Home > Personal Strategies > Miscellaneous > Changes To Tax Legislation
In his budget of February 16, 1999, the Minister of Finance announced some little known but important changes to our tax legislation.
RRSP Transfers to Dependants
Distributions of RRSP and RRIF contributions upon the death of an annuitant to financially dependent children and grandchildren can now be made tax free; however, such distributions become taxable in the hands of the dependent when such child or grandchild reaches the age of majority or ceases to be financially dependent.
Payments to Minor Relatives
Commencing in the year 2000, business income paid to a relative who is a minor will be taxed at the highest marginal tax rate, whether that income is paid directly from a partnership or trust carrying on business, or as dividends or other shareholder benefits where the business is carried on by a corporation. This in effect puts an end to income splitting trusts of the type referred to in our Fall 1998 Newsletter. (Did Revenue Canada read our Newsletter?)
Transfers to Offshore Trusts
Until now, offshore trusts have been taxed as trusts resident in Canada where both the settlor and some beneficiaries were residents of Canada. Under the new budget, an offshore trust will be deemed to be resident in Canada where the settlor is a resident of Canada, no matter where the beneficiaries reside. This in effect will restrict the use of offshore trusts to asset protection. Tax savings will only be possible where the trust is not set up by a Canadian resident.