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Summary of 2018 Federal and Alberta Budgets, and their Impact upon Family Law Practice

Ken Proudman Executive
 view Arbitrator profile
  BARR LLP
   Edmonton, Alberta


2018 Federal Budget

Several changes that might impact family law have been announced, such as:
  • Tax on Split Income (TOSI) expansion: to target corporate income-splitting, the "kiddie tax" has been expanded so that dividends and interest paid to certain related persons (eg spouses and older children) might be taxed at a higher rate, particularly where the related person isn't sufficiently actively engaged in the business and the payment exceeds a reasonable rate of return. There are more details than this summary can cover. You can read more here. This essentially means that corporate dividends/interest issued to uninvolved spouses might be audited and taxed at a higher rate. It may be beneficial to address this potential liability in separation agreements.

  • The Working Income Tax Benefit (WITB) has been replaced with the Canada Workers Benefit (CWB). The formula has changed, with the end result that an individual's maximum amount has increased from $1139 in 2017 to $1355 in 2019, and an individual with an eligible spouse or dependent's maximum amount has increased from $1708 in 2017 to $2335 in 2018. For those qualifying for the disability supplement, the additional benefit that they receive will now be up to $700 for each disabled person (previously up to $521 in 2017).

  • The Canada Child Benefit (CCB) will be indexed for inflation according to to the Consumer Price Index (CPI) commencing July 2018.

  • Increased Trust Accounting: Starting in the 2021 tax year, taxable express trusts will generally need to file T3 Tax Returns even if they didn't earn income that year. There'll also be a requirement to file a schedule identifying settlors, beneficiaries, trustees, and protectors, which might be useful for evidentiary purposes in family law matters. Clients may also want to consider winding up unnecessary trusts to avoid accounting fees or penalties.

  • The small business tax rate has been lowered (by increasing the Small Business Deduction (SBD)). The dividend gross-up factor and dividend tax credit have also been adjusted. The SBD limit now also decreases depending on certain investment income, and additional anti-avoidance measures have been added. This is probably only relevant to you if you ever manually calculate business tax rates, for example, taxes arising upon the withdrawal of income or assets from a corporation.

  • CDIC trust account reporting: The Canada Deposit Insurance Corporation Act has been amended, in part to explicitly address law firm trust accounts. We're now defined as "professional trustees". To qualify for coverage, we need to make an attestation in accordance with the by-laws stating that we're professional trustees, provide contact information, and request that the account be identified as a professional trustee account. An updated attestation must be provided "each April", although the CDIC must remind us to do so each March. We also need to maintain records setting out the current name and address of each beneficiary and the amount or percentage of their interest, to be provided to the CDIC upon their request. The CDIC can also make by-laws regarding the attestation and form/transmission of information provided. The CDIC say a lot about the changes on their website, it looks like they're waiting to see if Parliament will approve the budget. The CDIC invites us to keep checking this page. This means there might be a new form to complete for the upcoming reporting deadline (which may become April 30th rather than May 30th).

  • The Judges Act has been amended to allow for up to 75 additional judges (up from 36) to be appointed to Unified Family Courts (UFCs). A Lawyer's Daily article states that 17 superior court judge posts have been allocated to Alberta to create a UFC in Alberta. UFCs were previously established in Manitoba, New Brunswick, PEI, parts of Saskatchewan, and parts of Ontario. My understanding is that a UFC is primarily a consolidation of the Provincial Court and the Court of Queen's Bench, along with other potential objectives. There's an interesting older Law Now article about the potential benefits of a UFC is Alberta.

  • Several changes have been made to CPP, which are summarized as including:
    1. eliminating age-based restrictions on the survivor’s pension;
    2. fixing the amount of the death benefit at $2,500;
    3. providing a benefit to disabled retirement pension beneficiaries under the age of 65;
    4. protecting retirement and survivor’s pension amounts under the additional Canada Pension Plan for individuals who are disabled; and
    5. protecting benefit amounts under the additional Canada Pension Plan for parents with lower earnings during child-rearing years (the Child Rearing Provision).

Bill C-74's progress can be viewed here. As it has not yet been passed it is subject to change.

Alberta's 2018 Budget

Several amounts, thresholds, and credits will increase along with inflation, but otherwise no changes that would significantly affect family law practice were announced.

The full budget publication can be read here from pages 121 to 131. More changes may still be made to the Alberta Personal Income Tax Act.


0 5 years ago - edited 5 years ago

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