2010 Federal Budget Highlights

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                                                           2010 Federal Budget Highlights
Spring 2010
                                                 Finance Minister Jim Flaherty’s         Cosmetic Procedures
Inside this Issue                                Federal Budget tabled on March
                                                                                         Effective for expenses incurred
                                                 4, 2010, focused on creating jobs
                                                                                         after March 4, 2010, the budget
1          2010 Federal Budget                   and growth, sustaining the
                                                                                         proposes that expenses incurred
           Highlights                            nation’s economic advantages
                                                                                         for purely cosmetic procedures
2          2010 Ontario Budget Highlights        and planning to return to a
                                                                                         will not be eligible for the
                                                 balanced budget.
           Sales Tax Harmonization                                                       medical expense tax credit. A
           HST Consumers                         No new personal or corporate            cosmetic procedure will continue
                                                 income tax rate                         to qualify for the credit if it is
3          HST Businesses
                                                 changes were                            required for medical or
           Profile – Jim Radler                  announced.                              reconstructive purposes.
4          HST - Agriculture                                                             Employee Stock Options
           Allied Can Help
                                                                                         Various changes were introduced
                                                                                         to employee stock option plans
                                                 Personal Tax Changes                    including the elimination of the
                                                 Child Tax Benefits                      tax deferral election for employee
                                                                                         stock options exercised after
           We’re Moving!                         Where a child lives with two
                                                 eligible individuals who live
                                                                                         March 4, 2010.
                                                 separately, Budget 2010 proposes        Rollover of RRSP Proceeds
    After 34 years at our present
    location on Oxford Street, we                to allow the two individuals to         to an RDSP
    are moving our Head Office to a              share the monthly Canada Child          Budget 2010 proposes to extend
    larger facility a few blocks north           Tax Benefit and Universal Child         the existing RRSP rollover rules
    on Richmond Street.                          Care Benefit (UCCB) amounts             to allow a rollover of a deceased
                                                 and the quarterly GST/HST               individual’s RRSP proceeds to
    It will be a modern, airy work-              credit. This measure applies for
    place promoting a sense of
                                                                                         the Registered Disability Savings
                                                 benefits payable commencing             Plan (RDSP) of a financially
    belonging for all who work there
                                                 July 2011.                              dependent infirm child or
    or visit. We want our workplace
    to reflect the great caring and              Beginning in 2010, a single             grandchild. The amount of RRSP
    community spirit of our Allied               parent will have the option of          proceeds rolled over into an
    team.                                        including the total UCCB                RDSP will not be permitted to
                                                 received in his/her income or in        exceed the beneficiary’s available
    We will be located on a major                                                        RDSP contribution room. These
                                                 the income of the child for whom
    thoroughfare, easily accessible                                                      measures will be effective for
    by clients with ample parking.               the eligible dependent credit is
                                                 claimed or in the income of one         deaths occurring on or after
    Watch for our official relocation            of the children for whom the            March 4, 2010.
               notice which will be              UCCB was paid.                          U.S. Social Security Benefits
                    mailed in May.
                                                                                         Budget 2010 proposes to reinstate
                                                                                         the 50% inclusion rates for
                                                                                         Canadian residents who have


