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April 19, 2011

New Energy Rebate for Home Heating a Key Focus of Tax Relief Measures for Budget 2011

With Budget 2011, the Government of Newfoundland and Labrador continues to enhance its favourable tax regime while ensuring that the province’s fiscal position remains strong. Today, the Honourable Tom Marshall, Minister of Finance and President of Treasury Board, announced a new energy rebate on residential electricity and heating fuel for the benefit of all residents of the province who are facing rising energy costs. This new rebate will be in addition to the existing Home Heating Rebate Program that is targeted towards low income individuals and families.

“This year’s budget continues our commitment of putting more money back into the pockets of residents of the province,” said Minister Marshall. “Tax measures being introduced this year will continue the significant progress that has been made in reducing the tax burden, especially for those in the lower income brackets.”

Energy Rebate
The Government of Newfoundland and Labrador is introducing a tax rebate equal to the eight per cent provincial portion of HST on residential electricity and heating. All residential electricity will be eligible for the rebate, not just the heating portion. This $38 million initiative will directly result in lower energy bills and benefit all residents of the province, particularly during the cold winter months. Since the Home Heating Rebate program will also be continued, the total benefit to residents will be an estimated $55 million.

“Eliminating our portion of HST on residential heat is a fair way to ensure that every single resident of Newfoundland and Labrador benefits directly from the development of our natural resources,” said Minister Marshall. “In a climate such as ours, heat is an absolute necessity. While we continue to ensure that low income earners receive the help they need, this measure is also a recognition that earners in all income brackets should no longer have to pay the provincial portion of the HST.”

While the GST/HST is imposed, administered and collected by the Federal Government, this rebate of the eight per cent provincial component of the HST will be administered directly by the province. The Department of Finance will be consulting with energy suppliers to develop the most effective and efficient means to implement this program. The program will begin on October 1, 2011 in time for the next heating season.

Supplementary Child Care Credit
Budget 2011 continues the province’s commitment to supporting families with children. The province will introduce a new, non-refundable, Child Care Credit amount equal to child care expenses currently deductible from income commencing with the 2011 taxation year. The maximum benefit under this initiative will be $539 per child and will depend on a child’s age and the value of deductible child care expenses. The total cost of the credit is approximately $3 million.

“The Supplementary Child Care Credit will provide relief to families who are faced with the very significant costs associated with raising children,” said Minister Marshall. “Combining this credit with the existing deductions related to child care expenses will be a great help to parents.”

Firefighters’ Tax Credit
The Provincial Government is recognizing the critical role that the estimated 5,900 volunteer firefighters in Newfoundland and Labrador play in keeping our communities safe and secure. That is why a new Volunteer Firefighters’ Tax Credit worth $1.4 million will be implemented as part of Budget 2011 for those who perform at least 200 hours of service each year. The maximum benefit per firefighter will be $231.

“Volunteers are the lifeblood of our communities and firefighters certainly fall into that category,” said Minister Marshall. “They play an integral role in protecting the residents of the province and this credit is in recognition of the vital service that they provide.”

Increase in Payroll Tax Exemption
Retroactive to January 1, 2011, the payroll exemption threshold has been raised from $1 million to $1.2 million, meaning an additional 90 businesses will not have to pay any payroll tax while the tax burden will be reduced for 845 others. This measure puts $2.3 million back into the hands of the province’s employers.

“Over the past several years the Government of Newfoundland and Labrador has significantly reduced personal and business taxes in the province,” said Minister Marshall. “Due to sound fiscal management, the province emerged from the recent recession in better shape than most and we are in a position to further ease the tax burden on all residents. The tax reductions which I have announced today total more than $44 million annually and will leave more money in the hands of individuals and businesses to further stimulate economic activity and help ensure the province’s prosperity into the future. When added to tax reductions implemented since 2007, taxpayers will be saving about $500 million annually as compared to five years ago.”

