1. Special Budget Edition: Taxation Update
On March 22, 2016, Finance Minister Bill Morneau presented the 2016 Federal Budget which
contains several measures of interest to Investors Group and its clients. This summary contains
highlights of these proposals, which are not yet law. Clients should contact their Investors Group
Consultant for information on how these proposals may affect their financial plans.
Proposals Impacting Individuals
New Canada Child Benefit to replace the Canada Child Tax Benefit and the Universal Child
Care Benefit - The Budget proposes that starting in July 2016, a new Canada Child Benefit
(CCB) will replace both the Canada Child Tax Benefit (CCTB) and the Universal Child Care
Benefit (UCCB).
The current CCTB is a non-taxable and income-tested benefit. The current UCCB is a taxable
benefit with no income test, where families receive a higher amount for children under the age of
6 than for children age 6-17.
The new CCB will be non-taxable and income-tested. It will be paid on a monthly basis to
eligible families. The maximum annual CCB will be $6,400 per child under the age of 6 and
$5,400 per child aged 6 through 17. Families with adjusted family net income of less than
$30,000 will receive the full benefit. Where adjusted family net income exceeds $30,000, the
benefit begins to be phased out. According to the Budget documents, the CCB phase-out rates are
higher for adjusted family net income between $30,000 and $65,000, with lower rates applying to
the remainder of the benefit for the portion of income that exceeds $65,000.
Number of children
(for phase-out rates)
Phase-out rates (%)
$30,000 to $65,000 Over $65,000
1 child 7.0 3.2
2 children 13.5 5.7
3 children 19.0 8.0
4 or more children 23.0 9.5
A Child Disability Benefit (CDB) will continue to be available, providing up to $2,730 per child
eligible for the Disability Tax Credit. The phase-out of this additional CDB will be made to
generally align with the Canada Child Benefit.

2. Special Budget Edition: Taxation Update
Entitlement to the Canada Child Benefit for the July 2016 to June 2017 benefit year will be based
on adjusted family net income for the 2015 taxation year.
Income splitting credit to be eliminated - The Budget proposes to eliminate the income splitting
credit, known as the “Family Tax Cut”, effective for 2016 and subsequent tax years. This is a
non-refundable credit available for couples with at least one child under the age of 18, and allows
the higher-income spouse to notionally transfer up to $50,000 of taxable income to the lower-
income spouse to reduce the tax liability of the couple by a maximum of $2,000.
The Budget does not propose to change the current pension income splitting provisions.
Children’s Fitness and Arts Tax Credits to be phased out - The children’s fitness tax credit and
children’s arts tax credit are available on eligible fitness and art expenses for children under the
age of 16. The Budget proposes to phase out the children’s fitness and children’s arts credits by
halving the 2016 maximum eligible expense amounts from $1,000 to $500 and from $500 to
$250 respectively. A supplemental amount for children with a disability will remain at $500 for
2016. Both credits will be eliminated for the 2017 and subsequent taxation years.
Education and Textbook tax credits eliminated - The education tax credit and textbook credit are
non-refundable credits available for every month of enrollment in a prescribed educational
program at a designated post-secondary institution. The Budget proposes to eliminate the
education and textbook tax credits; however tax exemptions which currently rely on eligibility
for the education tax credit will be maintained (e.g. the exemptions for scholarship, fellowship,
and bursary income). These measures will apply effective January 1, 2017, however unused
education and textbook credit amounts carried forward from prior years will remain available to
be claimed in 2017 and subsequent years.
The tuition fee tax credit, which is a non-refundable tax credit on eligible tuition and
examination fees paid to a certified post-secondary educational institution, is not affected.
New Teacher and Early Childhood Educator School Supply Tax Credit – Effective January 1,
2016, the Budget proposes a 15% refundable tax credit for the cost of eligible supplies up to
$1,000 by an eligible educator. Eligible supplies include both durable goods (e.g., games and
puzzles, educational support software, containers) and consumable goods (e.g., paper, glue, paint,
pens, pencils, construction paper).
Old Age Security and the Guaranteed Income Supplement enhanced – The Budget proposes to
cancel the provisions in the Old Age Security Act that increased the age of eligibility for Old Age
Security (OAS) and Guaranteed Income Supplement (GIS) benefits from 65 to 67 and Allowance
benefits from age 60 to 62. These changes were to be phased in from 2023 to 2029 and would
have affected individuals born after March 1958.
The Budget also proposes to increase the GIS top-up benefit by up to $947 annually for seniors
who rely almost exclusively on OAS and GIS benefits. The Budget is also proposing to introduce
amendments which will allow couples who receive GIS and Allowance benefits and have to live

