Registered charities are often referred to as NPOs; however, while both type of organizations operate on a non-profit basis, the two types are defined differently under the Income Tax Act. If your organization meets the definition of a charity, it cannot be considered an NPO under the Income Tax Act, even if the organization is not registered or cannot be registered as a charity. An organization may meet one definition or the other, but not both.

If your organization meets the definition of a registered charity, the only form you are required to file is a Charitable Information return (form T3010). This form must be filed no later than six months after your fiscal period to avoid having your registration revoked by Canada Revenue Agency (CRA). If this happens, you will no longer qualify for exemption from income tax as a charity, you will be unable to issue official receipts, and may be subject to a revocation tax that is equivalent to the full value of your charity’s remaining assets. In addition, the names of revoked charities are published on CRA’s website. Charities who apply for re-registration after having their registration revoked will be subject to a non-refundable $500 penalty.

If your organization meets the definition of an NPO there are a few different forms you may be required to file: an NPO Information Return (form T1044), a Corporate Income Tax return (form T2) or a Trust Income Tax and Information return (form T3)

As an NPO, you are required to file an NPO Information return (form T1044) if:

• you received or were entitled to receive taxable dividends, interest, rentals, or royalties of more than $10,000 in the fiscal period,
• your total assets were more than $200,000 at the end of your last fiscal year or
• if you had to file this return for a previous fiscal period.  If you file once, you will need to continue to file for subsequent fiscal periods even if you no longer meet the first two requirements.

This form must be filed no later than six months after the end of your fiscal period. The late filing penalty starts at $100 and increases by $25 per day to a maximum of $2,500 for each late filing. For example, if your organization has never filed this form, but you were required to do so for the last four years, you could be subject to a late filing penalty of $10,000.

As an NPO, you may also be required to file a Corporate Income Tax return (form T2) or a Trust Income Tax and Information return (form T3). NPOs are generally exempt from tax if no part of its income is payable to, or available for, the personal benefit of a member or shareholder; however, even if there are no taxes payable, incorporated organizations are required to file a corporate income tax return. This form must be filed no later than six months after the end of each tax year.  If your organization’s main purpose is to provide dining, recreational or sporting facilities to its members, then the property of your organization is deemed by CRA to be held by an inter vivos trust. The tax year end of an inter vivos trust is December 31 and you must file a T3 return no later than 90 days after this date each year. The trust is taxable on its income from property, and on any capital gains from the disposition of any property that is not used to provide its services.

Late filing penalties for Corporate Income Tax returns and Trust Income Tax and Information returns are calculated on the unpaid tax balance. There is an initial penalty of 5% plus an additional 1% for each full month the returns are late (up to a maximum of 12 months).

Non-profit organizations may be required to file more than one return each year. It is important to make sure that you are meeting your filing requirements to avoid penalites for late filing, and in the case of registered charities, preventing the revocation of your charitable status. Please speak to your accountant if you are unsure of your filing requirements.

Family owned businesses have many dynamics not faced by other businesses in the corporate world.  This makes transition of family owned business to the second generation particularly difficult and, in fact, only a very small number of family owned businesses succeed transfer to the second generation and even a smaller number succeed passage to the third generation.  The four major reasons for failure in succession of a family owned business are:

1. Lack of viability – the business is actually totally dependent on the founder and cannot continue without his or her active participation.

1. Lack of planning – no planning for business succession has been done; therefore, the successors are not prepared, trained, or experienced enough to be able to take over management.

1. The owner does not want to give up control of the business.

1. The offspring have little or no interest in taking over the business.

Planning for succession in a family business must consider aspects such as:

1. Vision for the business
2. Reluctance of the founder to transfer control
3. Resistance of offspring to join the firm
4. Family politics interfering with business policy
5. Viability of the business
6. Cash flow on buy out
7. Valuation of the business
8. Lack of management training of offspring
9. Compensation of management
10. Attracting non-family management

The planning can involve four distinctly different plans:

1. Strategic plan for the business-to establish the vision and direction of the company, allow offspring to grasp the vision of the founding parents and ensure that everyone has a clear picture of the future.
2. Succession plan for the business-which would show how the succession would occur and the timing of the plan.
3. Estate planning for the founding parents-addresses issues such as estate taxes, inheritance of both corporate assets and non-corporate assets.
4. Family strategic plan-different from the strategic plan in that it addresses issues specific to the viability of the family business as it relates to running the business; such as policies relating to compensation, performance measures for management/owners and job descriptions.  The family plan will also address other issues such as the treatment of family members who might not be involved with the family business, or other areas that are specifically important to the family.  This plan, if implemented properly, should avoid such issues as sibling rivalry and management control issues.

