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2013 Canadian Budget and You

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# Monday, March 25, 2013
Monday, March 25, 2013 7:02:18 PM (GMT Standard Time, UTC+00:00) ( Finance | Taxes )
Jim Flaherty, the Canadian finance minister, presented his budget to parliament recently on March 21.

This year’s Canadian federal budget is rather low key, with no major tax breaks or increases. One interesting change is that CIDA (the Canadian International Development Agency) which is responsible for international aid and humanitarian assistance is being folded into the foreign affairs department.

Having said that, what most Canadian want to know is how this year’s budget will affect them personally. This blog article will answer this by discussing budget features that will directly affect Canadians and their families.

Note: much of the proposed spending on various programs will be financed by re-allocation of current expenditures and future federal savings (e.g. cutting expenditures elsewhere).

Job Training

This year’s budget proposes a new Canada Job Grant. The purpose of this program is to help train unemployed Canadians so that more Canadians are qualified for the jobs that are out there.

Canada Job Grant will give up to $5,000/person for job training. However, in order to qualify this amount has to be matched by a person’s province of residence as well as their employer.

It is questionable whether provinces can afford to match the federal government contribution. Also, it remains to be seen whether or not companies (especially small to medium sized businesses) can afford to kick in $5,000 for employee training. Time will tell on this one.

Closing of Tax Loopholes

While there are no new taxes with this budget there will be various tax loopholes that the government intends to close.

Ottawa is especially targeting those Canadians who hide their wealth in off-shore bank accounts to avoid paying taxes (personal and corporate). The "Stop International Tax Evasion Program" encourages Canadians to snitch on anyone who is involved in international tax evasion. If, as a result, the CRA can collects $100,000 or more in taxes than the informant may receive up to 15% of the amount collected by the government.

The government will also eliminate the practice of borrowing from a life insurance policy in order to reduce their taxes.

By closing these loopholes Flaherty figures the Canadian government could generate $4.4 billion over the next 5 years as a result.

Charitable Donations and Super Credits

Under this budget Canadians who haven’t claimed a charitable donation since 2007 are eligible to receive a one-time “super credit” of 25% for donations up to $1,000.

This super credit must be claimed within the next five years from now, and the credit is a modified version of the proposed "stretch credit".

It’s hoped that this will increase Canadian charitable donations by $100 million.

Baby Clothes and Sports Equipment Tax Breaks

Effective April 1 the government will remove tariffs on both baby clothes and sporting/athletic equipment.

The elimination of tariffs on these goods is supposed to help decrease the price gap between Canadian and U.S. consumer prices. The desired outcome is that Canadians stay at home when shopping for these goods as opposed to crossing the U.S. Canada border to look for deals.

Adoption and Homecare Expenses

The adoption expense tax credit will be expanded upon so that adoption related fees (e.g.  fees incurred from home study and adoption courses) are eligible for a 15% non-refundable tax credit. The maximum credit is $11,699 per child per year.

Currently there are over 30,000 children in child welfare agencies across Canada, and it is hoped this tax credit will encourage Canadians to adopt more often.

Fees for a provincially required home study and mandatory adoption courses will now be eligible for the 15-per-cent non-refundable tax credit (up to a maximum $11,669 in expenses per child for 2013).

There will also be a GST/HST exemption for personal care services (e.g. clothing, bathing, etc.) for publicly funded homecare. This credit will be available for the next two years.

Note, however, that not all provinces actually offer these homecare services (the keyword above is "publicly funded"). By offering this exemption the federal government hopes to encourage the provinces to augment publicly funded homecare.

Infrastructure Development

There is a "Building Canada" plan that allocates $53.5 billion into new and existing provincial and municipal infrastructure funding (e.g. bridge repair, road construction, new buildings, etc.).

At first glance this is a large number. But taking into account this is proposed over a period of 10 years and $6 billion has already been spent, this means that effectively there is little difference between this budget and the last budget when it comes to infrastructure (makes for a great headline though)!

Manufacturing Assistance

There is help for the manufacturing sector in this budget (which has taken a real beating due to NAFTA and other trade agreements). Of primary importance is the extension of "Accelerated Capital Cost Allowance", which allows for quicker write-offs by companies that purchase new machinery and equipment.

It is hoped that this will help Canadian manufacturers be competitive in the global market.

The province of Ontario stands to gain the most from this initiative, getting $1 billion over the next 5 years.

Native Canadians and the 2013 Federal Budget

Ottawa has tabled $241 million over the next 5 years to augment the Income Assistance Program for First Nations.

Half of the money will be sunk into setting up the program on reserves (e.g. compliance measures and counseling), while the other half will go to social assistance recipients that agree to enter the program.

While this initially sounds rather generous, it is important to note that only reserves that implement mandatory training for people on social assistance will be eligible. In other words, social assistance is now being tied to job training programs.

Roger Augustine (Assembly of First Nations Regional Chief for New Brunswick and PEI) was one of the native leaders who attended a controversial meeting earlier this year with PM Stephen Harper during the native Idle No More protests. Regarding this budget he was quoted as saying "It wasn’t a respectful budget". He also stated that progress (as discussed in his meetings with the prime minister) were "nowhere near what we talked about, and what we agreed on.".

Conclusion

We hope you found this blog article informative!

If you would like to know about tax credits for 2013 (tax time is upon us) please read the 2013 Canadian Tax Credits article as well.
 

Sources:
  • The Globe and Mail
  • CTV News
  • National Post
  • Huffington Post
  • Canada.com
  • The Star