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Spring 2010


been in receipt of U.S. social                                                       The HST will tax a wide range of
security benefits since before
                                           2010 Ontario                              goods and services but will not be
January 1, 1996, and for their             Budget Highlights                         charged on items such as basic
spouses and common-law                                                               groceries, prescription drugs and
partners who are eligible to               Finance Minister Dwight Duncan            medical devices. Businesses
receive survivor benefits. This            delivered Ontario’s 2010 Budget           making taxable or zero rated sales
measure will apply to U.S. social          on March 25, 2010.                        will generally be able to claim an
security benefits received on or           There are very few                        Input Tax Credit (ITC) for the
after January 1, 2010.                     tax related                               HST paid on their purchases in
                                           measures included                         the same way as they currently
Carry Forward of RDSP                      in the budget.                            claim ITC’s for GST.
Grants & Bonds
                                           Personal Property Tax                     In addition to various transitional
In recognition of the fact that            Credit (OPTC)                             and relief measures announced in
families of children with
                                           The budget proposes to convert            the 2009 budget, this budget
disabilities may not be able to
                                           the existing OPTC to the Ontario          proposes additional measures:
contribute regularly to their plans,
Budget 2010 proposes to amend              Energy and Property Tax Credit                 Ability for vendors to refund
the Canada Disability Savings              (OEPTC) effective starting in                  RST after October 31, 2010,
Act to allow a 10-year carry               2010 based on 2010 personal                    on other than returned goods.
forward of Canada Disability               income tax returns. The OEPTC                  Purchasers can claim RST
Savings Grants and Canada                  will be paid quarterly with the                refunds on goods purchased
Disability Savings Bonds                   timing of payments to be                       before July 1, 2010, and
entitlements.                              determined after consultation                  returned after October 31,
                                           with social policy groups. The                 2010, directly from the
Mineral Exploration Tax Credit             budget documents provide no                    Ontario Ministry of Revenue;
The eligibility for the Mineral            details on the computation of this
                                           credit.                                        A new RST rebate to
Exploration Tax Credit which                                                              purchasers who have paid
was scheduled to expire March              Corporate Income Tax                           both RST and HST on
31, 2010, will be extended to flow                                                        purchases after June 2010 to
through share agreements entered           No new changes have been
                                           proposed to corporate income                   eliminate double taxation;
into on or before March 31, 2011.
                                           taxes. The combined federal and                Exemptions for gifts of used
Business Tax Measures                      Ontario corporate income tax rate              vehicles between siblings;
                                           based on previously announced                  Vendor RST compensation of
Employment Insurance
                                           changes currently stands at 16.5%              up to $375 to be paid to
Premiums
                                           falling to 15.5% on July 1, 2010.              vendors for the April 1, 2010,
Budget 2010 proposes to freeze             These rates are applicable to the              to June 30, 2010, collection
EI premiums until the end of               first $500,000 of taxable income               period. ♦
2010 at $1.73 per $100 of                  in the corporation eligible for the
insurable earnings.                        small business rate. ♦                    HST – Consumers
Interest on Overpaid Taxes
                                           Sales Tax                                 With the introduction of the HST,
Effective July 1, 2010, the                                                          consumers will be faced with a
interest rate payable by the               Harmonization                             broader tax base than with the
government to corporations in              Beginning July 1, 2010, the               previous PST. For example,
respect to overpaid income tax,            existing Ontario Retail Sales Tax         currently most professional fees,
GST/HST, EI, CPP, excise and               (RST) will be combined with the           personal care fees, real property
duty will be reduced by 2%. ♦              federal GST to form a                     contracts, dry cleaning, fuel,
                                           Harmonized Sales Tax (HST) at a           internet access, magazines,
    GST/HST – 13%                          13% rate. The HST will be                 membership fees and utilities are
      Effective                            largely consistent with the GST.          all subject to GST of 5% and are
     July 1, 2010


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                                                                                                               Spring 2010