Transferring of a family business to a second generation is often more difficult than other methods of transferring ownership, such as outright sale, and is not for every business owner.  The dynamics of the family often play a major factor in the success of the transition and it takes co-operation and a commitment by all parties involved.

Good communication is the key element and it is recommended that a family retreat be set up in the early stages of the transition to craft an overview of the planning and test the will of all parties involved.  It is highly recommended that the meeting be planned and structured and an independent facilitator be used. This is where a planner, trained in the six step approach of financial planning, can help by:

1)    determining the outcome or strategy

2)    assessing the present situation,

3)     developing a plan,

4)    discussing and reviewing with clients,

5)    implementing the plan and

6)    monitoring and following-up

A financial planner is ideal for helping a family work through the transition.  At the family meeting such topics as who will be successor, timelines for transition, and estimated value of the business should be addressed.  Trained in the holistic approach, a planner will usually draw in a team of experts such as insurance agent, financial planners, bankers and tax accountants to help the family in the implementation of the transition.

If the company has not already developed a strategic plan this normally should be the first plan to be created and should include a business mission, goals and the strategy for achieving these goals.  The family business plan would normally be the next step and would address such issues as the code of conduct within the family business, policy of who is entitled to join, expectations of management etc.

Next would be the retirement and estate plans, which would incorporate the valuation of the business, how the buy out would be funded, how the retirement funds would be paid out, taxes involved in the estate would be calculated.  The experts such as insurance, lawyers, bankers and tax accountants should be used at this stage of planning.

Finally a succession plan should be created which would incorporate such items as setting the date for succession, training for new management, funding and timing for retirement, management of cash flow and involvement of the founding generation in the on going business.

A planner with their expertise in many areas can be an essential advisor to help the family balance both personal interest and business interest.  Communication, planning, co-operation of all parties and effective implementation procedures are key to successful transition.

In 1999 the federal government created rules to combat what, in their view, was abusive income splitting with children (under 18).  The rules called for a “tax on split income” – later cheekily dubbed the “kiddie tax” by the accounting community and media pundits – to be applied when the following situations occurred:

• The child received dividends or other taxable shareholder benefits from a private company (not publicly traded) other than through mutual funds
• The child received a share of partnership income which was actually earned from a family business (i.e. mom and son are partners and the partnership charges mom and dad’s company “management fees” during the year)
• The child received any income from a trust that could be sourced back to either of the above

When any of the above occurs, the child must file a tax return in which he or she must calculate tax at the maximum marginal rate (that’s 43.70% in BC in 2010).  Worse, the kiddie tax does not consider non-refundable tax credits such as the basic personal exemption.  In this way it, in most cases, becomes more costly to split income with the child than not to – which is, of course, the intent of the rules.  Note that this set of rules is separate from the attribution rules that could have a parent report the income generated from property their child owned.

In their 2011 federal budget, the government proposed to also include capital gains on sales of shares of the family corporation’s shares in the kiddie tax regime.  This was in response to the tax department’s observations that income splitting techniques had changed since the rules were implemented (in other words, some folks had cleverly figured out how to do it anyway).  When this situation occurs, the gain would be treated as a dividend to the child so he or she could not take advantage of the 50% capital gain income inclusion rate and the lifetime capital gains exemption.

You might be thinking, “And how does the government plan to collect this exorbitant tax from kids?”  Well, they’ve thought of that too.  Realizing that chasing children for tax balances would be politically off-putting to say the least, they chose to make the child’s parents jointly and severally liable for any amount due from their children, and any interest or penalties on the balance too.  Yikes.

