The small, “temporary” corporate surtax of approximate 1.12% is finally scheduled to demise, but only commencing with 2008 fiscal years. The basic federal corporate tax rate that applies, except to active and passive income of small businesses, will phase down by 2% over the fiscal years 2008-2010.


The 2004 Federal Budget redefined the medical tax credit system for supporting relatives. That new approach from last year is already being revised… in a positive way. The maximum creditable medical expenses incurred on behalf of a dependent is doubling in 2005 from $5,000 to $10,000.

The feds have been unhappy with losing some court cases related to home renovations qualifying as medical costs, notably “hot tubs”. Effective immediately, a two-part test must be met to qualify such expenditures; first, they must not typically enhance the value of the home and; second, they ought not to be the kinds of expenditures that a non-disabled person might incur (read “hot tub” again).


The basic personal exemptions and related family transfers thereof are indexed annually by a measure of inflation. These increases are being enhanced further annually between 2006-10 by small amounts.


A new tax credit will commence in 2005 allowing up to $10,000 per child for legal, agency, travel and associated costs of adopting a child. The credit may be split between parents.


This Budget brings forward the government’s new position on tax relief for people with disabilities, and this culminates a consultative process with various stakeholders.

At the big picture level, the old approach required “marked” restriction in at least one basic activity of daily living. The new approach commencing in 2005 requires “significant” (note: not marked!) restrictions in more than one basic activity, such that the cumulative effect is equivalent to the old single activity test. These conditions must exist all or substantially all of the time.

The extra refundable tax credit related to disabled children will get a boost starting in 2005.

Also, starting in 2005, the time limits to contribute and to withdraw RESP funds for educating disabled children will be extended beyond the regular period to 25 and 30 years respectively after commencement of the plan.

Lastly, the list of health practitioners who can certify disability applications expands effective immediately to include physiotherapists with respect to marked restriction in the ability to walk.


The 30% of book value “foreign content” restriction for sheltered accounts has been withdrawn, effective immediately.

“Investment-grade” gold and silver bullion coins and bars have been added to the list of qualified investments in a sheltered account, effective Budget Day.



There are some changes to CCA rates but mostly in uncommon classes for small businesses, e.g. pipelines, cables, telecommunications, etc.


The government continues to keep this ball in the air. Its draft release of October 2003 will not stand as is, and we are to await their revised position. In the meantime, we must rely on the older law and existing Court precedents.


$30M will be added to the annual federal expenditures to enhance audit and compliance with respect to cross border and international transactions, e.g. transfer pricing. In plainer language…more CRA auditors.


A public, national registry of GST registrations will be available for taxpayers to confirm the proper registration of suppliers to whom GST has been paid on purchases.


In a fine-tuning move, Directors’ liability for corporate GST extends beyond “amounts owing” to include “net refunds paid out” incorrectly. In other words, they can come after refunds paid but overturned by subsequent audits. This will be effective upon Royal Assent of the Ways & Means Motion.