Federal Budget -> 2010 Budget

Federal 2010 Budget - March 4, 2010

See the following on the Federal Budget 2010 website:

- Quick Index for links to selected budget topics

- Tax Measures: Supplementary Information

Federal Jobs and Growth Act

The Federal Jobs and Growth Act was introduced on March 29, including key elements of Budget 2010. The Act, Bill C-9, received Royal Assent on July 12, 2010.

Sustaining Canada's Economic Recovery Act

Draft legislative proposals were released for consultation on August 27, 2010, to implement tax measures from Budget 2010 as well as several previously announced tax initiatives. The Sustaining Canada's Economic Recovery Act, Bill C-47, received Royal Assent on December 15, 2010. Measures included in the Act:

	Indexing the working income tax benefit (WITB)
	Allowing RRSP/RRIF or RPP proceeds to be transferred to a RDSP on a tax-deferred basis
	Allowing a 10-year carry forward for RDSP grants and Bonds
	Implementing Employee Life and Health Trusts
	Further strengthening federally regulated pension plans
	Helping registered charities with disbursement quota reform
	Allowing taxpayers to request online notices from CRA
	Reducing the paperwork burden for certain taxpayers
	Better targeting tax incentives for employee stock options
	Addressing aggressive tax planning related to TFSAs
	Expanding access to accelerated capital cost allowance for clean energy generation
	Improving the complaint process for consumers when dealing with the financial services industry.

Personal Income Tax Changes

Basic personal amount, tax brackets, tax credits

There were no new changes of amounts announced for these items. They were indexed for inflation in 2010. See our tables of non-refundable tax credits and the marginal tax rate tables for 2010 amounts and rates.

Medical expense tax credit (METC) - cosmetic procedures

The Budget proposes to change the wording of the Income Tax Act in order to make it clear that medical or dental services or related expenses which are provided for purely cosmetic purposes are not eligible medical expenses for purposes of the medical expense tax credit, unless the services are necessary for medical or reconstructive purposes. This is effective for expenses incurred after March 4, 2010.

See Medical Expense Tax Credit on the Budget 2010 website.

Shared custody and child benefits

The Budget proposes to allow two eligible individuals who share custody of a child to each receive 50% of

	Canada Child Tax Benefit
	Universal Child Care Benefit, and
	GST/HST credit

This policy will apply when a child lives more or less equally with two individuals who live separately. It will apply to benefits payable commencing July 2011.

Single parents and Universal Child Care Benefit (UCCB)

The Budget proposes to allow a single parent the option of including the UCCB income in the income of the dependent for whom an eligible dependent credit is claimed. If the single parent is unable to claim an eligible dependent credit, the UCCB income can be claimed in the income of one of the children for whom the UCCB is received.

This measure will apply to the 2010 and subsequent tax years.

RRSP/RRIF/RPP rollover to an RDSP

Budget 2010 provided legislation (Income Tax Act s. 60.02) to allow a tax-deferred rollover of a deceased individual's RRSP/RRIF or RPP proceeds to the Registered Disability Savings Plan (RDSP) of a financially dependent infirm child or grandchild. This is effective for deaths occurring on or after March 4, 2010.

Carry forward of RDSP grants and bonds

RDSP beneficiaries are currently unable to carry forward unused Canada Disability savings Grants (CDSGs) and Canada Disability Savings Bonds (CDSBs) to future years.

Budget 2010 proposes to amend the Canada Disability Savings Act to allow a 10-year carry forward of CDSG and CDSB entitlements. The carry forward will be available starting in 2011. Plan holders will receive annual statements of CDSG entitlements.

For more information see the 2010 Budget website topic Carry forward of RDSP grants and bonds.

Scholarship exemption and education tax credit

Post-secondary scholarships, fellowships and bursaries are exempt from tax when they are received in connection with the student's enrolment in an educational program that entitles the student to the Education Tax Credit.