If you or someone you know is currently income splitting with their kids, they could be at risk for reassessment by Canada Revenue Agency.  Speak to your accountant right away to ensure your tax planning is in order, and there are no nasty surprises coming.

• Maternity – up to 15 weeks coverage over the period a mother gives birth,
• Parental leave – up to 35 weeks coverage for either parent (or shared between spouses) to care for their new child,
• Sickness – up to 15 weeks coverage for those who cannot work due to injury or illness,
• Compassionate care – up to 6 weeks coverage for those who must be away from work to care for a dying family member

If you are a Canadian who operates an unincorporated businesses, or you are a shareholder of a private corporation, who doesn’t qualify for EI regular benefits, you are eligible to opt in.  After paying premiums for 12 months, you will be eligible to receive payments in the above cases.

The premiums are the same as those you would pay if you were employed: 1.83% (2012) of your net business income if you’re unincorporated or on your wages if you’re a shareholder in a private corporation.  You pay the premium as part of your income tax return at the end of the year.  It’s worth noting that as a regular employee, not only would you have to pay your premium (deducted from your paycheque) but your employer also has to pay a larger portion for you.  As  a self-employed person, you only need to pay your own portion to access the same special benefits.  It appears that the government views this as a fair tradeoff for the lack of EI regular benefits coverage for self-employed workers.  Another important note for those who are shareholders of private corporations:  the EI premiums and benefits are based only on the uninsurable wages taken from your company.  Those dividends you’ve been taking are not considered.

As you can imagine, this program can be very attractive to people in certain life positions.  For example, a self employed woman in her 30s with income of $30,000 per year will pay $549 in special EI premiums each year to potentially access $317 per week in EI special benefits.  If she has a baby and takes maternity and parental leave (total of 50 weeks) she will receive $15,850.  Assuming her income and the EI rates remained the same, she could contribute for almost 30 years, and still be ahead in the end.

There is a potentially large drawback to opting in to this program.  If you enroll and then change your mind about it you can withdraw, but you’ll still need to pay premiums for the whole first year unless you withdraw right away.  Worse, if you enroll and at some point take benefits, you’re in it for life.  You will have to pay EI premiums on your self-employment earnings for the rest of your self-employed career, regardless of the nature of the earnings.  For example, a man in his 20s registers while he is a self-employed painter, and when his parents become gravely ill, he takes compassionate care benefits.  After, he stops painting to go to dentistry school on his inheritance.  When he finishes, he founds his own dentistry company and takes wages.  He will have no choice but to pay EI premiums on those wages, and they will still only qualify for EI special benefits, and not regular benefits.

Enrolling in this optional EI program is an important choice for every self-employed person to make.  For many, the thought of deliberately paying more to the government seems preposterous, but there are those for whom this system could really be helpful when they need a financial safety net.  If you think this might be a valid option for you, speak to your financial advisor or accountant for a second perspective on your situation before you take the plunge.

The rules for claiming a business’ expenses related to the use of a motor vehicle can be complicated and inflexible. In order to pass an auditor’s examination, you must adhere to the rules.

For income tax purposes, there are two types of vehicles:

CRA distinguishes between motor vehicles and passenger vehicles because the two classes of vehicles are eligible for different allowable tax deductions.

Vehicle definitions chart

To illustrate, here is how Canada Revenue Agency (CRA) states the definitions of  motor vehicles and passenger vehicles.

Motor vehicle

CRA states the motor vehicle is an automotive vehicle designed, or adapted, for use on highways and streets. A motor vehicle does not include trolley buses or vehicles designed, or adapted, to be operated only on rails.

Motor vehicles are eligible for more deductions than passenger vehicles.

Types of deductible expenses:

• License and registration fees
• Fuel costs
• Insurance
• Interest on money borrowed to buy a motor vehicle
• Leasing costs
• Capital Cost Allowance

Passenger vehicle

CRA states a passenger vehicle is a motor vehicle designed, or adapted, primarily to carry people on highways and streets. It seats a driver and no more than eight passengers. Most cars, station wagons, vans, and some pickup trucks are passenger vehicles.

If you own or lease a passenger vehicle, there is a limitation on the amounts of capital cost allowance, interest, and leasing that you can deduct.

