Canada: 2011 Federal Budget – Family Law Implications

Last Updated: June 17 2011
Article by Steve Z. Ranot

Finance Minister Jim Flaherty tabled the 2011 federal budget yesterday. While there were no changes to personal income tax rates, there were changes which may impact the calculation of income pursuant to the Child Support Guidelines ("Guidelines") and certain tax credits available to parents. Accordingly, family law specialists should consider these changes:

  1. A new $500 per child Children's Arts Tax Credit similar to the Fitness Credit will be available to offset the costs of artistic, cultural and recreational activities. The tax savings from these should reduce the costs of what may qualify as Section 7 expenses;
  2. A new $2,000 Family Caregiver Tax Credit is available for caregivers of dependants with a mental or physical infirmity including spouses, common law partners and minor children. This credit will apply beginning in 2012;
  3. Previously, the $2,131 Child Tax Credit was limited to one claim per household. This has now been changed so that separated parents living under the same roof can now each claim this credit;
  4. In addition to the "Kiddie Tax" which applies to taxable dividends received from certain related corporations, a new similar tax has been introduced to apply to capital gains realized by a minor from the disposition of shares to a related person. These capital gains will be treated as dividends and therefore will not benefit from the capital gains inclusion rate or qualify for the capital gains exemption;
  5. The capital gain on donated flow-through shares will no longer be tax-free. In order to encourage charitable donations, the capital gain on donated marketable securities has been tax-free for a number of years. This created an opportunity to make relatively inexpensive charitable donations using flow-through shares which generally create tax deductible losses to the investor followed by capital gains on disposition. From now on, any capital gain up to the cost of the flow-through share at the time it is donated will be taxable even if the share is donated. While all capital gains are considered for Guidelines purposes, these capital gains which arose from tax shelters, might have been ignored;
  6. Individual pension plans ("IPP's") will now require a minimum withdrawal starting at age 72 similar to Registered Retirement Income Funds ("RRIF"). This will increase the income of support payers with IPP's as they previously had the option of retaining income inside the plan;
  7. The corporate expense to fund IPP's may also be reduced as the cost to fund past service contributions must now first be satisfied by transfers from the individual's RRSP before a new past service contributions can be made. Where an individual sets up an IPP, he or she can cause his/her corporation to pay significant amounts as tax deductible contributions to this pension plan. This will greatly reduce a corporation's income. This may also create the impression that the individual's income for the Guidelines has been reduced. If contributions to an IPP are viewed as discretionary, then these expenses should not impact Guidelines income. Accordingly, the change to the rules will reduce expenses and increase reported income, but should not impact the calculation of Guidelines income; and
  8. In the 1995 budget, the Liberal government ended the use of non-calendar year-ends for unincorporated businesses. This ended the ability of individuals to defer tax on business income for a year. The Conservatives are now doing the same thing for partnership income earned by corporate partners. Until now, tiered corporate partnership interests allowed income to be deferred by using different year-ends. For example, a corporation with a December 31 year-end was a partner in a business with a January 31 year-end. Accordingly, the partnership's income for the year ended January 31, 2010 would not be included in the corporation's taxable income until its year ended December 31, 2010 thus allowing an eleven-month deferral. For multiple tiers of partnerships, this deferral was even greater. The 2011 budget eliminates this tax deferral for all corporate partners that are entitled to more than a 10% income allocation from a partnership in a year. Partnerships will have the option to change their fiscal year-end in order to simplify the process. Otherwise, the corporate partners will have to accrue estimated partnership income for the stub period between the partnership's year-end and the corporation's year-end. This will increase corporate income and create a scenario similar to the stub period inclusion on personal income tax returns of self-employed individuals from 1995 to 2004. It was generally accepted that the stub income was not to be included for Guidelines income in those years. It remains to be seen whether the same will apply to the corporate stub period income.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.