Measures concerning businesses

• The budget proposes to expand Class 43.2 (specified clean energy generation and conservation equipment – declining balance capital cost allowance (CCA) rate of 50%) to include: (a) heat recovery equipment used in a broader range of applications; and (b) distribution equipment used in district energy systems that rely primarily on ground source heat pumps, active solar systems or heat recovery equipment. These measures will apply to eligible assets acquired on or after March 4, 2010 that have not been used or acquired for use before that date.
• The budget proposes that satellite and cable set-top boxes that are acquired after March 4, 2010 and that have neither been used nor acquired for use before March 5, 2010 be eligible for a declining balance CCA rate of 40%.
• The budget proposes that the definition of taxable Canadian property be amended to exclude shares of corporations, and certain other interests, that do not derive their value principally from real or immovable property situated in Canada, Canadian resource property or timber resource property (subject to the 60 month rule). This measure will eliminate section 116 compliance obligations for these types of properties and will bring Canada’s domestic tax rules more in line with our tax treaties and the tax laws of major trading parties. This measure will apply in determining after March 4, 2010 whether a property is taxable Canadian property of a taxpayer.

Measures concerning individuals

• The existing rules restrict the receipt of the Canada Child Tax Benefit and the Universal Child Care Benefit (UCCB) to only one eligible individual in respect of a qualified dependant each month. This restriction also applies to the child component of the GST/HST credit payable each quarter. Effective for benefits payable starting in July 2011, it is proposed that two eligible individuals can share these benefits in respect of a child, if the recipients would be eligible to receive amounts under the existing shared eligibility policy of the CRA. This policy applies when a child lives more or less equally with two individuals who live separately.
• In two-parent families, the UCCB must be included in the income of the lower income spouse or common-law partner, while in a single parent family the UCCB is generally included in the single parent’s income. To alleviate the inequity of a single parent potentially paying more tax on UCCB amounts than a couple with one income earner, it is proposed that effective in 2010, a single parent will have the option of including the UCCB amounts in the parent’s income or the income of the dependant.
• It is proposed that medical expenses incurred after March 4, 2010 for purely cosmetic procedures be ineligible for the Medical Expense Tax Credit.
• Under certain conditions, an employee of a publicly-traded company who acquires shares under a stock option agreement may elect to defer the recognition of the employment benefit until the disposition of the optioned securities. The special election is also available for securities disposed of before 2010.
• It is proposed that the inclusion rate for US Social Security benefits received after 2009 be reduced from 85% to 50% for Canadian residents who have been receiving US Social Security benefits since before January 1, 1996.

- A lot of interesting changes with this budget including two eligible individuals being able to share child tax benefits.  This is a big step in the direction of recognizing not only "split families" but fathers being as important as mothers in the raising of children.

The Budget proposes to increase to 100% the CCA rate applicable to computer hardware and systems software acquired after January 27, 2009 and before February 1, 2011. Further, the half- year rule will not apply to property that is subject to this accelerated CCA treatment.

Computer equipment otherwise included in Class 50 will be eligible for this accelerated CCA regime. Such equipment is general-purpose electronic data processing equipment and systems software for that equipment. In addition, to be eligible for the accelerated CCA, the computer equipment and systems software must:

• be situated in Canada;
• be acquired for use in a business carried on in Canada or to earn income from property situated in Canada or for lease to a lessee who so uses the equipment or software; and
• not have been used, or acquired for use, for any purpose before it is acquired by the taxpayer.

Generally computer equipment and systems software, unless it qualifies as manufacturing and processing equipment and is therefore included in Class 29, is included in Class 50 and is subject to a 55% CCA rate on a declining balance basis. Computer equipment and systems software that would otherwise be included in Class 29 as manufacturing and processing equipment will also benefit from the 100% CCA rate.

It should be noted that computer software, other than systems software, is already subject to a 100% CCA rate under Class 12.

- UPDATE! Revenue Canada considers iPhone's computer equipment and so fall under the 100% rule for 2010.



"There are several changes coming for the CPP retirement pension.  The changes will not affect anyone who is currently collecting the CPP retirement, disability or survivor benefits.  It will also not affect anyone who starts to collect their pension

"The changes were included in Bill C-51, which received Royal Assent on December 15, 2009.

"A person's CPP retirement pension

Removal of the Work Cessation Test

"Before 2012, in order to qualify to collect the CPP retirement pension before age 65, a person must have reduced earnings for the month prior to collecting the pension, and the following month.

"Starting in 2012 - the Work Cessation Test will be removed.  No reduction in earnings will have to take place in order to collect the benefits prior to age 65.

Increase in the General Low Earnings Drop-Out

"If a person starts collecting CPP at age 60, the contributory period is 42 years, and at age 65 would be 47 years.  However, adjustments are made to the contributory period and average pensionable earnings by "dropping out" certain periods of low income

"Before 2012, there is a general drop-out of 15% of the contributory years which are low or nil for other reasons.  For individuals who start their CPP at age 65, this removes almost 7 years of low or zero earnings from the calculation.  This increases the average earnings and CPP retirement pension for every person.

Starting in 2012 -  increase the general drop-out rate to:

	16% in 2012, allowing a maximum drop-out of almost 7.5 years
	17% in 2014, allowing a maximum drop-out of 8 years.

"This change will also increase the average CPP disability and survivor pensions, which are based on the retirement benefit calculation.

CPP Contributions When Receiving Retirement Pension

"Currently, CPP contributions are no longer paid once a person is receiving a CPP retirement pension, or once the person is 70, whichever is earlier.

