Income Tax Changes for Individuals

Here is an overview of income tax changes for the 2006 tax year, including proposed changes that may not have become law yet. See the tax guides for more details.

Universal Child Care Benefit

Since July 2006, if you are an eligible individual responsible for the care of a child under 6 years of age, you are eligible to receive $100 per month for each qualified dependant. For more information, see Universal Child Care Benefit (UCCB) or Information Sheet S06-103, Universal Child Care Benefit.

Provincial parental insurance plan

This is a new income replacement plan for residents of Quebec. See your guide from Revenu Québec for details.

Taxable amount of dividends (eligible and other than eligible) from taxable Canadian corporations

The federal dividend tax credit will be calculated using two different rates depending on the source of the dividends. Certain dividends received from qualified corporations will be considered eligible dividends. Such dividends will qualify for the dividend tax credit at a higher rate. Dividends that qualify for the lower rate are referred to as dividends other than eligible dividends. In this guide, we call these high-rate and low-rate dividends. This new measure has resulted in changes to the T3 return, the T3 slip and summary, as well as T3 Schedules 4, 8, 9, and 11.

Taxable capital gains on donations

The capital gains inclusion rate for donations made after May 1, 2006 of publicly listed securities and ecologically sensitive land to qualified donees is zero. This includes securities acquired under an option agreement. For more information, see Gifts and Income Tax.

Capital gains deduction

A capital gain resulting from the disposition after May 1, 2006 of qualified fishing property is eligible for this deduction. For more information, see Capital Gains.

Capital gains of fishers

The sale or transfer after May 1, 2006, of property used in a family fishing business is eligible for the $500,000 capital gains exemption. For more information, see Capital Gains.

Reserve allowed on certain dispositions of fishing assets

The 10-year reserve period includes transfers of fishing property by an individual to the individual's child. For more information, see Capital Gains.

Other income

Certain scholarships, fellowships, and bursaries are excluded from income if you are entitled to claim the education amount.

Canadian Agricultural Income Stabilization (CAIS) program

As was the case last year a CAIS program participant whose farming operation is in Newfoundland and Labrador, Nova Scotia, New Brunswick, Manitoba, Saskatchewan, British Columbia, or Yukon is able to file the CAIS Program Supplementary Information form with their T1 return. In consultation with Agriculture and Agri-Food Canada, a new form was created for this purpose and is referred to as Form T1273, Statement A – Harmonized CAIS Program Information and Statement of Farming Activities for Individuals. Taxpayers will continue to be able to send their returns with this new form on paper, or using EFILE On-Line, EFILE On-Line Plus, and NETFILE. CAIS program participants whose farming operations are in Ontario, Alberta, or Prince Edward Island will continue to file Form T1163. CAIS program participants whose farming operations are in Quebec will file with “La Financière agricole du Québec,” as they did previously.

Patronage dividends

If you receive patronage dividends, issued by an agricultural co-operative corporation in the form of tax-deferred co–operative shares, you can delay reporting them as income until their disposition (or deemed disposition).

Canada employment amount

All employees are eligible to claim this credit. For more information, see Canada employment amount.

Public transit passes amount

You can claim the cost of public transit passes starting June 30, 2006. For more information, see Public transit passes amount.

Pension income amount

The maximum amount of eligible pension income that can be used to calculate the credit has been increased to $2,000.

Textbook amount

You can now claim an amount for textbooks if you are entitled to claim the education amount. For more information, visit our Web site at www.cra.gc.ca.

Investment tax credit

The deadline to claim a tax credit for renounced Canadian exploration expenses has been extended. For investment tax credits earned in a year that ends after 2005, the carry-forward period has been extended to 20 years.

Apprentice job creation tax credit

This tax credit is available if you are a self-employed individual who employs an eligible apprentice in your business. For more information, see Line 412 - Investment tax credit.

Refundable medical expense supplement

The maximum amount of the refundable medical expense supplement has been increased to $1,000.

Child Disability Benefit (CDB)

The maximum CDB has been increased to $2,300 per year for each child. The entitlement for the CDB has been extended to most middle- and higher-income families. For more information, see www.cra.gc.ca/disability

Tradesperson's tools expenses

If you were employed as a tradesperson (including an apprentice mechanic) in 2006, you may be able to deduct a part of the cost of eligible tools you purchased after May 1, 2006, to earn employment income as a tradesperson. For more information, see Tradesperson's tool expenses.

Non-capital losses

Non-capital losses, farm losses, and restricted farm losses arising in taxation years ending after 2005 can be carried forward 20 years instead of 10. This extension to the carry forward period does not apply to a non-capital loss arising from an allowable business investment loss (ABIL) however. For more information, see Capital Gains.

Aboriginal settlement lands

A number of new groups have entered into tax-sharing arrangements with the federal government. To account for this change, we use the phrase “designated Aboriginal settlement lands” to identify the groups participating in this arrangement.

Loss of testamentary trust status

Under proposed legislation, a testamentary trust that becomes an inter vivos trust will change its reporting period to a calendar year the day it becomes an inter vivos trust.

Multiple jurisdiction form for trusts

A new form is available for trusts with business income in more than one province or territory. If this applies to you, get Form T3MJ, T3 Provincial and Territorial Taxes for 2006 – Multiple Jurisdictions.

Goods and services tax/harmonized sales tax (GST/HST)

Effective July 1, 2006, the GST rate was reduced from 7% to 6% and the HST rate from 15% to 14%.

Starting in April 2007, if you are the owner of a rental property and a GST/HST registrant, you will receive a monthly statement about your GST/HST account to help you stay up-to-date. These new statements will be sent to you only if there is activity on your GST/HST account.