If you and another person own or lease a passenger vehicle, the limits on CCA, interest, and leasing still apply. However, as a joint owner, the total amount you and any other owners deduct cannot be more than the amount that one person owning or leasing the vehicle could deduct.

How to record vehicle use

CRA requires tracking of mileage to support any automobile expense claims.  A log book is a useful tool to keep track of automobile expenses during the year. The log book should contain total kilometers you drive and a separate record of the kilometers you drive for income-earning activities in order to get the full benefit of your claim for the vehicle. For each company trip, keep a log listing the following:

• date
• destination
• purpose
• number of kilometers you drive

Determining whether the trip is for business or personal use can sometimes be difficult. However, CRA states the following trips can be treated as business travel:

• A trip from your home to a client’s place of business and back home.
• A trip from your home to a client’s place of business and then to your regular place of work
• A trip from your regular place of work to a client’s place of business and then home.

Reasonableness is a major factor that a CRA auditor uses to determine if vehicle expenses are eligible to deduct, so make sure when you deduct motor vehicle expenses that the expenses seem reasonable and you have supporting receipts.

If you use more than one vehicle for business purposes, maintain detailed records for each vehicle in order to calculate expenses separately.

Waiting until tax time to start planning how expenses should be claimed can be too late, so plan ahead! Speaking to your accountant about how the rules for claiming vehicle expenses apply to your situation can save you money and keep those wheels rolling!

If the worker is an employee, he receives a T4 for the income he has earned.  Travelling expenses (such as flights, lodging, meals, etc) are not deductible.  Only when the employee is required to work away from the employer’s place of business do the travel expenses become deductible, and only if the employer certifies this is the case with a prescribed form.  In some cases, the employer may pay the employee a travel allowance to allow them to fly out to the oil sands to work.  It is commonly believed by many workers that this is a non-taxable allowance, but this is not the case.  Because the same requirement to be working away from the employer’s place of business applies, these allowances are actually taxable income to the employee and are included in income for the year.  That said, the employee may still qualify for an offsetting deduction.

It’s very likely that the employee’s residence while working falls into a prescribed zone for the purposes of the Northern Residents deductions.  If this is the case, the employee may be able to deduct some or all of the costs of travel as a northern resident.  Note that the Northern Residents deduction for travel only applies against taxable benefits received from employment and only to people who permanently reside in a prescribed area.

If the worker is subcontracting, the situation gets a little bit trickier.  Many people believe that subcontractor status allows them to deduct virtually any expense they can associate (even thinly) with their work.  As with an employee, a subcontractor can deduct travel expenses, but only those incurred “while away from home in the course of carrying on the taxpayer’s business”. [ITA 18(1)(h)].  Canada Revenue Agency considers that expenses related to travelling to the location of work are not incurred in the course of carrying on business, and are thus not deductible.  It is viewed that these expenses are basically the cost of commuting.  This may surprise some independent subcontractors, as for many it is typical practice to deduct the costs of getting to work each day (even just across town) but these expenses are, in fact, not deductible.   Note that this may not be the case if the subcontractor can demonstrate that their actual home is their business location and the travel was incidental, but for those who take long term contracts away from home this may be difficult or impossible.

Like an employee, if a subcontractor receives a travel allowance, this is taxable income.  This can be a bit painful from the view of the worker because the allowance is taxable, but the expenses the allowance is meant to cover are not deductible.

Finally, if the worker has incorporated a company and the company is subcontracting, other tax considerations come into play.  This is a popular method as it is a common view that because small corporation profits are taxed at a low rate, savings can be had.  There are two major problems with this.  First, most workers in the oil sands are not reinvesting their contract profits back into their companies, but are instead drawing the funds out for personal and family expenses.  As a result, the company has to push that income to the shareholder in the form of wages or dividends and he winds up paying personal tax on it anyway.

Second, a corporation that has less than 5 employees and earns all its income from a single source (in other words a corporation acting like an employee) is considered by Canada Revenue Agency to be a “Personal Services Business” (PSB).  PSBs are subject to special tax rules that effectively take all the tax advantages of incorporating away by disallowing all deductions except Canada Pension Plan contributions, and by disallowing the advantageous small business deduction that is responsible for that low corporate tax rate.

