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News

Bill Morneau - Fall Economic Update

(November 23, 2018)  Finance Minister Bill Morneau’s fall economic statement introduces measures enabling better long-term planning for resource explorers and, by extension, improved prospects for better returns for flow-through investors.  Read more

Federal Budget 2018

While largely focused on the governments policy agenda, Budget 2018 contained several new tax measures to tighten tax rules, increase taxes on passive income earned within small businesses and other changes which highlight the importance of maximizing tax efficiency for individual and corporate tax payers.

Highlights relating to personal and small business taxation

  • Some (up to $50,000) of passive -or investment- income earned within Canadian controlled private corporations will be protected, however the tax deduction will be reduced on investment income in excess of $50,000 and will be zero when $150,000 of investment income is reached – regardless of the amount of business income.
  • New anti-avoidance measures to deter business owners from transferring assets if one of the reasons was to reduce the adjusted investment income.
  • Changes to the refundable dividend tax on hand provision, creating eligible and ineligible classes.
  • The tax advantages and availability of products that convert income to capital gain (or synthetic equity arrangements) through the use of securities lending arrangements will be reviewed.

“The Canadian mining industry applauded the latest budget update, which provides tax credits and incentives…”

*Financial Post

“Changes to the passive income rules will cost small business owners $2.3 billion…”

*Conference Board of
Canada
Existing tools to maximize tax efficiency for Canadians are becoming less available / effective.

Highlights relating to flow-throughs

  • Budget 2018 proposes to extend the availability of the mineral exploration tax credit for flow-through investors, applicable to flow-through share agreements entered into on or before March 31, 2019.
  • Under the “look-back” rule, funds raised in one calendar year with the benefit of the credit can be spent on eligible exploration up to the end of the following calendar year. This means funds raised with the credit during the first three months of 2019 can support eligible exploration until the end of 2020.
  • For services extended by the General Partner to an Investment Limited Partnership, these will attract GST/HST – effective September 8, 2017.
Links to further reading:
*Financial Post  /  IIAC – Investment Industry Association of Canada  /  Dentons/Wolters Kluwer  /  *Conference Board of Canada
 

About the Flow-Through investment program: Flow-through shares allow resource companies to renounce expenditures related to eligible exploration activities and instead, transfer (or have them “flow-through”) to an investor, who can deduct the expenses against their own taxable income. These are ‘Canadian Exploration Expenses’, also known as ‘CEE’. The mineral exploration tax credit (or ‘METC’) provides an additional income tax benefit for flow-through share investors by augmenting the tax benefit with further tax credits of up to 15% (and more – based on specific provincial allowances). The program is one of the few remaining tax efficiency strategies available to investors subject to Canadian taxes. We refer you to the Gravitas Flow-Through Investor Guide for further details on how flow-throughs work.

The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Gravitas Securities Inc. or its affiliates. Gravitas Securities Inc., Member Canadian Investor Protection Fund.

August 21, 2017

We’d like to share the following from Advisor.ca:

WORKING CLIENTS

  • Maximum RRSP contribution: The maximum contribution for 2016 is $25,370; for 2017, $26,010.
  • TFSA limit: The annual limit for 2017 is $5,500, for a total of $52,000 in room available in 2017 for someone who has never contributed and has been eligible for the TFSA since its introduction in 2009. The annual TFSA limit will be indexed to inflation in future years.
  • Maximum pensionable earnings: For 2016, the maximum pensionable earnings is $54,900, and the basic exemption amount is $3,500. And, for 2017, maximum pensionable earnings under the Canada Pension Plan will be $55,300, while the basic exemption amount will remain the same.
  • Maximum EI insurable earnings: The maximum annual insurance earnings (federal) for 2016 is $50,800; for 2017, $51,300.
  • Lifetime capital gains exemption: The lifetime capital gains exemption is $824,176 in 2016 and $835,716 for 2017.
  • Low-interest loans: The current family loan rate is 1%.
  • Home buyers’ amount: Did your client buy a home? He or she may be able to claim up to $5,000 of the purchase cost, and get a non-refundable tax credit of up to $750.
  • Medical expenses threshold: For the 2016 tax year, the maximum is 3% of net income or $2,237, whichever is less. For 2017, the max is 3% or $2,268, whichever is less.
  • Donation tax credits: After March 20, 2013, the first-time donor super credit is 25% for up to $1,000 in donations, for one tax year between 2013 and 2017.
  • Basic personal amount: For 2016, it’s $11,474, line 300. For 2017, it’s $11,635.

