxes. This is important planning tool if you are going to be the one supporting your child when he or she attends post-secondary school. Before unabsorbed educational credits can be transferred to you, the student must first claim tuition, education and textbook credits to reduce his or her taxable income to zero. An RRSP deduction will reduce the student's income, allowing you to transfer more of the credits to your return.   Your minor child also needs to include in income any survivor and/or disability benefits from the Canada Pension Plan. This will boost his or her net income. If you are a single parent, this could be particularly significant because the claim for "eligible dependentî or spousal equivalent for tax purposes will be reduced or eliminated. But there is a tax special provision for minors available only to single parents: you can transfer taxable Universal Child-Care Benefits (UCCB) to the child, and he or she can include it in income. This will be of advantage to you if you are in a higher marginal tax bracket than the child. It's Your Money. Your Life. File tax returns for all family members together, including minor children. The objective is to maximize the tax free zone of $10,822 and, if necessary, reduce income levels further with an RRSP deduction. What's required is that the minor has eligible RRSP room, which is created by filing a return. This filing strategy can create savings on a supporting parent's return as well, with the transfer of certain available tax provisions ó to the benefit of the entire family unit. Next Time: Making claims for minor children on your return Evelyn Jacks, president of Knowledge Bureau, is author of Essential Tax Facts 2012 and co-author of Financial Recovery in a Fragile World. To purchase your books, visit www.knowledgebureau.com/books  

Canada Revenue Agency recently released new rules concerning Registered Disability Savings Plan (RDSP) and the taxation of withdrawals from the plan. In a five-part series, Knowledge Bureau Report will examine RDSPs and explore the tax implications of the new rules. In this first report, Greer Jacks looks at what payments from RDSPs are taxable. Contributions. A plan holder(s) is the person or persons who opens the account on behalf of the disabled person, who becomes the plan's beneficiary. There is no limit to the amount the plan holder(s) can contribute annually to an RDSP, but the overall lifetime limit for a beneficiary is $200,000. Plans can qualify for a Canada Disability Savings Grant and the Canada Disability Savings Bond, as well as designated provincial programs, which are outside the contribution limit. Contributions can be made to the plan until the end of the year in which the beneficiary turns 59. A beneficiary can only have one RDSP at any given time, although the RDSP can have multiple plan holders throughout its existence. Payments. Three types of payments can be made from an RDSP: disability assistance payments (DAPs), repayments of grants and bonds to the government, and transfers of all property from the beneficiary's current RDSP to a new RDSP for the same beneficiary. Only the beneficiary or the beneficiary's legal representative acting on the beneficiary's behalf can receive DAPs, which is the only type of payment that is taxable. The beneficiary must include those amounts in his or her annual income. Reporting the income. When payments are from the RDSP, RDSP issuers report the taxable part of the payments from the plan in box 131 of the T4A slip, located in the "Other informationî area, and send two copies of the slip to the beneficiary or the beneficiary's legal representative. The beneficiary must include this amount as income on line 125 of his or her tax return for the year in which he or she receives it. For more details, see CRA's information circular IC99-1, www.cra-arc.gc.ca/E/pub/tp/ic99-1/ and CRA publication RC4460 www.cra-arc.gc.ca/E/pub/tg/rc4460/. Greer Jacks is updating jurisprudence in the EverGreen Explanatory Notes, an online research library of assistance to tax and financial professionals in working with their clients.  