So what about those travel expenses?  If after the above rules have been considered, incorporation is still the approach taken, there are a number of options available that can result in the deductibility of not only the travel expenses but possibly the lodging and living expenses as well.  Some of the techniques may involve the payment of a non-taxable living out allowance to the primary employee, the use of the “special work site” designation, and more.

In order to determine which approach will be best for you and your family, or to better understand your available deductions, always speak to a professional accountant before flying out and getting dirty.

Canada Revenue Agency (CRA) has a page called Benefits and Allowances, http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/menu-eng.html, that explains which benefits are taxable.

One of the most common benefits, that can also be somewhat confusing, are medical benefits.  If your employer pays provincial health care insurance premiums on your behalf (i.e. MSP), those premiums are considered to be a taxable benefit.  Therefore, many Canadian employers do not pay those premiums on behalf of employees.  However to make things convenient, employers may deduct premiums for an employee’s pay cheque and remit it on the employee’s behalf.  Since the employee is paying for the premiums, it is not considered a taxable benefit.

Most group health care plans include both taxable and non-taxable benefits. Life insurance paid by the employer is a taxable benefit. Disability insurance paid by the employer is also a taxable benefit unless the employer pays the benefit out of their own funds.  Accidental death and dismemberment and extended medical and dental coverage is not taxable to the recipient. Extended medical and dental that is paid by an employee can be claimed as an eligible medical expense on their personal income tax return. As a result of this, many employers apply the employee paid portion of the premium first to the extended medical and dental to maximize the medical expense claim they can make at tax time.

Employer paid premiums to a group wage-loss or income maintenance plan is taxable if the benefit is paid by a third party and not out of the employers own funds. Premiums paid to a non-group plan of this type are taxable. However, if you make a claim, those benefits are taxable.  On the other hand, if your employer pays for disability premium on the employee’s behalf (premium is deducted from the employees pay cheque), any claims made are not taxable.

Another common employee benefit is a company car.  Whether you are an owner or an employee, a company vehicle may result in two taxable benefits. The first benefit is a standby charge for your personal use, which will vary depending on whether the vehicle is employer-owned or leased.  The second benefit is an operating cost benefit which relates to the operating expenses (i.e. gas, repairs, etc) paid for your personal use of the vehicle.

CRA has an online calculator that allows you to calculate the estimated automobile benefit, here is the link

http://www.cra-arc.gc.ca/esrvc-srvce/tx/bsnss/bc-eng.html

But Revenue Canada does allow one exemption: whether an employer provides an employee with a company car or the employee uses their own vehicle, a reasonable car allowance for operating costs based on the number of kilometers driven is a tax-free benefit.

Looking at the calculations involved in determining the automobile benefits, it often is simpler for an employee to use their own vehicle and have the employer provide a tax-free reimbursement (currently up to $0.52 per km) on the business use of the vehicle.

Another common employee benefit is an employer-owned cell phone.  CRA’s view on this is if the employee is provided with a cell phone for business purposes, there is no taxable benefit to the employee. But if the cell phone is used for personal calls, a taxable benefit may arise.  CRA’s position is if the cell phone plan is a reasonable cost, the plan is a basic one with a fixed cost, and the employee’s personal use of the cell phone does not result in additional charges over and above the basic fixed cost, no taxable benefit would occur.

It would be worthwhile for an employer to look into cell phone plans for their employees that provide generous airtime that can be justified by the employee’s business-related use of the phone and for the employee to not incur additional charges (i.e. long distance or roaming charges) on their monthly fixed plan amount.  Otherwise, the additional charges that pertain to personal use will be considered a taxable benefit and added to the employee’s income.

There are a number of factors to consider when determining whether a benefit is taxable or not.  It is important to take these considerations into account when structuring benefit plans, rather than after the benefits have been provided.  This helps to ensure that benefit plans are structured in the most tax efficient manner.

First, the shareholder loan rule does not apply if the loan is repaid within one year after the end of the taxation year of the corporation in which the loan was made. For example, if the corporation’s taxation year is May 31 and it provided the shareholder with a loan on June 2, 2012, the shareholder would have until May 31, 2014 to repay the loan under this exception. This provides you almost two years to repay the loan without its being included in your income. But note that in order for this exception to apply, the repayment cannot be part of a series of loans and repayments.

