Market Commentary

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Q1 Review - Market Commentary 2016

The 2016 Federal Budget was released last month – the first under the new Liberal government and Finance Minister Bill Morneau. While you may have heard some of the pleasant (and unpleasant) surprises in the media, we thought you would appreciate an overview of how some of the proposed changes may have an impact on your financial planning. Prime Minister Trudeau spent heavily in this budget, projecting a $29.4 billion shortfall this year. The good news is part of that spending may benefit you directly.

New Canada Child Benefit

  • The new Canada Child Benefit replaces both the Canada Child Tax Benefit and the Universal Child Care Benefit as of July 2016 and will provide a maximum tax-free benefit of up to $6,400 per child. The benefit will be phased out based on family income and number of children, and the government says nine out of ten families will receive more than under the current system.

Capital Gains Tax

  • Investors can breathe a sigh of relief when it comes to a key issue that was not affected – the capital gains tax inclusion rate. Currently, investors must include 50% of any capital gains as taxable income, and while experts speculated an increase this year, the rate will remain as-is.
  • Though this would not affect retirement savings, clients with large non-registered investments should be aware of how a future change to this rate could affect their plans. 

Taxation of fund switches

  • The ability to switch tax-free between investment funds held inside the same mutual fund corporation has been eliminated –thereby eliminating a core benefit of Corporate Class mutual funds. An exchange between funds will now be considered, for tax purposes, a disposition at fair market value.
  • Under the old rules, investors could move between different funds within one corporation without triggering a taxable disposition, a huge advantage when rebalancing a portfolio.
  • The new rules apply after September, so if you hold any Corporate Class mutual funds within a non-registered account, now would be a good time to revisit your portfolio and rebalance as necessary.

Small Business Tax Rates

  • The small business corporate tax rate was 11% in 2015, and was scheduled to decline to 9% by 2019 in 0.5% increments. In an unexpected move, further reductions have been cancelled. The current rate is 10.5% and will remain as-is.
  • Given that the cuts were only announced last year, this move, while disappointing, will likely not have a severe impact on most small business owners.

Life Insurance Loophole for Business Owners

  • A change to the tax treatment of corporately owned life insurance policies has been implemented, reducing the amount of proceeds a corporation can distribute tax-free through the Capital Dividend Account.
  • CDA credits are a powerful tax-planning tool for shareholders of private companies, and while the details are complicated, if you have discussed this type of strategy with your advisor but have not yet put a plan in place, it’s worth speaking to them to determine how these upcoming changes will affect your succession planning.

All the best,
Sabrina Beaudoin, BSc, CFP

P.S. Whether you are approaching retirement, a business owner, or just starting out, it is important to review and discuss your financial plan on a regular basis to ensure the strategies employed are right for your own circumstances and goals. Call us at 604-688-5262 to schedule a review meeting today.




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Ciccone/McKay Financial Group is an independent financial services firm with over 75 years of combined experience in the areas of risk management, wealth management and employee benefits.


We specialize in providing insurance and investment solutions for our clients, helping businesses, individuals and families grow, manage, protect and transfer their wealth.

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