Here is a summary of some recent income tax—and some non-income tax—changes.

Investors

• Safety Deposit Box Fees

Fees paid in 2014 and subsequent years are no longer tax deductible.

• Tax form T1135 “Foreign Income Verification Statement”

This tax form is completed when a taxpayer holds certain foreign assets with an aggregate tax cost of over $100,000 at any time in a year. The necessary disclosures on this form were greatly expanded for 2013. For 2014 the form has again been revised in that the disclosure of foreign assets held by a Canadian registered security dealer or Canadian trust company will be simplified as taxpayers will be permitted to report aggregate amounts rather than the detail of each foreign investment. With respect to these foreign assets, the T1135 reporting needs to -

• be on a country-by-country basis,
• note the highest market value at the end of any month in the year
• note the market value at the end of the year and
• disclose the income (loss) and any gain (loss) if there were any disposals in the year.

Taxpayers are permitted to use the average exchange rate for the year in determining the Canadian dollar market value. Another change beginning in 2014 is that  the detailed T1135 reporting exception where the income on the foreign asset has been reported on a T3 or T5 slip has been eliminated.

• Tax Free Savings Account (TFSA)

The 2014 TFSA contribution limit is $5,500. The aggregate contribution limit is now $31,000 provided an individual was at least 18 in 2009.

Old Age Security

• The OAS repayment – or “clawback” - for 2014 begins at a net income of $71,592. Where an OAS recipient has a net income amount above this threshold their OAS needs to be partially or fully repaid. The repayment is calculated as 15% of net income above $71,592 to the extent of OAS received. A full clawback occurs at net income of $116,103.
• Automatic enrollment for OAS began in 2013. Individuals who are automatically enrolled are notified in the month following their 64th birthday. If a notification is not received the individual must apply for OAS.

Business

• Lifetime Capital Gains Exemption

Sales of qualified small business corporation shares and qualified farm and fishing property now qualify for a capital gains exemption of $800,000 – an increase from $750,000. For 2015 and future years the exemption limit will be indexed to inflation.

• “Kiddie Tax”

Kiddie tax – or “tax on split income” - is levied at the highest tax rate in certain situations where, generally, a parent is “splitting” income with a minor child through the use of a corporation, partnership or trust. The high rate of tax payable by the child is designed to nullify the tax advantages of income splitting.

Kiddie tax was originally introduced to apply to dividend income received by a minor child from a family owned private corporation. It was then extended to apply to certain capital gains realized by the minor child and beginning in 2014 it has been extended to rental and business income earned through a partnership or trust.

• Payroll Remittances

Beginning in 2015, some employers will be able to reduce the frequency of their payroll remittances. The threshold levels of average monthly withholdings used to determine remittance frequency are being increased. The average monthly withholding threshold for remitting two times per month is to increase to $25,000 (from $15,000) and to $100,000 (from $50,000) for remitting four times per month.

• Small Business Job Credit

Small businesses’ employment insurance (EI) premiums are to be reduced from $1.88 to $1.60 per $100 of insurable earnings in 2015 and 2016. To qualify for the reduction the employer’s EI premiums must be $15,000 or less in those years. The credit will automatically be calculated by CRA based on the T4s filed by the employer.

In 2013, the government announced that EI premiums would be frozen at the $1.88 threshold to the end of 2016. GST/HST

• Transactions Between “Closely Related Persons”

GST/HST can often be avoided on transactions between closely related persons. (For example, certain transactions between a parent corporation and its 100% owned subsidiary.) These transactions are considered to occur at “nil consideration” for GST/HST purposes. To take advantage of the rules the parties must elect to do so. The election is documented by completing form GST25. Currently, the form does not need to be filed with CRA as the only requirements are that the form be completed and kept in the records. Beginning in 2015 any new election form will need to be sent to CRA. With respect to any election made before 2015 the election form needs to be filed with CRA before 2016.

• Automatic GST/HST Registration

GST/HST legislation generally requires registration - and the charging, collection and remittance of GST/HST - where business revenues are greater than $30,000 annually. CRA can now register a person that CRA believes is required to be registered for GST/HST. CRA will be required to send a notice to the person and the person will have 60 days to respond as to why they should not be registered or to register themselves. If no action is taken by the person within 60 days CRA will automatically register the person for GST/HST.

Other

• Medical Expenses

The costs associated with a service animal trained to assist an individual with severe diabetes are now eligible for the medical expenses tax credit. The GST/HST exempt list of health care services now includes acupuncture and naturopathic services.

• Adoption Tax Credit

The 15% non-refundable credit now applies to costs up to $15,000. The maximum tax savings is now $2,250 (up from $1,766 in 2013). The maximum credit will be adjusted for inflation for 2015 and subsequent years.

• Child Fitness Tax Credit

Effective for 2014, the amount eligible for the credit is $1,000 (up from $500). The maximum tax savings is now $150 per child (up from $75). In 2015, this credit will become a refundable tax credit. Currently, the credit can only be used to reduce a tax liability.

Brian J. Quinlan, CPA, CA, CFP, TEP, Campbell Lawless LLP, Chartered Professional Accountants, Suite 900, 8 King Street East,Toronto, ON M5C 1B9 Tel: (416) 364-0702, ext. 230. Email: bjq@clcpa.ca