Highlights of the Federal 2014 Budget: Personal Tax Measures Part 2

by in Canadian Government News and Updates

Here are more personal tax measures proposed in the Federal 2014 Budget.

Amateur Athlete Trusts

Budget 2014 proposes to allow income that is contributed to an amateur athlete trust to qualify as earned income for the purpose of determining the RRSP contribution limit of the trust’s beneficiary.

Pension Transfer Limits

In 2011, the Government introduced a special rule that applies in certain circumstances to allow a member leaving an Retired Pension Plan whose estimated pension benefit has been reduced due to plan underfunding to disregard that benefit reduction in calculating their transferable amount. Budget 2014 proposes to allow this rule to apply in additional situations. In particular, the rule will be available in respect of a commutation payment to a plan member who is leaving an RPP if that payment has been reduced due to plan underfunding and either:

  • where the plan is an RPP other than an individual pension plan, the reduction in the estimated pension benefit that results in the reduced commutation payment is approved pursuant to the applicable pension benefits standards legislation; or
  • where the plan is an individual pension plan, the commutation payment to the plan member is the last payment made from the plan (i.e., the plan is being wound up).

GST/HST Credit Administration

Budget 2014 proposes to eliminate the need for an individual to apply for the GST/HST Credit and to allow the Canada Revenue Agency to automatically determine if an individual is eligible to receive the GST/HST Credit.

Tax on Split Income

Budget 2014 proposes a targeted measure to maintain the integrity of the tax on split income. It is proposed that the definition “split income” in the Income Tax Act be modified to include income that is, directly or indirectly, paid or allocated to a minor from a trust or partnership, if:

  • the income is derived from a source that is a business or a rental property; and
  • a person related to the minor
    • is actively engaged on a regular basis in the activities of the trust or partnership to earn income from any business or rental property, or
    • has, in the case of a partnership, an interest in the partnership (whether held directly or through another partnership). 

Graduated Rate Taxation of Trusts and Estates

Budget 2014 proposes to apply flat top-rate taxation to grandfathered inter vivos trusts, trusts created by will and certain estates (including a number of consequential changes).

Non-Resident Trusts

Budget 2014 proposes to eliminate the 60-month exemption from the deemed residence rules, including related rules that apply to non-resident trusts.

 

Source: http://www.budget.gc.ca/2014/home-accueil-eng.html

 

 

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