The Liberals’ budget bill passed, making changes to stock options, annuities and MEPs


While the bill passed in the Senate on Tuesday included measures announced in this year’s budget to increase spending on old age security and child care, the Liberals’ proposal to impose a new vehicle tax on luxury was not part of the legislation.

Royal Assent of Bill C-30 means that employee stock option deductions effectively imposed at the capital gains rate will be capped at $ 200,000 effective July 1. The limit of $ 200,000 will be based on the fair market value of the underlying shares, and the limit does not apply to Canadian-controlled private companies.

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The bill also made progress on two new types of annuities for registered plans proposed in 2019: advanced deferred life annuities (ALDA) and variable payment life annuities (VPLA).

ALDA would allow a client to transfer a portion of their savings from their registered retirement accounts to a deferred annuity until age 85. (Annuities purchased with registered funds generally start at age 71.) A purchase limit has been set at 25% of the source plan, up to a maximum of $ 150,000.

The VPLA would provide payments that vary based on the investment performance of the underlying annuity fund and annuitant mortality. The Budget Act amended both the Income Tax Act and the Income Tax Regulations. However, the Canadian Life and Health Insurance Association (CLIA) said in a statement Wednesday that enabling provincial legislation will be required in all jurisdictions except Quebec to provide for VPLA.

Under the new rules, VPLAs can only be offered by defined contribution pension plans and group registered pension plans. ACCAP lobbied to extend the VPLA proposal to RRSPs, RRIFs, and ultimately TFSAs, rather than requiring annuities to be built into a pension. This could allow banks, fund companies and potentially other regulated entities – as well as insurers – to offer them.

The budget implementation bill will also limit transfers of pensionable service to individual retirement plans (IPPs) by clarifying that an IPP cannot be implemented simply to avoid the cash value tax. benefits from another defined benefit plan.

And legislation has also evolved to prevent mutual funds and ETFs from using a method to allocate income and capital gains realized by redeeming unitholders. The change to the “allocation to redeemers” methodology will apply to tax years beginning after March 18, 2019 (when the 2019 budget is released) for mutual funds. For ETFs, the government is taking longer to establish the rules and the changes will not apply to taxation years that begin before December 16, 2021.


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