Federal Budget 2017

The 2017 Federal Budget was fairly low profile, and largely un-noteworthy.

The 2017 BC Liberal Budget died on the legislative floor as a result of the election, and we can only await the drama to play out. No doubt…Mr Trump is relieved that British Columbians have something else to entertain them!


     PROFESSIONAL SERVICES

A narrow collection of self-employed Professionals (specifically, accountants, lawyers, dentists, doctors, chiropractors and veterinarians) long have been able to report revenue on a billed-basis, as opposed to accrual. This method of recognizing revenue historically has failed to acknowledge the fundamental accounting concept of “matching” revenue to related expense, because the Practitioner expenses any staff wages paid, but not yet billed, at year-end.

For year-ends after 2018, the lower of cost and fair market value of unbilled time must be included in revenue. In transition, no change is required in 2017, and only 50% of this value must be included in 2018. This applies to year ends which commence after Budget Day.

The devil is in the details here…as the issue arises whether unbilled time of the owner/practitioner(s) should be included in the calculation.


TAX CREDITS

The Liberals have continued their minor assault on the Conservative’s proliferation of tiny tax credits….on the chopping block…..

  • Public transit credit-closed after June 30, 2017
  • First-time charitable donor super-credit- closed after 2017
  • Infirm dependent, caregiver and family caregiver credits consolidating into one credit, effective for 2017 and beyond
  • The uncommon deduction for low interest employee loans related to job relocation will be axed after 2017

OIL & GAS INVESTORS

For many years, Canadian exploration expense has qualified for an investor flow-through deduction at 100% in the year incurred. Starting in 2019 (and with some transitional exceptions) most of such costs now will be reclassified as development expense and instead be written off more slowly at 30% declining balance.

Previously, small oil and gas exploration companies had a special privilege to treat $1M annually as exploration expense, even though it actually was development. That privilege will be removed after 2018, as well (and also with some transitional exceptions).


The Liberals have adopted an approach of “soft” budgets… areas where they are telegraphing future intents…which they apparently are aiming at certain perceived benefits to entrepreneurs and their private companies. That said, a past government telegraphed reform intent in the area of interest deductibility which has remained in the shadows for decades.

 

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