Tax memo: 2011 Federal Budget

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Will it Come to Pass?

The federal budget that Minister of Finance Jim Flaherty presented on March 22, 2011, may well be defeated when it comes before the House of Commons, triggering an election. Even so, many of its measures are likely to be re-introduced later.

This budget maintains corporate and personal tax rates, but does propose some new personal tax credits, including a Children's Arts Tax Credit.

Many measures are aimed at tightening perceived loopholes or inequities in various aspects of the tax system. Notably, the budget curtails the ability of a corporation to defer income tax by taking advantage of the timing of the year-ends of partnerships of which it is a member. This change will affect tax planning that is common in a number of sectors, including oil and gas, real estate and retail, as well as in income trust conversions.

Enhancements to the capital cost allowance (CCA) system extend the 50% straight-line accelerated CCA rate for manufacturing and processing equipment for an additional two years and expand the property eligible for a 50% declining balance accelerated CCA rate (specified clean energy generation and conservation equipment acquired before 2020).

Personal tax measures include tightening of the rules that govern individual pension plans. Furthermore, the existing “tax on split income” rules (the “kiddie tax”) are extended to apply to capital gains realized by or included in the income of a minor in certain circumstances.

A variety of budget measures are intended to ensure that the tax benefits of charitable giving are not abused.

144 KB 2011 Federal Budget: Full commentary
Download the full PDF Tax memo.

144 KB Tax memo: 2011 Federal Budget: Highlights
Download the full PDF Tax memo.