Personal Income Tax Measures

March 23, 2017

Disability Tax Credit – Nurse Practitioners

The Budget seeks to extend to nurse practitioners the ability to certify that an individual is eligible to receive the disability tax credit available under the Tax Act. The disability tax credit is a 15% non-refundable tax credit available to individuals who have a prolonged impairment in physical or mental functions. The effect of the impairment must be to such a magnitude that the individual is, in general, blind or, in spite of appropriate therapy, markedly or significantly restricted in performing basic activities of daily living (defined as walking; feeding or dressing oneself; mental functions necessary for everyday life; speaking; hearing; and eliminating bodily waste).

An eligible medical practitioner must certify that an individual qualifies for the disability tax credit. Such medical practitioners presently include medical doctors, audiologists, occupational therapists, optometrists, physiotherapists, psychologists and speech-language pathologists. It is proposed that nurse practitioners be added to this list.

Nurse practitioners are registered nurses who have received additional educational preparation and experience. They are regulated by provincial and territorial regulatory bodies across the country and are able to diagnose autonomously, as well as perform certain functions generally attributable to physicians, such as ordering and interpreting diagnostic tests, prescribing pharmaceuticals and performing specific procedures within their legislated scope of practice.

This measure will apply to disability tax credit certifications made on or after Budget Day.

Tuition Tax Credit

The Budget proposes to extend the eligibility criteria for the tuition tax credit to fees for occupational skills courses that are not at the post-secondary level. The credit will only be available in those circumstances if the course is taken for the purpose of providing the individual with skills (or improving the individual’s skills) in an occupation and the individual is at least 16 before the end of the year. Eligibility as a “qualifying student” will be extended to individuals meeting the circumstances described above. This measure will apply to the 2017 and subsequent taxation years.

Medical Expense Tax Credit – Eligible Expenditures

The Budget proposes that the medical expense tax credit be available for qualifying medical expenses that are in excess of the lesser of $2,268 and 3% of the individual’s net income.

The Budget proposes to clarify the list of expenses eligible for the medical expense tax credit to insure that the costs related to the use of reproductive technologies (e.g. in-vitro fertilization procedures) are recognized as eligible expenses under the credit.

This measure will apply to the 2017 and subsequent taxation years.

Consolidation of Caregiver Credits

The Budget proposes to replace the existing caregiver credit, infirm dependant credit and family caregiver tax credit with a new 15% non-refundable Canada Caregiver Credit. The maximum amounts that may be claimed under the new credit are $6,883 for the care of an infirm dependant relative (e.g. parents, grandparents, brothers, sisters, uncles, aunts, nephews, nieces or adult children), and $2,150 for an infirm dependent spouse or common-law partner, an infirm dependant for whom the individual claims an eligible dependant credit, or  an infirm child who is under the age of 18 years at the end of the taxation year. The amounts that may be claimed under the new Canada Caregiver Credit are consistent with the amounts that could have been claimed in respect of these dependants under the current caregiver credit and family caregiver tax credit, respectively. The credit amount is reduced dollar-for-dollar by the dependant’s net income exceeding $16,163.

The new credit will apply for the 2017 and subsequent taxation years. The credit amounts and the net income threshold will be indexed to inflation after 2017.

Electronic Distribution of T4 Information Slips

Currently, employers must provide two copies of the T4 information slips to each employee. These slips must be delivered to the taxpayer or sent to the taxpayer’s last known address. Copies of T4s may only be sent to a taxpayer electronically if the taxpayer has provided advance written or electronic consent to receive the slips in that manner.

The Budget seeks to reduce compliance costs and increase efficiencies by allowing employers to distribute T4s electronically to current active employees without first having to receive the employees’ consent. In order to ensure that employee information remains confidential, adequate privacy safeguards will need to be in place before T4s can be sent to employees under the new measures. These privacy safeguards will be outlined by the Minister of National Revenue and will include provisions mandating employers to continue to provide paper T4 slips to those employees who do not have confidential access to view or print their T4s (e.g. employees who are on leave and former employees). To the extent that an employee requests paper copies of his or her T4s, the employer will be obliged to provide him or her with same.

This measure will apply for T4s issued for the 2017 and subsequent taxation years.

National Child Benefit Supplement

Budget 2016 introduced the Canada Child Benefit, replacing the previous child benefit system, which included the National Child Benefit supplement.

Certain provinces and territories use information from individuals’ federal National Child Benefit supplement amounts to calculate adjustments to provincial and territorial social assistance and child benefit amounts. A reference to the National Child Benefit supplement was retained in the Canada Child Benefit rules (the calculation of the Canada Child Benefit is unaffected by such action) to give the applicable provinces and territories sufficient time to amend their social assistance and child benefit programs following the elimination of the National Child Benefit supplement. This reference is currently legislated to be repealed on July 1, 2017. The Budget however proposes to delay the repeal of this reference until July 2018.