not subject to PST. These will            Single individuals receive three
now be taxed at the HST rate of           payments of $100 with the first in
                                                                                     Profile
13%.                                      June 2010. For families, the
To help consumers offset the
                                          maximum benefit begins in June             Jim Radler, CA
                                          2010 is $330 with two payments             Jim joined Allied
additional cost of the HST, the                                                      in 2003 as the Area
                                          of $335 in December 2010 and
Ontario government has                                                               Manager in Waterloo/
                                          June 2011. ♦
announced several measures to                                                        Wellington. He received his Bachelor
assist Ontario residents.
                                          HST – Businesses                           Degree from Wilfrid Laurier
                                                                                     University in 1995 followed by his
Ontario Sales Tax Credit                                                             Chartered Accountant designation in
                                          Beginning July 1, 2010,
This new credit replaces the              businesses must begin collecting           2002. Jim has over 10 years of
current Sales Tax Credit and will                                                    experience working with owner
                                          HST on taxable sales and
                                                                                     managed businesses in the
be paid quarterly starting in July        claiming ITC’s based on the HST            agricultural sector. He is an approved
2010 to individuals with net              rate of 13%.                               advisor for specialized farm business
income less than $20,000 and                                                         planning services delivered through
families with net income of less          For goods, HST will apply when
                                          goods are delivered and                    the Growing Forward Program.
than $25,000. This new credit
will be up to a maximum of $260           ownership transferred after June           Jim’s clients can be assured they
per adult and child.                      30, 2010. As for taxable services,         receive the utmost advice, assistance
                                          HST will apply for services                and service with their accounting
Point of Sale Rebates                     performed after June 30, 2010.             needs, farm business advisory
                                                                                     services, tax matters, and accessing
Point of sale rebates will be             For transactions that straddle the         any available government funding.
available on:                             July 1, 2010, implementation
                                                                                     Jim joined the Allied Owners Group
    Children’s clothing and               date, there are also transitional          in 2008 and he and his wife,
    footwear;                             rules that need to be considered.          Charlene, live in St Jacobs with their
    Children’s car seats and car          To help businesses with the                three children, Matthew, Lucas and
    booster seats;                        change to the HST, a one-time              Jaiden.
    Diapers;                              credit for small businesses was
    Feminine hygiene products;            introduced to assist with
    Books, newspapers, bulletins;         additional costs that may be                   Review accounting system to
    Prepared food purchased               incurred to implement the                      ensure it is updated to be
    under $4 in value.                    changes. The credit is based on                compliant with HST.
                                          the level of taxable sales in the
Transition Payments                                                                      Cash registers, computer
                                          first full quarter commencing
                                                                                         software and web sites will
One time transition payments              after June 30, 2010. The credits
                                                                                         need to be updated to include
totaling $300 for single persons          will range between $300 for
                                                                                         HST.
and $1,000 for families will be           businesses with sales under
available to Ontario tax filers who       $15,000 in the quarter, to a                   Consider changing the HST
are 18 and over. Payments will be         maximum of $1,000 for                          reporting period to assist
made to single persons with net           businesses with sales over                     with cash flow where eligible.
income under $80,000 and                  $50,000 but less than $500,000 in              Consider the effect HST will
families with net income under            the quarter. If sales exceed the               have on pricing of goods in
$160,000. This benefit will               $500,000 threshold in the quarter,             order to remain competitive.
reduce by 5% of income over the           there will be no credit available.             Consider delaying large
thresholds.                               In preparation for the transition to           purchases until after July 1,
Persons attaining the age of 18           the new tax, businesses should                 2010, where these have a
in 2010 should consider filing a          consider the following:                        current RST rate.
2009 tax return to ensure they                                                           Consider buying PST exempt
receive this credit.                                                                     supplies and assets now.