The federal government earned the wrath of soon-to-be seniors recently when it suggested it might extend the age at which Old Age Security (OAS) benefits begin to age 67 from age 65. At this point, the proposal ó and it is only a proposal ó would not change OAS benefit amounts or indexing. This begs two important questions. Why is this being proposed? And, how will this change affect your retirement plan? In this issue of Knowledge Bureau Report, Knowledge Bureau author Douglas Nelson will explore the "whyî of the federal proposal. Next week, he'll look at the impact of this change on your retirement. Why is this change being proposed? First, let's put the proposed OAS changes into context by comparing them with the changes that have already taken place with the Canada Pension Plan (CPP). It is important to note that the CPP is a "fundedî program to which all Canadians contribute. It is based on employment income and both employers and employees contribute equally. (Self-employed people pay both portions). Federal and provincial governments do not contribute to this program. Beginning in 1997 and fully implemented in 2003, the federal government increased CPP contributions to 9.9% of employment income from 6%, with the goal of ensuring the CPP's long-term sustainability. Starting last year and ending in 2016, the feds are making further changes to the CPP, now encouraging Canadians to delay drawing their CPP retirement benefits until after age 65. (Our analysis suggests that, in many cases, the best approach is to delay drawing your CPP benefits until age 70, so that you get the very best value for your dollars invested in the plan. See Knowledge Bureau Report, Jan. 18.) So, over the past 15 years, there have already been huge changes to the CPP, all with the intention of boosting the financial soundness of the plan, in order to be ready for an aging population heading into retirement and the potentially shrinking tax revenues caused by that same population. OAS, on the other hand, is funded out of general tax revenues. In other words, Canadian's do not contribute to this plan in any way other than through the taxes they pay. Parliamentary Budget Officer Kevin Page last week released a report on this issue entitled Federal Fiscal Sustainability and Elderly Benefits. According to the report, 15.9¢ of every tax dollar collected in fiscal year 2010ñ2011 went to elderly Canadians.The report projects that by 2031 ó 19 years from now, when the last of the baby boomers reaches age 65 ó this figure will have climbed to 19.8¢ for every dollar of tax collected, a 3.9¢ increase. A small figure, indeed, but it is still an increase of 25%. From where will the extra money come? What corresponding cuts to federal spending do we want to see? Are we comfortable with cuts to health-care funding, for example? Or are we prepared to pay higher taxes? The overwhelming question, then, is: are we prepared to make the necessary sacrifice, whatever it may be? We have seen CPP contributions double and potential benefits reduced or delayed. Isn't it obvious, then, that these same changes need to take place with OAS? It appears that this small change, from a starting age of 65 to a starting age of 67, can have a large and positive impact on the overall financial situation of our country. But, once again, this point emphasizes that Canadians must rely on their own prudent savings to ensure a reasonable retirement income. Douglas Nelson, B.Comm.(hons.), CFP, CLU, MFA, CIM is the author of Master Your Retirement: How to fulfill your dreams with peace of mind. In this book, Nelson talks about the great killers of wealth and how they remove your ability to achieve your retirement goals. Master Your Retirement provides a roadmap ó including a 12-month game plan ó to financial security and peace of mind.  Doug is an independent financial advisor based in Winnipeg.  

We don't often think of the taxman as cupid, but this month, you may have received a Valentine's Day treat: the timely delivery of your 2011 RRSP Deduction Limit Statement. Canada Revenue Agency dropped this simple, one-page form ó complete with easy-to-read definitions ó into the mail early in February, to remind eligible Canadians of their correct RRSP deduction limits. This very useful information arrived in the usual fearsome, brown, CRA envelope. If you trembled and hid it at the bottom of your burgeoning pile of unopened mail, go dig it out. By noting the important information on this form and making the correct RRSP contribution, you'll reduce your net income (line 236 of your income tax form). That is the number used to generate a host of tax goodies: Refundable tax credits such as the federal GST/HST Credit, Canada Child Tax Benefits and Working Income Tax Benefit. Many provinces have refundables, too, so RRSP-reduced net income can influence cash flow throughout the year. Non-refundable tax credits, such as the Spousal Amount, Age Amount, Caregiver Amount, and Tuition, Education and Textbook amounts, to name a few. Social benefits such as the Old Age Security and Employment Insurance benefits, which are clawed back at certain net-income ceiling thresholds. Moreover, a lower net income can also decrease provincial pharmacy deductibles and per diems at nursing homes. So, take a peek at your RRSP Deduction Limit Statement. It is easy to read and tells you in very plain terms: Your RRSP deduction limit for 2010 and how much of that you used on last year's tax return. That leaves you with your unused RRSP deduction limit at the end of 2010. Your RRSP deduction limit for 2011, which may include a variety of adjustments related to your employer-sponsored pension plan, if you have one. Those adjustments might increase or decrease your RRSP deduction limit. This second figure is next to a prominent figure (A). Find it and circle it. For most people, this is the exact amount you can contribute to your RRSP and you should do so by Feb. 29, 2012, if you are to get the deduction that will reduce your 2011 net income. It is very helpful to show the statement to your financial advisor, or the person at your financial institution who will sell you the RRSP. That's because this form also notes whether you have any unused RRSP contributions available for 2011. This is labelled, albeit not as noticeably, as Amount (B). That's the amount you previously invested in your RRSP, but have not yet deducted on your tax return. It's important to pay attention to this number because sometimes too much of a good thing ó an excess contribution ó can attract a 1%-a-month penalty. That happens when your unused RRSP contributions (B) are more than your deduction limit (A) plus a $2,000 "buffer zone.î (Note: minors aren't allowed the buffer zone.) If that's too much information and the dreaded tax tremors are back, visit your tax advisor, who will know what to do about your over-contribution and excess contribution. Just between you and me, tax pros tremble at the thought of having to complete the dreaded 1% penalty form, a T1-OVP, so they're motivated to keep you out of the penalty zone! It's Your Money. Your Life. Treat yourself to more cash flow throughout the year and more accumulated, tax-deferred capital by looking over your 2011 RRSP Deduction Limit Statement and then making your correct RRSP contribution by Feb. 29. Evelyn Jacks, President of Knowledge Bureau, is author of Essential Tax Facts 2012 and co-author of Financial Recovery in a Fragile World. To get your copy, see www.knowledgebureau.com/books   Additional Educational Resources: Essential Tax Facts 2012 Edition and Introduction to Personal Tax Preparation Services.