Home Relocation Loans Deduction

Where a person receives a loan because of their employment, and the interest rate on the loan is below a prescribed rate, that person is deemed to have received a taxable benefit in an amount determined by reference to the difference between these two rates.

Currently, the value of any portion of the benefit that is in respect of an eligible home relocation loan may be deductible from taxable income. However, the amount deductible is generally limited to the annual benefit that would arise if the amount of the loan were $25,000.

The Budget proposes to eliminate the deduction in respect of eligible home relocation loans.

This measure will apply to benefits arising in the 2018 and subsequent taxation years.

Anti-Avoidance Rules for Registered Plans

Registered Education Savings Plans (“RESPs”) are widely used by Canadian families to help save for a child’s post-secondary education, while Registered Disability Savings Plans (“RDSPs”) enable persons with disabilities and their families to save for their future needs and requirements. As tax-assisted registered plans, accumulated investment income within RESPs and RDSPs, together with government grants and bonds received by RESPs and RDSPs from the Federal Government (Canada Education Savings Grants and Canada Learning Bonds, in the case of RESPs, and Canada Disability Savings Grants and Canada Disability Savings Bonds, in the case of RDSPs) are taxable only at the time of withdrawal.

The Tax Act includes certain anti-avoidance rules (collectively, the “Anti-Avoidance Rules”) to help ensure that tax-assisted registered plans do not provide excessive tax advantages which are outside of their basic objectives. The Anti-Avoidance Rules generally apply to Registered Retirement Savings Plans, Registered Retirement Income Funds,  and Tax-Free Savings Accounts and include:

  • advantage rules, which are generally intended to prevent taxpayers from exploiting the tax advantages of registered plans by shifting returns from otherwise taxable investments into registered plans;
  • prohibited investment rules, generally geared to ensuring that taxpayers hold only arm’s length “portfolio” investments within registered plans; and
  • non-qualified investment rules, generally designed to restrict the classes of investments that can be held within registered plans.

The Federal Government seeks to improve the consistency of the rules that apply to investments held by registered plans by extending the Anti-Avoidance Rules to RESPs and RDSPs. According to the explanatory notes to the Budget, the Federal Government does not expect the extension of the Anti-Avoidance Rules to RESPs and RDSPs to have an impact on the vast majority of RESP and RDSP holders, who typically invest only in ordinary portfolio investments.

The advantage rules noted above will not apply to swap transactions which are undertaken by RESPs and RDSPs before July 2017.  However, transactions undertaken to ensure that an RESP or RDSP complies with the new rules by removing prohibited investments or investments that would otherwise give rise to an advantage under the new measures introduced as part of the Budget will be permitted until the end of 2021. In all other cases, the extension of the Anti-Avoidance Rules to RESPs and RDSPs will apply to transactions occurring, and investments acquired, after Budget Day.

An RESP or RDSP plan holder may (subject to certain conditions) elect by April 1, 2018 to pay tax under Part I of the Tax Act (instead of the advantage tax) on distributions of investment income from an investment held on Budget Day that becomes a prohibited investment on account of the new measures.

Mineral Exploration Tax Credit for Flow-Through Share Investors

The Budget proposes to continue the mineral exploration tax credit (“METC”) for another year. Consequently, investors will be able to claim the METC where a flow-through share agreement is entered into on or before March 31, 2018. The “look-back” rule provides that funds raised in one calendar year with the benefit of the credit can be spent on eligible exploration up to the end of the following calendar year, e.g., funds that are raised in January 2018 can support eligible exploration until the end of 2019. The continuation of the METC will be implemented by updating the definition of “flow-through mining expenditure” in subsection 127(9) of the Tax Act.

The METC helps resource companies raise capital to fund mineral exploration by making flow-through shares even more attractive to investors. Generally speaking, flow-through shares allow resource companies to “flow through” expenses incurred in respect of exploration activities to investors, who may deduct the expenses against their personal income. The METC provides an additional benefit of a tax credit equal to 15 per cent of the specified mineral exploration expenses incurred in Canada that are flowed through to share investors.

Elimination of the Public Transit Credit

The Budget proposes to eliminate the public transit tax credit effective July 1, 2017. The public transit tax credit provides a 15% non-refundable tax credit in respect of the cost of eligible public transit passes, which includes electronic fare cards used on an ongoing basis and annual, monthly, and weekly passes. As a result of its elimination, the cost of eligible public transit passes attributable to public transit use that occurs after June 2017 will no longer be eligible for the credit.


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