Opportunity: Canadian Dollar Stabilizes, Somewhat

Things have started to turn around for the Canadian dollar in the second quarter of 2025. It hit a 22 year low in January of 2025. Investors and property owners, who have been swooning at the high burn rate in their travel plans and property maintenance abroad, may wish to consider recent more positive trends and consider some risk mitigation opportunities now that the dollar is stabilizing somewhat.  

CRA has released bulletin RC4054 which provides an update of the ceiling amounts it will allow for rents and utilities benefits calculated for those living in Prescribed Zones for the purposes of the Northern Residents Deductions. For prescribed zones without a developed rental market, the ceiling amounts reflect increased in the Consumer Price Index. For 2011, for common shelter, the amount is $173 a month, same as last year. For apartments or duplex, the amount has increased to $467 a month for rent only, $227 per month, utilities only and $694 for rent and utilities. For a house or trailer, the 2011 amounts are $781 per month, rent only, $345 per month, utilities only and $1126 for both. ADDITIONAL EDUCATIONAL RESOURCES: DFA-Tax Services Specialist Designation courses.

The Electronic Filer's Manual for 2010 (RC4018) was released on January 14, 2011: http://www.cra-arc.gc.ca/E/pub/tg/rc4018/rc4018ch1-10e.pdf The "What's Newî section discusses the Universal Child Care Benefits (UCCB) amount which can now be designated to a dependant of single parents, E.I. for the self-employed, GST/HST modifications and several provincial changes to tax and credits. New fields for Stock Option Special Relief are outlined as well. ADDITIONAL EDUCATIONAL RESOURCES: Distinguished Advisor Workshop Reference Journal, now available in the Knowledge Bureau bookstore.

The Governor of the Bank of Canada, Mark Carney, spoke at a press conference in Ottawa on January 19, 2011. He discussed several factors that caused the Bank to maintain its target for the overnight rate at 1%. The economic recovery, although proceeding more quickly than anticipated, still has associated risks and challenges. Although private domestic demand in the U.S. has grown, financial stability and sovereign debt issues in Europe continue to be of concern. In Canada, household debt is expected to restrict consumption and residential investment but business investment should continue to grow. The strong Canadian dollar and low productivity will continue to dampen the recovery here. The inflation target remains at 2%. Upside risks include higher commodity prices and unexpected momentum in the housing sector. Downside risks include weak Canadian competitiveness and muted household spending. The Bank expects the economy to return to full capacity by the end of 2012. The next scheduled announcement date to announce the overnight target is March 1, 2011. ADDITIONAL EDUCATIONAL RESOURCES: Distinguished Advisor Workshop Reference Journal, now available in the Knowledge Bureau bookstore.

 For the second time in less than a year the federal government has announced measures that will tighten mortgage regulations in this country, a move designed to protect Canadians from taking on too much debt. The three changes announced on January 17, 2011 are: Borrowers looking for more than 80% financing for a new, government insured mortgage will be restricted to a 30% amortization period. The loan to value ratio for refinancing is reduced from 90% to 85% Lines of credit that do not require regular payments (non-amortizing) and are secured by homes will no longer be eligible for government-backed insurance. A home ownerís line of credit that has a fixed schedule of principal and interest payments will continue to be insured by the government. The first two measures will come into force on March 18, 2011 and the third on April 18, 2011. Although the new rules reduce mortgage options, they should also serve to increase equity for homeowners and reduce interest paid for the lifetime of the mortgage, particularly for those using home equity loans.   These changes follow an interesting history in home financing in Canada: In 2006 the government began loosening regulations, allowing amortization periods to rise from 25 to 40 years and approving 100% loan-to-value financing. In response to the global economic crisis amortization periods were reduced to 35 years in October, 2008 and financing brought down to 95%. In April, 2010 the loan to value financing ratio was further reduced to 90% and a 20% down payment required for properties not occupied by the owner. Measures to ensure that borrowers are credit-worthy have been implemented recently as well. ADDITIONAL EDUCATIONAL RESOURCES: For more information on financing a mortgage see Essential Tax Facts, 2011 edition.

The Knowledge Bureau Report issued on January 12, 2011, contained an error in the article: Did You Know? Part Time Studies May Qualify For Education and Textbook Credits. We extend our thanks to tax professional Nancy Williams for pointing this out. Eligible students may claim the education amount if they receive a salary or wages while taking a course related to their job. This was not the case until the rules changed in 2004. This is certainly an important piece of information for all who believe in life-long learning! For more information about the Education Amount: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/323/dctn-eng.html

On January 13th The Prime Minister announced the launch of a project that aims to reduce red tape for small and medium businesses. Did you know that the Canadian Federation of Independent Business estimates that businesses in Canada spent 30.5 billion dollars (that's 1.9% of the GDP) on regulatory compliance tasks in 2008? The smaller the business is the higher is the cost of doing business, according to Statistics Canada. The Red Tape Reduction Commission will consult with Canadians to identify compliance requirements that distract from the operation of a business and cost the employer time and money. Innovation, productivity and competitiveness suffer when a business is over-taxed with paperwork. This endeavor may provide a long lasting stimulus to the business community at a very reasonable cost. Click here for more information. Additional Educational Resources: Tax Planning for the Small Business Owner