To Clients/Prospects: The 2013 Federal Budget and Your Financial Plan
Show clients you’re proactive by sending them this customizable letter about the Federal
Budget.
Dear Client/Prospect name,
As you know, Finance Minister Jim Flaherty delivered his federal budget on Thursday in
Ottawa.
This year’s budget takes aim at deficit reduction, and closes some key tax loopholes in an
effort to generate revenue for Ottawa.
As such, there are several items that could affect your financial plan, and one or two that
present opportunities. In case you haven't had a chance to review the media coverage, I
thought you would appreciate a quick overview.
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Small business owners will benefit from a $50,000 increase in the Lifetime
Capital Gains Exemption to $800,000 effective 2014. The exemption will be
indexed to inflation after 2014.
Manufacturing companies get help from a two-year extension of the accelerated
capital cost allowance for machinery and equipment. This line item lets business
owners write down capital costs more quickly and reap tax advantages from
equipment purchases before those goods begin to depreciate.
Businesses owners needing to train employees will be able to take advantage of
the Canada Job Grant, which will provide up to $15,000 per person for skills
training.
Philanthropy gets a boost from a Donor Super Credit which complements the
existing Charitable Donations Tax Credit with an additional 25% credit for firsttime donors. The existing federal charitable tax credit system provides a 15%
credit on the first $200 of donations, and a 29% credit above the $200 level. The
super credit adds 25% to each of those credit rates up to $1,000.
While there were no changes to the pension system, the government plans to
work with provinces and plan sponsors to promote low-cost, secure pension
options.
Criticism about the over generous nature of the dividend tax credit system has
led to a reduction of the gross-up factor applicable to non-eligible dividends from
18% to 25%, and the corresponding dividend tax credit to 13/18ths of the grossup amount, from the current 2/3.
The government will close another loophole with measures ensuring derivative
transactions can’t be used to convert fully taxable ordinary income into capital
gains, which are taxed at a lower rate.
Other rule changes will eliminate unintended tax benefits relating to leveraged
insured annuities and leveraged life insurance arrangements, commonly
known as 10/8 arrangements.
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Finally, the budget will give CRA new tools to reduce international tax evasion
and aggressive tax avoidance, including a new Stop International Tax Evasion
Program.
I hope you find these highlights useful. If you'd like to discuss these and other federal
budget initiatives and how they affect your financial plan, please don't hesitate to contact
me.
Sincerely,
[Your signature]
[Your name]
(03/21/13)