Another exception to the shareholder loan rules generally applies to loans made by employers who are in the business of lending money. This exception applies to a debt that is from normal business activities, provided standard arrangements for repayment are made and maintained.

The third exception applies when you receive the loan as the employee of the corporation. More specifically, it must be reasonable to conclude that you received the loan because of your employment and not because of any persons’ shareholdings. In the meantime, the loan must have a bona fide arrangement for repayment and must be repaid within a reasonable time. If you are not a “specified employee”, you can use the loan for any purpose and still fall within this exception. A “specified employee” is generally one who does not deal at arm’s length with the corporation or who owns at least 10% of the shares of any class of the corporation or a related corporation. If you are a specified employee, the non-taxable loan must be used to either (1) purchase a dwelling in which you will live, (2) purchase new shares from the employer corporation (or a related corporation), or (3) purchase an automobile to be used for employment duties. In this case, the one year rule can be extended for a longer period, but no longer than normal commercial terms, therefore, a housing loan could be a 25 or 30 year term but an automobile loan would normally only extend to five years.

If the shareholder loan rule applies and the shareholder loan was previously included in your income, you can get a deduction from income in the year that you repay the loan. However, no deduction is allowed if the repayment was part of a series of loans and repayments.

If the shareholder loan is not included in your income because you fall within one of the exceptions, you may still be taxed on a deemed interest benefit if the loan does not bear adequate interest. The benefit will equal the prescribed rate applied to the outstanding portion of the loan, minus any interest that you paid in the year or by January 30 of the following year. The prescribed rate is set quarterly by Canada Revenue Agency and has been 1% since January 2011. In other words, there will be no deemed benefit if the loan is at the prescribed rate. For example, if you received a loan of $10,000 from the company on January 1, 2012 and are required to pay it back one year later without interest, you are considered to have an employment benefit of $100 for the year 2012, and have to include $100 in your income for 2012. However, if you make an interest payment of $100 to the company before January 30, 2013, you will avoid any employment benefit.

Make sure you consult with your accountant before you take a large sum of money out of your company over and above your regular wages or dividends. The costs could be far more than you anticipated if the loan is not structured properly.

Families

•    New Family Caregiver Tax Credit (effective 2012): This tax credit, based on $2,000, is an enhancement to the existing dependency-related tax credit and also results in an increase in the dependant’s income threshold.  While the credit is meant to assist caregivers of all types of infirm dependent relatives, the actual benefit has been the source of much debate. Some believe that while it may be an advantage for the average-(middle class)  looking after a dependent, a non-refundable tax credit does little to assist those caregivers that really require it, the low income earners.

•    New Children’s Arts Tax Credit: This tax credit mimics the Children’s Fitness Tax Credit imposed in 2007. The credit is based on $500 of eligible expenses paid for the enrolment of a child in programs of artistic, cultural, recreational or development activities.

•    New Child Tax Claimant Rule: The rule that limited the Child Tax Credit to one parent per household is now removed.

•    New Medical Expense Tax Credit Rule: The $10,000 limit on eligible expenses that can be claimed under the Medical Expense Tax Credit in respect of a dependent relative has now been removed.

•    Extension in Tax on Split Income (“Kiddie-Tax”): Any capital gains realized by a minor as a result of the sale of shares of a corporation to a person not dealing at arm’s length (e.g. the child sells his or her shares to a parent) will be subject to tax on the full amount of the gain rather than the general half rate treatment usually given to capital gains.

Communities & Job/Economic Growth

•    Temporary Hiring Refund for Small Businesses: Small businesses, whose EI premiums were less than $10,000 are eligible for a refund of up to $1,000 against the increase in 2011 EI premiums over those paid in 2010.

•    Extension of the Mineral Exploration Tax Credit: Eligibility for the Mineral Exploration Tax Credit, equal to 15% of specified mineral exploration expenses incurred in Canada, is extended by one year for flow-through share agreements entered into before March 31. 2012.

•    Expanding Tax Support for Clean Energy: The eligibility for the 50-per-cent accelerated capital cost allowance for clean energy generation and conservation equipment has been expanded to include equipment acquired on or after March 22, 2011.

