In Feb 2018, Finance Minister Bill Morneau unveiled the Liberal government’s third Federal Budget entitled “Equality + Growth: A Strong Middle Class” which continues with many of the themes of previous budgets, including an undertaking of a gender-based analysis in developing any budget proposals. The Budget anticipates a deficit of $19.4 billion for fiscal 2017-18 and forecasts a deficit of $18.1 billion for 2018-19.
Consistent with previous years, notable themes of the Budget include innovation, gender equality – including the introduction of a new EI Parental Sharing Benefit – and tax fairness and integrity. With regards to the latter items, the Budget outlined the government’s continued focus on eliminating perceived unfair tax advantages for some, cracking down on tax evasion, and measures to improve the efficiency, certainty and fairness of the tax system.
From a personal and small business tax perspective, which is the focus of this review, the Budget did not propose any changes to personal or corporate tax rates. Notably, as expected, the government introduced important changes to the tax treatment of passive income earned in Canadian private corporations. However, these changes to private corporations and their shareholders are simpler and more targeted than originally envisioned in the government’s 2017 consultation paper and subsequent announcements. The personal tax measures proposed in the Budget were minor in comparison, consisting primarily of slight tweaks to existing specific tax credits.
The most significant income tax measures affecting individuals and Canadian private companies are summarized below. Note that the measures introduced are only proposals at this stage and may not ultimately be enacted into law. Readers are cautioned to consult with their tax advisors for specific advice on how they may be affected by these proposals.