Earlier this week the federal government presented its third annual budget entitled Equity + Growth: A Strong Middle Class. The budget mainly focuses on investing in innovation and research as well as pay equity, with the goal to position Canada’s economy for success over the long term. Here are some additional highlights I thought investors would find interesting:

Capital Gains Inclusion rate – Despite a lot of speculation that the capital gains inclusion rate would rise to 75%, the liberals left it at 50% – for now.

Tax Credits – Eligible low-income Canadians could receive up to $1355 under the newly named and enhanced Canada Worker Benefit tax credit (formerly Working Income Tax Benefit).

Medical Tax Credit – After 2017, this credit will be enhanced to include eligible expenses relating to psychiatric service animals. This credit will not be allowed for animals that provide only comfort or emotional support.

Working Women – The government will make $1.4 billion available over the next three years in new financing for women entrepreneurs through the Business Development Bank. In addition, $250 million will be available through Export Development Canada over the same time period for financing and insurance for women-owned and women-led businesses.

Parental Sharing Benefit – This new employment insurance parental benefit will be for the non-birthing parent of eligible two-parent families, thus encouraging women to re-enter the workforce sooner.

Tax Cheats – The government will spend $90.6 million over the next five years to crack down on tax evasion cases that have been identified both domestically and internationally.

Cyber Security – A total of $155.2 million will be put towards a new Canadian Centre for Cyber Security, while another $116 million will be allocated to the RCMP to create a National Cybercrime Co-ordination Unit.

Foreign Trade – Plans to spend over 86.8 million over the next six years to bolster Canada’s trade ties with China and Asia.

Cracking down on Unintended Tax Advantages – The government will review and clarify the application of at-risk rules to prevent tax advantages for limited partnership investments.

Preventing Artificial Losses – Changes to tax rules will be made to prevent Canadian banks and other financial institutions from gaining tax advantages by creating artificial losses through sophisticated financial instruments. This change is expected to generate approximately $2.5 billion for the government over the next five years.

Securing Pensions – The government will help pensioners, workers and companies affected by insolvencies that involve substantial unfunded pension liabilities.

Small Business Tax Measures – The government confirmed it will proceed with the newly introduced income sprinkling rules; as well as lowering the small business tax rate to 10% (from 10.5%) this year and to 9% in 2019. New rules have also been introduced to limit Canadian-controlled private corporations (CCPC) to benefit from earning passive investment income above $50,000.

Hope you have found this helpful, have a great weekend,

Tracey

 

Sources: 2018 Federal budget highlights by Fidelity Investments Canada Budget Team, Highlights from Budget 2018 posted on Advisor.ca by Staff with files from The Canadian Press, 02-27-18

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