STEP Canada, the Toronto-based national organization representing trust and estate practitioners, has issued a six-point “wish list” for the federal government in advance of next week’s budget.

It wants Ottawa to:

  • revise capital gains rules to encourage philanthropy;
  • extend the application of alter ego and joint conjugal trusts;
  • reduce double taxation on corporate and shareholders;
  • simplify the rules for dividing up small businesses;
  • increase tax support for families with disabled members, and;
  • eradicate retroactive tax-legislation announcements.



Ottawa should encourage philanthropy, says Paul LeBreux, chair of STEP Canada. STEP is advocating that transfers of capital property to charities by Canadian residents be exempted completely from capital gains tax. At present, half the income generated from such a transfer is included in income for tax purposes.

Alter ego and joint partner trusts were created — the former for use by individuals, the latter for use by married, common law and same-sex couples — to enable property transfers of property by donors age 65 and older to a trust without triggering capital gains tax, says LeBreux. “The rules should be extended to donors who are younger than 65,” he says. “The age limitation seems rather arbitrary and unfair.”

Ottawa should increase the dividend tax credit available to individual taxpayers to reduce the incidence of double taxation at both the corporate and shareholder levels. “Full integration will only be accomplished when the taxation of corporate source income, both at the corporate and shareholder level, equals the taxation of a comparable unincorporated business,” says LeBreux.

“With the aging population, more entrepreneurs will be implementing estate-planning transactions, many of which will involve some form of splitting up operating or holding companies,” he says. “A new, simpler regime should be established to permit divisive reorganizations of small businesses.” The current provisions contained are too complex, confusing and dependent on administrative policies to be workable.

STEP is advocating for Ottawa to increase legislative support for families supporting disabled family members. “That includes whether disabled, dysfunctional, critical or debilitating illness,” says LeBreux. “With the high cost of hospital care, and the increasing awareness of personal choice in living and dying with dignity, many families now care for disabled parents, siblings or children at home. Such efforts and incremental costs should be recognized by the tax system, possibly in the form of an enhanced home care tax credit.”

Finally, STEP Canada laments the commonplace practice by the Department of Finance to impose legislation with retroactive effect. LeBreux cites several recent examples, including the rules for non-resident trusts and foreign investment entities, proposed legislation governing “reasonable expectation of profit,” and the general anti-avoidance rule.

“Setting retroactive effective dates, often at times when earlier drafts of such rules remain in transition, and taxpayers can not have foresee new rules is patently unfair to Canadian taxpayers and their advisors,” he says. “It runs counter to the central principle underlying the imposition of tax in Canada of voluntary self-assessment.”