2018 Budget Overview: Specific Personal Tax Provisions

Review specific personal tax provisions announced by the Government in the 2018 Federal Budget.

Working Income Tax Benefit

Effective for Tax Year 2019

The Working Income Tax Benefit will be renamed as the Canada Workers Benefit.

As previously announced, the benefit will be enhanced for 2019 to compensate for increased costs for Canada Pension Plan contributions starting in 2019.

For 2019, the benefit will be 26% (increased from 25%) of earned income over $3,000 (unchanged).  The maximum benefit will be increased to $1,355 (from $1,042 for 2017, $1,059 for 2018) for single taxpayers and $2,335 (from $1,892 for 2017, $2,165 for 2018) for couples and single parents. The clawback rate will be 12% (decreased from 15% for 2017; 14% for 2018) for income over $12,820 (up from $11,838 for 2017) for singles and $17,025 (up from $16,348 for 2017).

In addition, for disabled taxpayers, the new Canada Workers Benefit will be increased to $700 (up from $521 in 2017). This benefit is reduced at a rate of 12% when only one partner is disabled (down from 15%) and 6% when both partners are disabled. The clawback begins at $24,111 for one disabled taxpayer (up from $18,785 in 2017) and $36,483 when both spouses are disabled (up from $28,975).

Provinces can change the amounts applicable to their province (as is currently done in AB, BC, QC, and NU).

The budget also proposes to allow CRA to include the benefit in the assessment for taxpayers who qualify but do not apply for the benefit by completing Schedule 6 when they file their tax returns. To implement this and certain other tax measures, the budget proposes to require designated educational institutions be required to report to the CRA prescribed information regarding the enrolment of students (number of months of full- and part-time attendance). Currently this information is provided to students on Form T2202A, but these forms are not provided directly to the CRA.

Medical Expenses: Psychiatric Service Dogs

Effective for expenses incurred after 2017

For 2018 and subsequent tax years, the costs incurred in respect of an animal specially trained to perform tasks for a patient with a severe mental impairment in order to assist them in coping with their impairment will be allowed as a medical expense. Expenses related to dogs not specifically trained for this purpose will not be allowable as a medical expense.

RDSP (Registered Disability Savings Plan) Qualifying Plan Holders

This is an extension of an existing measure

The current rule that allows a family member to be a plan holder for a disabled RDSP beneficiary who is not competent is being extended to the end of 2023. (the previous rule expires at the end of 2018). A family member who becomes a qualified plan holder before this rule expires could continue to be a qualified plan holder after 2023.

Deductibility of QPP Enhanced Contributions

Effective 2019 taxation year

To ensure that QPP contributions and CPP contributions are treated the same way, the budget proposed to amend the Income Tax Act to allow taxpayers who pay additional contributions on the enhanced portion of QPP (equivalent to the enhanced CPP contributions planned for 2019) be allowed to deduct those contributions.

Retroactive Eligibility for Child Benefits

Effective retroactive to July 2016

The budget proposes that foreign-born status Indians legally residing in Canada who are neither Canadian citizens nor permanent residents be eligible for the following benefits, retroactive to their inception if they otherwise qualify:

• Universal Child Care Benefit (UCCB)
• Canada Child Benefit (CCB)
• National Child Benefit supplement

Sharing of Information

This is a continuation of existing policies

The budget proposes to amend the Income Tax Act to authorize the sharing of information with respect to the Canada Child Benefit with provinces for the sole purpose of administering social assistance programs.  The change is required as of July 2018 as the National Child Benefit supplement is no longer payable after that date.

Mineral Exploration Tax Credit for Flow-Through Shares

This is an extension of an existing policy

The budget proposes to extend the eligibility for the mineral exploration tax credit which currently expires March 31, 2018, to flow-through share agreements entered into on or before March 31, 2019.  This will allow deductions for such expenditures through to the end of 2020.

New Reporting Requirements for Trusts

Effective for 2021 and subsequent taxation years

Certain trusts (including some trusts that are not currently required to file a T3 return, will be required to report

• the identity of all trustees, beneficiaries and settlors of the trust
• the identity of each person who has the ability to exert control over trustee decisions regarding the appointment of income or capital of the trust

Electronic Processing of T3 Returns

The budget also proposes to provide funding, over a five-year period to develop an electronic platform for processing of T3 returns.

Penalties for Trust Returns

Effective for 2021 and subsequent taxation years

The budget proposes the following penalties:

• Late filing: $25 per day (minimum $100; maximum $2,500)
• Additional late filing penalty: 5% of fair market value of trust assets (minimum $2,500) where the failure to file the trust return was made knowingly or due to gross negligence

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