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Luke Joyce
Director of Communications
Department of Finance
709-729-6830, 725-4165


Tax Measures for Budget 2011

Residential Energy Rebate
A new residential energy rebate will be implemented for the upcoming heating season to help people with the rising cost of home energy. Effective October 1, 2011 an eight per cent rebate will be provided with respect to the purchase of home energy, which is equivalent to the provincial portion of the Harmonized Sales Tax (HST). The rebate will be available to all residents regardless of income, and will be based on the total cost of residential energy. This rebate is for residential energy purchases only, and includes electricity, furnace oil, stove oil, propane, wood pellets and other sources of home energy. The rebate will be applicable to all residential electricity, not just the heating portion. Only purchases where HST has been paid to a HST registered vendor qualify for the rebate. This new rebate is estimated to cost approximately $38 million.

The GST/HST is imposed under federal law, and is collected and administered by the Federal Government. Federal administration of this program falls outside of the province’s harmonized sales tax agreement with the federal government. The eight per cent Energy Rebate Program will be administered by the provincial Department of Finance. The department will be undertaking consultations with energy suppliers and will be putting systems in place to ensure the most efficient and effective program for suppliers and customers, with implementation of the program scheduled in time for the next heating season.

Further details concerning the administration of the program will be announced over the coming months. A breakdown of potential rebate amounts is in the table below.

Annual Purchase of Residential Energy Rebate Amount
$1,000 $80
$2,000 $160
$3,000 $240
$4,000 $320
$5,000 $400

Child Care Tax Credit
To make child care more affordable, a new non-refundable tax credit for families who incur child care expenses will be introduced. Effective for the 2011 tax year, a provincial tax credit will be available for deductible child care expenses incurred. Eligible expenses are those child care expenses allowable for deduction under Line 214 of an individual’s tax return, and the credit is in addition to the deduction currently available.

The following table shows the impact of the announcement for families:

Eligible Child Care Expenditure Maximum Benefit
$1,000 $77
$4,000 $308
$7,000 $539
$8,000 $616
$10,000 $770
$11,000 $847
$14,000 $1,078

This tax credit is 7.7 per cent of allowable child care expenses incurred to a maximum of:

  • $7,000 for each child under the age of seven years;
  • $4,000 for each child aged seven to 16 years; and,
  • $10,000 for each child for whom the disability amount can be claimed.

The tax credit will be available to the individual eligible to claim child care expenses in respect of an eligible child. An eligible child is:

  • the individual or their spouse’s or common-law partner’s child; or,
  • a child who was dependent on the individual or their spouse or common-law partner, and whose net income meets the federal income restriction.

The child must have been under 16 years of age at some time during the year. However, the age limit does not apply if the child was dependent on the individual or their spouse or common-law partner and was mentally or physically infirm.

The child must have lived with the individual when the expense was incurred for the expense to qualify. Child care expenses are amounts paid to have someone care for an eligible child so that the individual could earn employment income, carry on a business, attend a qualifying educational program, or carry on research or similar work for which the individual received a grant.

This measure is estimated to put $3 million back into the hands of approximately 12,000 families annually.

Volunteer Firefighters’ Credit
This credit will be available to volunteer firefighters who perform at least 200 hours of volunteer firefighting services in a taxation year.

To the extent possible, the provincial tax credit will mirror the proposed federal credit.

This measure will apply to the 2011 and subsequent taxation years at an annual cost of $1.4 million, and is estimated to benefit 5,900 Newfoundlanders and Labradorians.

Payroll Tax
Retroactive to January 1, 2011, the payroll tax exemption threshold has been increased by $200,000, rising from $1 million to $1.2 million. Employers with payroll between $1 million and $1.2 million have been removed from the tax rolls. All other employers will receive a tax reduction in the amount of $1 to $4,000, depending on their payroll amount for 2011.

Employers who are associated with other corporations or who are in partnership with other employers who pay remuneration to employees, are required to file an allocation agreement for the purposes of allocating the exemption threshold. For these employers, the department will allocate the revised exemption threshold based on the most recently filed allocation agreement. A sample of potential tax savings is found in the following table:

2011 Payroll Savings
Up to $1 million $0
$1.1 million $2,000
$1.2 million $4,000
Over $1.2 million $4,000

This measure will remove approximately 90 employers from the tax rolls and will provide relief for another estimated 845 employers.

2011 04 19                                                                            2:15 p.m.

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