If you’re a newcomer to Canada, there are plenty of important things that will likely be at the top of your priority list: finding a place to live, a job, transportation, a school for your kids.
Filing your income taxes? That's not likely to be a priority.
However, even if you only entered the country in the last few months of the calendar year, you are required to file income tax, most commonly classified as a “part-year resident.” Cleo Hamel, H&R Block’s senior tax pro and spokesperson, offers up these tax tips for new Canadians, to help maximize your returns and reduce complications down the road:
1) Part-year residents must report all income from anywhere in the world after their arrival in Canada. Any income you generate in any country in the world, as long as you’re a resident in Canada, is taxable, be it from a salary, business, rental income, etc. However, many countries have tax treaties with Canada, which prevent newcomers from getting dinged by both their former and current homes. “If you’re [from] France or Australia or the U.K., when you file your tax return, there are foreign tax credits that you get to use concurrently in both countries so there isn’t a double taxation,” said Ms. Hamel.
2) Newcomers who own property such as buildings, art, gold and stocks should determine their fair market value (FMV) on the day they establish residence. It’s important to record this information, since it is the amount used to calculate any future capital gains. Keeping good records will ensure that when the property is sold, owners will only be taxed on the difference between the sale price and the FMV when they arrived in Canada.
3) Moving expenses are not deductible. “A lot of people coming into Canada will hear about moving expenses being deductible,” said Ms. Hamel. “You and I living in Canada, we can move anywhere across the county, and as long as we move more than 40 km closer to our work we’re able to claim moving expenses. Unfortunately moving in and out of Canada does not count.” One exception is post-secondary students, who can claim moving expenses against the taxable portion of any scholarships or grants they receive.
4) Basic personal amounts may have to be pro-rated, depending on the period of residence in Canada. Canadians can earn up to $10,527 tax-free. However, if a newcomer has only been in Canada for three months and earns $10,000, they wouldn’t be able to claim that tax credit because the basic personal amount would be pro-rated to the amount of time they have been in the country.
5) New Canadians are entitled to the GST credit and child tax credit after their arrival. It frequently takes newcomers some time to get established in Canada, said Ms. Hamel, and some families don’t file for a year or more after moving here. But one of the benefits of filing is that you can take advantage of the GST credit and child tax credit right away. “For some people, if they can’t find work right away or end up taking a part-time job, with the GST they’ll get it on a quarterly basis and with the child tax credit on a monthly basis, so at least they would have a cash flow," she said.
Ms. Hamel acknowledges that for some newcomers to Canada, filing income tax can be a daunting prospect. Some might have a language barrier or come from countries where income tax is an unfamiliar concept. She suggests newcomers start by contacting settlement organizations in their community, who can help them find a translator, government resources, or a tax professional.