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tax matters

As I get older, birthdays just aren't as much fun any more. When I was a kid, I looked forward to the parties and gifts. The annual federal budget is much the same: It used to be fun to attend the annual budget lock-up – a party of sorts (okay, not everyone got a kick out of the process – but many tax geeks did). In the past few years, the fun has all but disappeared.

Will there come a day again when taxpayers have something to look forward to in the annual budget? Perhaps. As we near the 2017 federal budget (at the time of writing, the date has yet to be announced), let me share what I think could be the key themes and potential changes.

Some of these ideas come from a review of the report of the Standing Committee on Finance (SCOF) and its recommendations to the Finance Minister for this budget.

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If there's any good news for investors, I expect it will be in the area of venture capital or angel investing. A few groups have suggested that flow-through shares could work well to increase investment in new and expanding businesses. Flow through shares, as in the resource sector, would allow small businesses to flow the deduction for expenses incurred, to investors. So, in exchange for making a higher risk investment, investors would receive some tax relief. We may also see the government invest in a national network supporting angel investing, enabling data collection and the reporting of investment outcomes.


There are a few measures that may be introduced to help seniors – particularly those with low incomes. We may see a new "Senior's Index" that will be used to annually adjust the amount of Old Age Security and Guaranteed Income Supplement benefits. There's also a general feeling that the GIS should be increased to help those with lower incomes. We may see an adjustment to the minimum withdrawal schedule for registered retirement income funds (RRIFs) so that seniors can keep their money in those plans a little longer – but there's only a remote chance of this change. There was one suggestion to the SCOF that Canadians should be allowed to use funds in a registered retirement savings plan (RRSP) to purchase long-term-care insurance as a qualified investment.

I like the idea a lot – although I'm not sure Bill Morneau will agree.

People with disabilities

We're guaranteed to find measures in the budget for those with disabilities. We may find that the disability tax credit becomes a refundable credit, meaning that the credit can produce a tax refund if it's high enough to go beyond just eliminating any taxes owing. Expect to see the term "disability" expanded to include those regularly required to administer insulin. There will also be measures to provide financial incentives to small and medium-sized businesses that hire people with disabilities.

Indigenous peoples

There will be plenty in the budget to support indigenous peoples. Look for financial support to promote postsecondary education for indigenous young people. We might even find funding for the establishment of indigenous-controlled universities or colleges.

Business owners

It's possible that we could see changes to the small-business deduction, which currently is available to all companies earning active business income (ABI) under $500,000 federally. The small-business deduction reduces the tax rate on ABI to an average of about 14 per cent (varies by province). This deduction could become more limited in some manner – perhaps by making it available only to those corporations meeting additional tests, such as number of employees or particular industries. Also, expect the government to announce a review of intergenerational transfers of businesses. There is pressure to make it more tax-efficient to transfer businesses to the next generation, particularly in the agriculture sector. I expect we'll also see some changes to capital-cost allowance rates, for the better, to reflect changes in the useful life of technology assets. There is also pressure mounting to tax international companies carrying on business in Canada, such as Netflix or Uber, so we may see changes here. Finally, expect to see the government commit money to support "clusters and incubators" to promote innovation here in Canada.


While our cousins south of the border tighten up on immigration policies, expect to see the budget introduce changes that will reduce red tape to make it easier for immigrants to settle here – particularly in the area of wait times for processing applications and work visas.


We will also see measures to help veterans settle back into the work force after injuries. This might include a lifelong financial benefit and paid education.

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