•    New Volunteer Firefighters Tax Credit: This tax credit, based on $3,000, allows volunteer firefighters who performed at least 200 hours of volunteer firefighting services during the year to claim a 15% non-refundable tax credit.
Education & Training

•    Occupational, Trade and Professional Examination Tuition Tax Credit: Apprentices in the skilled trades and workers in regulated professions are now eligible to claim the Tuition Tax Credit on examination fees.

•    Tax Assistance for Study Abroad Students: The minimum course duration requirement for access to the Tuition, Education and Textbook Tax Credit has been reduced from 13 consecutive weeks to 3 consecutive weeks for Canadian students studying abroad. Course duration requirements for students studying abroad who wish to access educational assistance payments from an RESP have also been reduced to 3 consecutive weeks.

•    Reallocation of assets in an RESP: Assets in a registered education savings plan can now be reallocated among siblings without incurring any tax penalties or forfeiting Canada
Education Savings Grants.

These are just some of the changes that the 2011 Federal Budget has brought upon us. Each year the implementation of Canada’s Federal Budget results in a long list of new and changing tax measures that have a direct impact on tax payers. For many, keeping up with these changes can seem like an impossible task, however; not being informed can result in missed opportunities and over-payment of taxes. That being said, if reading and interpreting Federal Budgets isn’t your idea of an enjoyable past time, make sure you speak to an accountant to ensure that you receive the maximum tax savings possible each year.

So, who is eligible to claim their moving expenses?

• Employees or self-employed individuals moving to start a new job within Canada.
  • The catch: It is required that you earn income or self-employment income at the new job, and that your new home is at least 40km closer to your new work location than your previous home.

• Employees or self-employed individuals moving to start a new job from outside Canada to a location in Canada, from Canada to outside Canada, or from two locations outside Canada.
  • The catch: You must be a deemed or factual resident of Canada, and have moved from one place where you ordinarily reside to another place where you will ordinarily reside (not keeping a residence in both locations). It is also required that you earn income or self-employment income at the new job, and that your new home is at least 40km closer to your new work location than your previous home.

• Students moving to attend a post-secondary institution (in Canada or outside Canada).
  • The catch: You must be a full-time student that has received an amount from a scholarship, bursary, fellowship or research grant during the year which was required to be included in your income. It is also required that your new home be at least 40km closer to your new educational institution than your previous home was.

Which expenses are deductible?

• Transportation and storage costs (packing, hauling, in-transit storage, insurance) for household effects, including items such as boats and trailers,
• Travel expenses (vehicle, meals, accommodation) incurred while moving you and your family to the new location,
• Costs for up to 15 days of temporary accommodation (including meals),
• Costs of cancelling a lease for your old residence,
• Legal or notarial fees for the purchase of the new residence, as well as any taxes paid (other than GST/HST or property taxes) for the transfer or registration of title to the new residence (only if old residence is sold),
• The cost of selling your old residence, including advertising, notarial or legal fees, real estate commission, and any mortgage penalty when the mortgage is paid off before maturity,
• Costs incurred to change your address on legal documents,
• Costs incurred to replace driving licenses and non-commercial vehicle permits (not including insurance),
• Utility hook-ups and disconnections costs,
• Up to $5,000 in expenses incurred in an effort to maintain your old residence when it was vacant during a period when reasonable efforts were made to sell (interest, property tax, insurance, heat & utilities).

Although the moving expenses that are deductible are reasonably straight forward, there are some complicated rules that go along with them. For example; if you paid for your moving expenses in the year after you moved, you cannot carry back those expenses to the year of the return in which you moved, even if you earned employment income or self-employment income at your new job during that year. However; you may carry forward any unused amounts and deduct them against eligible income in the following years. In addition, there is more than one way to calculate the moving expenses you incurred. Rather than adding up all your receipts to calculate your expenses, which is called the detailed method, there is a simplified method that you can use that often results in a greater deduction.

If you’ve relocated or are planning to relocate in order to embark on new opportunities, talk to your accountant about how to deduct your moving expenses, and get an idea of just how much money you may be able to save.