Budget 2010 proposes

	to clarify that post-doctoral fellowships will be taxable. A post-secondary program consisting primarily of research will only be eligible for the education tax credit and the scholarship exemption if it leads to a college or CEGEP diploma, or a bachelor, masters or doctoral degree or equivalent.
	that an amount will be eligible for the scholarship exemption only to the extent that it is received in connection with enrolment in an eligible educational program for the *duration of the period of study related to the scholarship*.
	that the scholarship exemption will be limited, in the case of part-time programs, to the amount of tuition paid for the program plus the costs of program-related materials. There would be an exception to this for a student entitled to the disability tax credit, or a student whose medical or physical impairment prevents them from being enrolled on a full-time basis.

These measures will apply to the 2010 and subsequent taxation years.

Employee Stock Options

Stock option cash outs

Budget 2010 proposes that the stock option deduction will only be available to employees

when they exercise their options by acquiring securities of their employer, or

when stock option rights are cashed out to the corporation, as long as the employer makes an election to forgo the deduction for the cash payment.

The Budget will also clarify that when stock option rights are disposed of to a non-arm's length person, this results in an employment benefit at the time of disposition (including cash out).

These measures apply to dispositions of employee stock options occurring after 4pm EST on March 4, 2010.

Stock option tax deferral election repealed

Currently, the taxable employment benefit from the acquisition of securities under stock options can be deferred under certain conditions, until the disposition of the optioned securities.

Budget 2010 proposes to repeal the tax deferral election, and to ensure that withholding tax is remitted by the employer based on the value of the employment benefit related to the acquisition of securities under stock options.

The repeal of the tax deferral election will apply to employee stock options exercised after 4pm EST on March 4, 2010.

The clarifications to remittance requirements will not apply until 2011.

Relief for taxpayers who have made stock option deferral elections

For taxpayers who have made tax deferral elections on stock options, Budget 2010 is proposing a special elective tax treatment which will ensure that the tax liability on a stock option benefit will not exceed the proceeds of disposition of the optioned securities, taking into account tax relief resulting from the offsetting of the capital losses on the securities against capital gains from other sources.

For more information on all employee stock option measures, see Employee Stock Options in the Budget 2010 web site.

Business Income Tax Changes

For all business tax measures see the Budget 2010 website Business Income Tax Measures.

Accelerated CCA for Clean Energy Generation

Budget 2010 proposes to expand Class 43.2 to include:

heat recovery equipment used in a broader range of applications; and

distribution equipment used in district energy systems that rely primary on ground source heat pumps, active solar systems or heat recovery equipment.

Class 43.2 provides accelerated capital cost allowance at a rate of 50% per year on a declining balance basis. Class 43.1 also provides accelerated CCA, at the rate of 30% per year, for assets acquired before February 23, 2005. A higher efficiency standard is required for Class 43.2 than for Class 43.1 Systems that only meet the lower efficiency standard are eligible for Class 43.1.

These measures will apply to eligible assets acquired on or after March 4, 2010 that have not been used or acquired for use before that date.

Distribution Equipment of a District Energy System

Budget 2010 proposes to broaden Class 43.1 and Class 43.2 to include certain specified distribution equipment which is part of a district energy system used by the taxpayer to provide district heating or cooling through the use of thermal energy.

Canadian Renewable and Conservation Expenses - Principal-Business Corporations

Budget 2010 proposes that the definition "principal-business corporation" be amended to clarify that flow-through share eligibility extends to corporations the principal business of which is one, or any combination, of:

producing fuel;

generating energy; or

distributing energy

using Class 43.1 or Class 43.2 property.

For more information on the Budget 2010 website, see Tax Measures: Accelerated CCA for Clean Energy Generation.

GST/HST Simplification for Direct Sellers

A simplified GST/HST accounting method was proposed in Budget 2009 for network sellers employing the commission-based model. Budget 2010 proposes enhancements and clarifications to the previously announced measure, which will apply for fiscal years of a network seller that begin after 2009. For more information on the Budget 2010 website, see Tax Measures: Simplification of the GST/HST for the Direct Selling Industry.

Vehicle and Equipment Financing Partnership

The Government is creating the Vehicle and Equipment Financing Partnership as part of the Business Credit Availability Program (BCAP), in order to expand financing options for small and medium-sized finance and leasing companies, increasing the availability of credit at market rates for dealers and users of vehicles and equipment. For more information on the Budget 2010 website, see Tax Measures: Extending Access to the Financing Needed to Support the Recovery.

Revised: October 26, 2023