2016 Budget Overview: Personal Tax Measures

Tax provisions that affect personal taxation for 2016 and beyond.

Northern Residents Deductions:

Effective the 2016 tax year

The Northern Residence Deduction will be increased as follows:

• Residency deduction – each member of the household can currently claim $8.25 per day.  Starting in 2016 this rises to $11.00 per day
• Double deduction for sole claimant:  If no one else in the household makes the claim, $22.00 per day may be claimed.
• Intermediate zones:  half that amount - $5.50 and $11.00 respectively

Teacher and Early Childhood Educator School Supply Tax Credit

Effective 2016 tax year

Claim a 15% refundable tax credit on amounts up to $1,000 in expenditures made by employed teachers for eligible supplies.  Employers must certify that supplies were purchased for teaching or learning enhancement environments and receipts are required.  Eligible educators are those who hold a valid teacher’s certificate or early childhood education certificate or diploma.

Eligible supplies include games, puzzles, supplementary books, software, containers, construction paper, items for science experiments (vinegar, seeds, stir sticks) art supplies and stationery items.

Ontario Electricity Support Program

Effective 2016

Amounts received from this program will not affect income-tested benefits from the federal government.

Mineral Exploration Tax Credit for Flow-Through Share Investors

Extended to flow through agreements entered into on or before March 31, 2017.  This is a benefit extended to individuals who invest in mining flow-through shares, equal to 15% of specified mineral exploration expenses incurred in Canada.

Education and Textbook Tax Credits

Effective January 1, 2017

The education and textbook amount will be eliminated starting in the 2017 tax year.  However, the tuition tax credit will continue to provide a 15% non-refundable tax credit on eligible fees for tuition and eligible examination fees paid to qualifying educational institutions.  Unused amounts can be transferred to qualified supporting individuals.  The exemptions that rely on these eliminated credits, such as the scholarship, fellowship and bursary income exemption, will be modified to be unaffected by these changes.  Unused education and textbook credit amount carried forward will continue to be available for future years.

Children’s Fitness and Arts Tax Credits

Effective 2016 and 2017 Tax Year

These tax credits will be phased out starting in the 2016 year.  The refundable child fitness amount will remain for 2016 but be reduced to a maximum of $500 from the current $1,000 maximum. The children’s arts tax credit maximum claim will be reduced to $250 from $500 – this credit is however non-refundable.  Both will be eliminated in 2017.  The supplemental claim for disabled children will remain at $500 in both cases for 2016.

Labour- Sponsored Venture Capital Corporations Tax Credit

Effective 2016 and subsequent years

In support of province that use LSVCC tax credits, the federal LSVCC tax credit will be restored to will be 15% for share purchases of provincially registered LSVCCs.  These must be sponsored by an eligible labour body and invest and maintain a minimum of 60% of its shareholder equity in eligible investments generally in small and medium sized enterprises.

For 2016 the federally registered LSVCC will remain at 5% and be phased out for 2017.

Taxation of Switch Fund Shares

After September 2016

The ability to switch shares of one class of mutual fund corporation for another will no longer be deemed tax free for dispositions of share that occur after September 2016.  This means that transfers between corporate class funds within the corporate class structure will be treated like transfers between any other types of mutual funds.

Sales of Linked Notes

After September 2016

A linked note is a debt obligation linked to the performance of one more reference assets or indexes over the term of the obligation.  This includes principal protected notes and principal-at-risk notes.  The returns of a linked note will retain the same character whether it is earned at maturity or reflected in a secondary market sale after September 2016. 

A deeming rule will be applied relating to accrued interest on sales of these debt obligations.  It will treat capital gains realized on the sale of a linked note as interest that accrued on the debt obligation.  If the linked note is denominated in foreign currency, fluctuations will be ignored for the purposes of calculating these gains.  There is an exception where a portion of the returns is based on a fixed rate of interest.  Here any portion of the gain reasonably attributable to market interest rate fluctuations will be excluded.

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