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Spring 2010


    Review contracts, invoices                                    Most expenses presently taxed at                                 component which was not
    and receipts that may need to                                 a 5% rate will now have a 13%                                    recoverable, will now be
    be updated.                                                   HST rate applied. Although this                                  recovered as an ITC under HST.
    Assess the impact on cash                                     will result in an increase in the
                                                                                                                                   If you presently charge for
    flow of the change.                                           amount of taxes paid, the entire
                                                                                                                                   custom work or rent out land,
                                                                  amount will be recovered as an
    Final PST return is due July                                                                                                   keep in mind these charges will
                                                                  ITC when the HST return is filed.
    23, 2010. ♦                                                                                                                    be subject to the 13% HST rate.
                                                                  For this reason, you may want to
                                                                  change your filing frequency if                                  Farmers with annual taxable sales
HST – Agriculture                                                 you presently file on an annual                                  under $30,000 and presently not
The implications for                                              basis.                                                           registered for GST may want to
farm operations are                                                                                                                consider the advantage of
                                         Under the HST, Ontario farmers
somewhat different                                                                                                                 registering for HST to recover
                                         will be in a more favourable
than for other                                                                                                                     HST on business inputs.
                                         position on many items such as
businesses, primarily as farm            trucks, light vans and parts, office It should be noted, harmonization
operations have advantages over          furniture, lawn mowers,              also means a loss of PST point of
other businesses from the                computers, freezers and other        sale rebate on certain farm
previous PST system. The main            equipment as the previous PST        inputs.♦
concern will now be one of cash
flow.
                           If you need assistance with the transition to the new HST,
                         please contact your Allied advisor well in advance of July 1st.


Allied Can Help
We recommend you discuss any tax planning strategies before undertaking any action on the basis of this or any other general
advice. Your Allied advisor can help you assess the effect of any tax changes on your personal finances or business affairs and
point out ways to ease any adverse changes.
    Bryan Smith, CA (Peterborough Office) .............. 705-760-9900                       Dennis Jubenville (Sarnia) ................................         519-542-0162
    Les MacAlpine (Peterborough Office) ................. 705-760-9900                      Brian Thorne, BBS (Petrolia) ............................           519-882-2586
    Sarah Radnor (Peterborough Office) .................... 705-760-9900                    Vern Doupe (Clinton)........................................        519-482-5786
    Bob Williams (Norwood) ..................................... 705-639-1455               Teri Cobean, CMA, CFP (Hanover) ..................                  519-364-0611
    Chris Hart, BA, CMA (Winchester) ..................... 613-774-5204                     Jordan Domm (Stratford) ..................................          519-274-0891
    Leonard Dick, CGA, CFP (Whitby) ..................... 905-556-0370                      Kurt Sawyer, B.Comm. (Thamesford) ..............                    519-285-1127
    John Hrick, BA (St. Catharines) ........................... 905-685-6056                Elco DeBoer (Mt. Elgin) ...................................         519-842-6077
    Jim Radler, CA (St. Jacobs) ................................. 519-574-6698              Joni Anderson, CGA (Ailsa Craig) ...................                519-293-3000
    Jeff Boucher (Cambridge) .................................... 519-260-0211              Kim Vandevrie (Mt. Brydges) ...........................             519-264-9948
    Jeff Thompson (Atwood) ..................................... 519-356-9005               Chris Annis (London)........................................        519-642-4722
    Karen Lund, CGA (Barrie) ................................... 705-241-5485
Our experienced Office Tax Staff provides knowledgeable support to our area managers. If you require clarification of any of the
foregoing or wish to discuss your tax or financial affairs with one of our senior staff, please feel free to contact our office.
    John Wilkin .......................................... Chief Executive Officer          Wayne Ryan, CA .............................. Executive Vice President
    Brad Ostrom...................................................... Senior Manager        Liz Barrie .................................................................. Controller
    Martin Benson................................................... Senior Manager         Ruth Ann Harvey, CGA ............................................. Manager
    Lisa Benson ................................................................. Manager   Jim Kalman ................................................ Computer Systems
    Debbie Loiselle, CFP ................................................... Manager        Cheryl Oliver .................................................. Staff Accountant
    Lynn Breckenreid ........................................... Staff Accountant           Connie Iro ...................................................... Staff Accountant
    Adam Szymanski ............................................ Staff Accountant            Dan Hoftyzer, CMA ...................................... Staff Accountant
    Heather Oosterhof ........................................... Staff Accountant          Dane Anderson .............................................. Staff Accountant
    Laura Thompson ............................................. Staff Accountant           Blake Connelly ............................................... Staff Accountant




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