Koroll & Company Blog

Older taxpayers who have recently completed and filed their tax returns for 2016 may face an unpleasant surprise when that return is assessed. The unpleasant surprise may come in the form of a notification that they are subject to the Old Age Security “recovery tax” – known much more familiarly to Canadians as the OAS clawback.

The OAS clawback is a product, in part, of the way in which Canada’s government-sponsored retirement income system is structured. OAS is one of the two main components of that system – the other being the Canada Pension Plan (CPP).

While many retired Canadians receive both OAS and CPP benefits, the two plans are quite different. 

As just about everyone knows, individual income tax returns for the 2016 tax year should have been filed, by most Canadians, and any tax balance owed must've been paid by all individual Canadians, on or before May 1, 2017. And, most Canadians do file that return, and pay any tax balance owed, on or before the deadline.

As of April 24, 2017, the Canada Revenue Agency (CRA) had received just over 18 million individual income tax returns for the 2016 tax year. There are, however, a significant minority of Canadians who don’t file a return, or pay taxes owed (or both) by the annual deadline.

The Canadian tax system is in a constant state of change and evolution, as new measures are introduced and existing ones are “tweaked” through a never-ending series of budgetary and other announcements.

However, even by normal standards, 2017 is a year in which there are larger than usual number of tax changes affecting individual taxpayers. And, unfortunately, most of those changes involve the repeal of existing tax credits which are claimed by millions of Canadian taxpayers.

For the majority of Canadians, the due date for filing of an individual tax return for the 2016 tax year was May 1, 2017. (Self-employed Canadians and their spouses have until June 15, 2017 to get that return filed.) In the best of all possible worlds, the taxpayer, or his or her representative, will have prepared a return that is complete and correct, and filed it on time, and the Canada Revenue Agency (CRA) will issue a Notice of Assessment indicating that the return is “assessed as filed”, meaning that the CRA agrees with the information filed and tax result obtained by the taxpayer.

Not infrequently, though, the taxpayer realizes that information has been inadvertently misstated, or perhaps omitted because an information slip was received (or located) after the return was filed.

In such situations, the taxpayer is often at a loss to know how to proceed, but the process for amending a return is actually quite straightforward.

For most Canadian taxpayers, income tax is an “out-of-sight, out-of-mind” subject, with most taxpayers giving serious thought to their tax situation only when it’s time to file the annual tax return. And, too often, that approach leads to an unexpected (or higher than expected) tax amount owing when the return is filed – and seemingly no way to fix that problem.

While it is true that nearly all tax planning and tax saving strategies need to be implemented before the end of the calendar year in order to be effective for that year (the RRSP contribution deadline of 60 days after year-end being the only major exception), it’s not the case that nothing can be done at tax filing time to minimize the tax bill payable.

The time has come when the annual chore of gathering together the various pieces of information needed to complete one’s annual tax return, and getting that return completed and filed can’t be delayed any longer.

For those wishing to put that chore off as long as possible, there is one (very small) bit of good news. Individual Canadians (other than the self-employed and their spouses) are required to file the annual return by April 30 of the following year, and to pay any tax amount owed by the same deadline.

Opioid Overdose Treatment Drug — Naloxone

When Health Canada began allowing Naloxone to be dispensed without a prescription, the drug’s historical GST/HST exemption was technically lost. The Budget proposes to include Naloxone on the list of GST/HST-free non-prescription drugs to restore its GST/HST-free status.

Taxi and Ride-Sharing Services

To ensure that the GST/HST applies consistently to taxi services and ride-sharing services, effective July 1, 2017, the definition of a taxi business will be amended to require providers of ride-sharing services to register for the GST/HST and charge tax on their fares in the same manner as taxi operators.

Ecological Gifts Program

The Budget proposes the following measures to protect gifts of ecologically sensitive property made after March 21, 2017:

• The 50 per cent tax which applies where the use of ecologically sensitive land is changed, or the property is disposed of, without the consent of Environment and Climate Change Canada (ECCC), will be extended to situations where the land is transferred between organizations for consideration and the transferee changes the use of the property or disposes of it without the consent of ECCC.
• The requirement for ECCC to approve recipients of ecological gifts will be extended, on a gift-by-gift basis, to municipalities and municipal and public bodies performing a function of government.
• Private foundations are no longer permitted to receive ecogifts.
• The donation of personal servitudes will qualify as ecological gifts, provided certain conditions are met (e.g., the servitude must run for at least 100 years).