The taxpayers were already required to report the sale of principal residence if it was not a 100 % principal residence from the date owned by the tax payer. Effective 2016 even if sale of a home qualifies as principal residence for all the years from the date owned it MUST be reported on the tax return. Many of our clients consider it as an aggressive action by CRA, however, this action is intended to crack down individuals who don't report the sale of properties resulting in capital gain tax. CRA has a reassessment period of three years from the date of the initial assessment after which any reassessment for that year can be considered as invalid. This becomes a big issue when a taxpayer does not report the sale of property treating the property as principal residence even though it does not meet the definition of principal residence. However, when CRA audits such type of taxpayers many times the reassessment period gets expired.

In a recent campaign CRA levied some $11.6 million in penalties to 2,500 taxpayers from BC and Ontario who were subsequently found to have demonstrated "gross negligence in failing to report their tax obligations correctly." So many other tax evaders would have escaped as they were either not audited or were audited but the normal reassessment period of three years was passed. Therefore, to bring the fairness in the tax system and to crack down such tax evaders CRA has implemented this change of reporting the sale of principal residence which was required anyways if it was not a 100% principal residence throughout the period from the date of ownership. But the good thing is that there is no change in the taxation rules of the principal residence. So, yes it is an extra reporting required but eventually this is a step well taken for the good of the taxpayers in general

Principal residence exemption not available to the non-resident property owners.

If a taxpayer was not a resident of Canada at the time of purchase of property and even though an immediate family member was living in that property the principal residence exemption will be disallowed for all the years in which the owner was a non-resident. When making the principal residence designation “1+ rule” is used to determine the principal residence exemption. For example, if a property was owned for 2 years and only one year it was ordinarily inhabited by tax payer then as per “1+rule” the property qualifies for full principal residence exemption even though the owner lived there for one year only. This “1+ rule” will not be available for any disposition by the non-residents after October 3, 2016  Again, this is to promote the fairness in the tax system as many Canadians leave Canada for ever or for a long period of time and subsequently purchase the residential property in Canada with one Canadian immediate family member living in Canada. Under the existing rules the non-resident buyer or owner of the property was allowed principal residence exemption for the years either he was resident of Canada and living in that property or his (her) immediate family member was living in the property while the property owner was non-resident for tax purposes. However, now the non-resident owner will not be allowed to claim principal residence exemption for all the years he (she) non-resident of Canada for any property sold after October 3, 2016.

Bank Account Number to be provided on the T183 form that tax payer signs to authorize the tax preparer to file electronically.

In August 2016 CRA released a newer version of T183 a form that authorizes tax preparer to file electronically on behalf of the taxpayer. This newer version of the form has fields to provide the bank account number of the tax payer for a one time pre-authorized payment of income tax due. It is a question in the minds of the tax payer as to why this information is required by CRA and raising doubts in minds of taxpayers. Taxpayers are going to be unsure whether to provide the banking information to CRA or not. The good thing is that it is not mandatory but completely optional to provide the banking information on this form.

We hope you liked our blog on recent changes by CRA. We will appreciate your comments and will be glad to answer your questions.

Please note the information contained in this page must not be treated as a tax advice and a consultation specific to your tax situation must be received by either contacting Ish Jindal CPA Professional Corporation  or your local Chartered Professional Accountant.

Published on October 13, 2016