"Future - CPP retirement benefit recipients will be required to continue to make CPP contributions until age 65.  Those age 65 to 70 will be able to elect not to continue contributing to the CPP.  CRA states that

	These contributions will result in increased retirement benefits, even for persons already receiving the maximum pension amounts.
	The additional benefits would be earned at a rate of 1/40th of the maximum pension amount ($10,905 in 2009) per year of additional contributions.  The exact amount would depend on the earnings level of the contributor, and the resulting pension could be above the maximum.

Pension Adjustments for Early and Late CPP Take-Up

"Before 2012, when the CPP retirement pension is taken early, it is reduced by 0.5% per month for each month that the pension is taken before the 65th birthday.  The pension is reduced by 30% (5 years x 12 months x 0.5%) for a person who starts collecting it at age 60.

"The late pension is increased by 0.5% per month up to the age of 70.  The pension is increased by 30% for a person who waits until age 70 to start collecting it.

"Starting in 2012 the percentage amounts used to reduce or increase the early or late taken pensions will be gradually increased.  To do this:

	The early pension reduction would be gradually increased to 0.6% per month for each month that the pension is taken before age 65.  This would be done over a period of 5 years, starting in 2012.  This would result in the pension being reduced by 36% for a person who begins collecting it at age 60 after 2017.
	The late pension augmentation would be gradually be increased to 0.7% per month for each month that the pension is taken after the 65th birthday, up to age 70.  This would be done over a period of 3 years, starting in 2011.  This would result in the pension being increased by 42% for a person who begins collecting it at age 70 after 2014.

"This change would not affect those currently collecting CPP retirement benefits or those taking their benefit before these changes begin to take effect.

"For more information, see the Department of Finance Information Paper on Proposed Changes to the Canada Pension Plan."

For a number of years, the CRA has permitted the EFILE community to submit returns in advance of our official opening in February providing their software has been certified.  For the 2010 program (2009  tax year returns) the EOL+ (batch) filing system will accept transmissions into the stockpile inventory on January 25th, 2010 at 8:30 a.m. (eastern (Ottawa) time). These returns will be held until we open for processing on February 15th, 2010.

- EFILE HELP DESK 1/18/2010 4:38AM

For those of you who like to file early, please note that CRA will not be processing T1's filed until February 15th.  If you need your refund before the end of February, it is possible but it takes (on average) 2 weeks for a refund to appear in your mailbox after Efiling...

If you are getting a sizeable refund, as the government isn't giving you money and is merely returning your money, you may want to request a decrease in the tax deducted at source (if possible).

- Please note "extend EI special benefits including maternity, parental, sickness and compassionate care benefits" means those are the only benefits the new program will provide.

Self-employed individuals will have the option of joining the EI program anytime after Jan. 1, 2010 -- but there is nothing forcing them into the program, ever.

If you opts to join, your premiums will be the same rate as salaried employees, currently 1.73% of net income up to $42,300, or a maximum of about $730 a year. 

Although you won't have to pay the employer's premium, you have to pay employee premiums for at least a year before you will be eligible to collect special benefits for maternity, parental and sick leave equal to 55% of normal earnings up to about $450 a week.

The amount being reviewed is $1.

This isn't even $1 in tax savings, it is $1 in tax deductions so really is about 22 cents.

Two pages of information requested to support the claim of $1.

Postage, paper, ink, computer time and payroll costs (charged to Canadian taxpayers) to fund CRA trying to verify the taxpayer's right to claim the deduction of $1.

Individuals and businesses can now pay their taxes online via a new online service, My payment, at the Canada Revenue Agency (CRA). This service, available starting October 5, 2009, allows taxpayers to complete transactions containing several payments for a combination of both individual and business accounts including among others, GST, deductions at source, individual income tax, excise tax and corporations income tax. Payments can be made from a personal or a corporate bank account at a participating financial institution. For more information, read the CRA’s news release.  

- Some weekend reading.  This article touches on the issue that governments indirectly tax you via inflation.  Inflation occurs when the government increases the money base (prints money) causing the value of the dollar to decrease.  Generally, governments increase the money base as a means to increase their budget.  This doesn't occur in Canada in the same way it has occurred over the last 30+ years in the US but it is a real possibility in Canada as the US dollar devalues. 

"Sellers who make use of eBay and other online sales sites will come under the scrutiny of the Canadian Revenue Agency (CRA). The CRA will begin contacting eBay sellers at the end of summer to ensure compliance.

"In 2007, the federal court ruled that eBay must turn over information on its high volume Canadian sellers, and although eBay tried to appeal the ruling, it was rejected in April. Now the CRA is getting serious. In court filings, it appears that the CRA, for now, focusing on eBay Power Sellers from the years 2004 and 2005, and will continue from there.

"If you fall under this category, expect the tax man to come a knockin’ in a few months at the most. As eBay is the largest target, there was no mention of other online sales sites by name in the CRA press release, but once they churn through eBay, I’m sure they’ll hit the rest.

"There is an amnesty program however...

“To avoid paying these fines and penalties, taxpayers who have failed to file income tax returns for past years or who have not reported all their income can voluntarily correct their tax situation,” stated Minister Blackburn.

In fact, under the Voluntary Disclosures Program (VDP), taxpayers who take the initiative to correct or disclose any information will not be penalized or prosecuted if they make a full disclosure before the CRA starts any audit or other compliance action.

Consider yourself warned, Power Sellers!