OLDER CLIENTS

  • Age amount: Clients can claim this amount if they were 65 years of age or older on December 31 of the taxation year and have income less than $83,427 in 2016 or $84,597 in 2017. The maximum amount they can claim in 2016 is $7,125, and in 2017 is $7,225.
  • Pension income amount: Clients may be able to claim up to $2,000 if they reported eligible pension, superannuation or annuity payments.
  • OAS recovery threshold: If your client’s net world income exceeds $73,756 for 2016 and $74,788 for 2017, he or she may have to repay part of or the entire OAS pension.

CLIENTS WITH CHILDREN

  • Children’s fitness tax credit: This credit is being phased out, and will be gone as of 2017. If your client’s children played baseball, soccer, or participated in some other program of physical activity, clients may be able to claim up to $500 in 2016 ($0 in 2017), per child, of the cost of these programs. Until 2017, clients can claim an additional $500 for each eligible child who qualifies for the disability amount and for whom they’ve paid at least $100 in registration or membership fees for an eligible program. As of 2015, this is a refundable credit.
  • Children’s arts tax credit: This credit is being phased out, and will be gone as of 2017. If clients’ children participated in a program of artistic, cultural, recreational, or developmental activity such as tutoring, clients may be able to claim up to $250 of the fees paid, per child, on these programs in 2016 ($0 in 2017). Until 2017, clients can claim an additional $500 for each eligible child who qualifies for the disability amount and for whom they’ve paid at least $100 in registration or membership fees for an eligible program.
  • Family caregiver amount: If you have a dependant who’s physically or mentally impaired, you may be able to claim up to an additional $2,121 in calculating certain non-refundable tax credits.
  • Disability amount: The amount for 2017 is $8,113 (non-refundable credit; $8,001 in 2016), with a supplement up to $4,733 for those under 18 (the amount is reduced if child care expenses are claimed; $4,667 in 2016). Canadians claiming the disability tax credit (DTC) can file their T1 return online regardless of whether or not their Form T2201, Disability Tax Credit Certificate has been submitted to CRA for that tax year.
  • Child disability benefit: The child disability benefit is a tax-free benefit of up to $2,730 (2016) for families who care for a child under age 18 with a severe and prolonged impairment in physical or mental functions.
  • Canada Child Benefit: This non-taxable benefit is effective as of July 1, 2016. The maximum CCB benefit is $6,400 per child under age six and up to $5,400 per child aged six through 17. More here.
  • Universal child care benefit (UCCB): This benefit was replaced with the Canada Child Benefit as of July 1, 2016. However, Canadian residents can still apply for previous years if they meet certain conditions, including living with the child and being primarily responsible for the child’s care and upbringing.
  • Child care expense deduction limits: The maximum amounts that can be claimed are $8,000 for children under age seven, $5,000 for children aged seven through 16, and $11,000 for children who are eligible for the disability tax credit.

March 6, 2017

Ottawa to Extend Mineral Exploration Tax Credit

The federal government will extend the Mineral Exploration Tax Credit, which was slated to end at the end of this month, Canada’s natural resources minister announced Sunday.The credit was scheduled to expire at the end of this month, but the government is proposing to extend it for a year until March 31, 2018, Natural Resources Minister Jim Carr said at the media event on the opening night of the annual Prospectors and Developers Association of Canada’s convention. The credit is often part of the federal budget, but Carr made no mention of when that might be coming.

“The 15 per cent mineral exploration tax credit is aimed at helping junior mineral exploration companies raise the capital they need to finance early stage exploration, which is vital to mining development and the creation of our mines of tomorrow,” he said.

Related“This credit helps support the future prosperity of Canada’s mineral industry and it all starts from the flow through shares that serve as an incentive for attracting investors into grassroots exploration.”

The flow through share system is a unique investment structure in which resource companies pass along (or flow through) their expenses to investors who can deduct them against their taxable income. The METC adds a 15 per cent tax credit on top of that for an added incentive.

It was a welcome development for the mining sector, which argues the credit is an invaluable tool that helps fund early stage prospecting and development that might not otherwise be funded.

In 2015, more than 200 companies issued flow through shares and more than 410,000 investors benefitted from the credit, Carr noted.

Financing for junior mining companies has been especially hard to come by in recent years as the entire industry has been going through a down cycle of low commodity prices.

A similar credit was first introduced under Jean Chretien’s government during a previous mining downturn in 2000. That temporary measure aimed at helping the companies weather tough times expired in 2005. When the Conservatives took over they revived the mineral tax credit and extended it each year through their reign. The Liberal government has continued to extend it on a year-by-year.