3. Special Budget Edition: Taxation Update
apart for reasons beyond their control (such as a requirement for long-term care) to receive higher
benefits based upon their individual incomes.
Northern residents deduction increased - Individuals living in prescribed areas in northern
Canada for at least 6 consecutive months in a taxation year may claim the northern residents
deduction in computing their taxable income for that year. The Budget proposes to increase the
maximum residency deduction that each member of a household may claim from $8.25 to $11
per day, and where no other member of the household claims the residency deduction, to increase
the maximum residency deduction from $16.50 to $22 per day. Residents of the Intermediate
Zone will be entitled to half of these increased amounts. These proposals will apply for the 2016
and subsequent taxation years.
Proposals Affecting Investors
Taxation of Mutual Fund Corporations - Mutual fund corporations, including Investors Group
Corporate Class, can be structured so that each class of shares represents a separate fund with its
own investment mandate. Under current legislation, this structure allows for tax deferred
switching from one fund to another within a mutual fund corporation. Effective for switches
that occur after September 2016, the Budget proposes to treat a switch or exchange of class funds
as a disposition at fair market value for tax purposes. The Budget documents indicate that the
proposals are not to apply to switches between different series within the same class of shares.
No draft legislation relating this proposal was released with the Budget material. Investors
Group will closely monitor this situation and assess its potential implications to our clients.
Labour-sponsored venture capital corporations (LSVCC) tax credit - The previous Government
introduced legislation to gradually reduce and ultimately eliminate the federal tax credit available
to individuals who acquired both federally and provincially registered LSVCC shares. For 2016
and future years, the Budget proposes to restore the 15% federal tax credit for purchases of shares
of provincially-registered LSVCCs that meet certain conditions prescribed under the Income Tax
Act.
Proposals Impacting Business Owners
Small business tax rate and non-eligible dividend taxation - For a Canadian Controlled Private
Corporation (CCPC), the first $500,000 of active income is eligible for the small business
deduction. The resulting federal tax rate for 2016 is 10.5%. This rate was scheduled to decrease
gradually to 9% by 2019. The Budget proposes that the tax rate on income subject to the small
business deduction will remain at 10.5%. As a result, the gross-up factor applicable to non-
eligible dividends will be maintained at 17% and the corresponding dividend tax credit rate will
be 12.3% of the actual dividend.
Small Business Deduction - Corporations that are members of a partnership are required to share
one annual $500,000 small business deduction limit among the corporate partners based on their
pro-rata share of partnership profits. Many partnerships have put in place organizational
structures utilizing services corporations that allow each partner to access a separate $500,000

4. Special Budget Edition: Taxation Update
small business deduction limit. The Budget proposes to eliminate this planning opportunity by
prorating a corporation’s small business deduction limit on income realized from services
performed for the partnership. These structures were common among professionals who carry on
their practices through professional corporations. This change is to apply to taxation years that
begin on or after March 22, 2016.
Eligible Capital Property - Beginning January 1, 2017, the Budget proposes that Eligible Capital
Property (ECP) rules will be repealed and replaced by a new capital cost allowance class, Class
14.1. Property that was ECP (e.g. purchased goodwill) will now be considered depreciable
property and will be treated as such (the half-year rule, recapture, and capital gains will now
apply). Effective January 1, 2017, new expenditures will fully be added to Class 14.1 with
annual CCA available on this class of 5% on a declining balance basis.
Proposals Impacting Charitable Donations
Donations of Private Corporation Shares or Real Estate tax credit rescinded – Last year’s
Budget included a proposal which, if enacted, would have provided that where the cash proceeds
from the disposition of private corporation shares or real estate were donated to a registered
charity or a qualified donee within 30 days of the disposition, there would be no tax applicable to
any capital gains realized by the disposition. The 2016 Budget states that the Government will
not proceed with this measure.
This report specifically written and published by Investors Group is presented as a general
source of information only, and is not intended as a solicitation to buy or sell specific
investments, nor is it intended to provide legal or tax advice. Clients should discuss their
situation with their Consultant for advice based on their specific circumstances.