Finance Minister Bill Morneau delivered the government’s 2017 federal budget on March 22, 2017. The budget expects a deficit of $23 billion for fiscal 2016-2017 and forecasts a deficit of $28.5 billion for 2017-2018. Find out what this means for families.
Key points for families
- Childcare: The funding could serve to create more affordable childcare spaces for low-income families
- Parental leave: Extending parental leave and benefits to 18 months, Parents who choose to stay at home longer, however, will have to make do with a lower Employment Insurance (EI) benefit rate of 33 per cent of their average weekly earnings, instead of the current rate of 55 per cent
- Caregiver benefit: Introduce a new caregiver benefit that’s meant to help families copy with illnesses and injuries.
- Parents who go to school: Single, higher federal income threshold for part-time students to receive Canada Student Grants. Grants don’t have to be repaid.
- Foreign Nannies: Waiving a $1,000 processing fee required to obtain a work permit.
- No changes to income tax rates
- No changes to capital gains inclusion rate
Tax Planning using private companies
While no specific measures are mentioned, the government will review the use of tax planning strategies involving private corporations “that inappropriately reduce personal taxes of high-income earners.” including:
- Income Splitting: Reducing taxes by income splitting with family members who are subject to lower personal tax rates.
- Regular income to Capital Gains: Converting income to capital gains (instead of income being taxed as dividends)
- Passive income inside Corporation: Since corporate income tax rates are generally lower than personal tax rates, this strategy can facilitate the accumulation of earnings by owners of private corporations.
The government eliminated a tax deferral opportunity for certain professionals.
Accountants, dentists, lawyers, medical doctors, veterinarians and chiropractors
will no longer be able to elect to exclude the value of work in progress in computing their income. This will be phased-in over two taxation years, starting with taxation years that begin after this budget.
Please don’t hesitate to contact us if you have any questions.