2017 Federal Budget

Good day,

There was a lot of anticipation and anxiety leading up to March 22nd – the publish date of the Federal Budget. Rumours were circling about the possibilities of taxing on disposed principal residences, increasing taxes for small businesses, reducing income splitting opportunities, a potential increase in the capital gains inclusion rate from 50% to 66% or 75%, etc.

While none of these ideas have materialized, there has been some indication that such changes could be coming. For the time being, I’ve noted the key items which might affect some of our clients:

Anti-avoidance rules extended to RESPs and RDSPs – Anti-avoidance rules are currently applicable to most registered plans to ensure these plans don’t offer excessive tax advantages or advantages which are unrelated to the benefits these plans are meant to provide. If the budget passes, these rules will be extended to RESPs and RDSPs.

Mutual Funds structured as corporations – Most MFs are set up as mutual fund trusts. A number of years ago, some investment fund companies had began to structure some of their MFs as corporations, labeling such funds as “corporate class” funds. The tax benefits previously derived from these structures somewhat disappeared a few years ago when the administration at the time changed the rules. The current budget proposes to relax the previous rules so that such investment vehicles may benefit from certain tax-deferral opportunities.

Billed-based accounting for designated professionals – Doctors, dentists, lawyers, accountants, and other professionals will no longer be permitted to exclude the dollar value of their “work in progress” when they calculate their income for tax purposes.

Other points to note include the government’s decision to spend $524 million over the next 5 years to reduce tax evasion, eliminating what it deems as ineffective tax measures, and eliminating the use of Canada Savings Bonds at the end of this year.

Have a good weekend!


Danny Popecu CFP, CIM, FMA, FCSI

President & CEO


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