Henry report under fire over rumours of indexation return

OPPOSITION to an overhaul of capital gains tax rules intensified yesterday, with tax experts warning that the proposed changes would hurt investors and create havoc for dividend reinvestment plans.

The investment community is awash with talk that the Henry report, being considered by Wayne Swan, has recommended the reintroduction of indexation, a move likely to be greeted with widespread opposition.

KPMG tax partner Matt Hayes said yesterday that reverting to the old regime of indexation, effectively scrapped about 10 years ago, was contrary to the notion of trying to simplify tax return preparation.

He said for dividend reinvestment plans, indexation could be a “compliance nightmare” because investors needed to determine the capital gain based on inflation for every asset. Indexation can also be a headache for property or other non-managed fund investors who cannot rely on an administrator or fund manager to provide exact details of when the asset was bought and sold.

There has also been talk that the review, headed by Treasury secretary Ken Henry, is looking to ditch the 50 per cent capital gains tax discount for assets held for longer than a year for alternative options such as a standard flat rate on capital gains or a longer tenure-of-holding rule.

But Zurich Financial Services Australia acting head of technical services, Dimitri Diamantes, issued a warning that a longer period-of-holding rule represented a significant tax burden for investors who were forced to sell prematurely.

“A client who suffers a personal lifestyle crisis or who, because of economic events, needs to sell down investments, for example for a margin call, will be in a situation where they will have an added tax burden,” Mr Diamantes said.

One view is that the current 12-month holding rule does not encourage long-term investment and a sliding scale should be adopted whereby the capital gains rate reduces the longer an asset is held.

In its submission to the review, the Investment and Financial Services Association said a tiered discount based on years of ownership would be significantly more difficult for collective investment vehicles to administer and for individual investors to comply with.

One industry representative said fund managers were “up in arms” over the suggestion of extending the 12-month holding rule as very few held assets for longer than a year.

But there was also talk yesterday that the review may be looking to scrap the 50 per cent discount altogether as part of a plan to address the distortion in tax rates across the different classes of investments by introducing a standard flat rate.

Tags: Canada, Canada Mortgage and Housing Corporation, CMHC, Community, Housing, Mortgage, program, Tanya Hutchens

Community Inclusions to Construct New House in Alberton for People with Intellectual Disabilities

Eight affordable housing units for persons with intellectual disabilities will soon be constructed in the Town of Alberton,says Tanya Hutchens, through a partnership with the federal and provincial governments.

Prince Edward Island’s Minister of Social Services and Seniors, Doug Currie, and the Honourable Gail Shea, Minister of Fisheries and Oceans, on behalf of the Honourable Diane Finley, Minister of Human Resources and Skills Development Canada and Minister Responsible for Canada Mortgage and Housing Corporation, made the announcement today.

“The Government of Canada is committed to making affordable housing available in Prince Edward Island and across Canada for those who need it most,” said Minister Shea. “The creation of these new units here in Alberton will provide persons living with intellectual disabilities access to quality, affordable housing, while ensuring that they can stay close to their families and friends.”

The $580,000 project is being developed by Community Inclusions and will be located on Church Street. The development is made possible though a $200,000 investment from the Federal Affordable Housing Trust Fund and a $150,000 investment from Human Resources and Skills Development Canada’s Homelessness Partnering Strategy (HPS).

“Our Department of Social Services and Seniors understands the pressures and worries of aging parents who care for adult children with intellectual disabilities,” said Minister Currie. “It’s a complex challenge to provide sufficient supported housing in our province, and I am pleased that we are continuing to work with families, communities and non-government organizations such as Community Inclusions to find the best solutions for these individuals,” he said.

The Government of Canada’s Homelessness Partnering Strategy (HPS) is a unique community-based program aimed at preventing and reducing homelessness by providing direct support and funding to more than 60 communities across Canada. The HPS took effect April 1, 2007, with annual funding of $134.8 million for two years. It has been extended at the same funding levels for two additional years from April 1, 2009 to March 31, 2011. Funding for housing and homelessness programs has been extended for another five years, until March 31, 2014.

The residence in Alberton will provide transitional housing for eight individuals with intellectual disabilities. There will be a four-bedroom unit on the first floor, with two, two-bedroom dorm-style units on the first and second floors.

The objective of the Canada – Prince Edward Island Affordable Housing Agreement is to create and sustain rental housing for low- or moderate-income Prince Edward Island households through new construction or rehabilitation.

The provincial Department of Social Services and Seniors contributed two lots of land estimated to be valued at $40,000 for the project. The Department also increased its annual grant to Community Inclusions by nine per cent, bringing its total grant for 2009 – 10 to $691,800. This contribution will assist the organization with operating funding and staffing the new facility.

Community Inclusions is a non-governmental organization that provides supports and services to adults with intellectual disabilities in western PEI.

“Back in August of 2007, this organization released a needs analysis that clearly illustrated the need for more housing for person’s with disabilities in the West Prince region,” said Jackie Charchuk, Board Chair for Community Inclusions. “We see this as a very positive step in the right direction in beginning to meet that need,” she said.

Tags: Alberton, Canada, Community, Diane Finley, Doug Currie, funding, Gail Shea, Honourable, Housing, Human, Jackie Charchuk, Prince Edward Island, Seniors, Tanya Hutchens, West Prince

Murakami Gardens Salt Spring Island, British Columbia

Read this great story, says Tanya Hutchens. The Murakami family arrived on Salt Spring Island in B.C. from Japan in 1896 and prospered, developing a sizeable farm. All that changed when Japan entered the Second World War. Canada interned west coast residents of Japanese descent and confiscated their property. Rose and Richard Murakami were toddlers when they were removed from the Island early in 1943; they remember the less-than-stellar welcome they received when they came back in 1954, the only interned Japanese-Canadian family to return.

That history didn’t deter them from wanting to help those of their neighbours struggling to afford the escalating cost of housing on Salt Spring Island. They knew from their childhood experience what it’s like to live in substandard shelter; they decided to help others as a memorial to their parents.

Among the properties the Murakamis acquired as they rebuilt their lives on the Island was an old fish plant. The first step towards developing affordable housing on the site was to secure CMHC Seed Funding–a total of $20,000, half of which was a grant, the other an interest-free loan repayable if the project succeeded.

CMHC also contributed $60,000 in interest-free Proposal Development Funding (PDF) loan. The eventual proposal was for 27 apartments–six studio units, 14 one-bedroom units, five two-bedroom units and two three-bedroom units. Because the proposal was to convert the old fish plant into housing, the project qualified for $648,000 from CMHC’s Residential Rehabilitation Assistance Program (RRAP). In 2006, the Murakamis approached the Salt Spring Island Community Services Society with the idea of partnering with them on the conversion the unused building into housing. The Society agreed to become the sponsor and owner-operator of the project.

The B.C. Ministry of Housing and Social Services and BC Housing provided $75,000 in PDF and a grant of $1,312,000 and interim financing of $1.8 million during construction. The Murakami gift was valued at $473,412 and the family also provided a forgivable loan of $200,000.
The Salt Spring Island Community Services Society provided approximately $100,000. The Capital Region Housing Trust Fund–Salt Spring Island is part of B.C.’s Capital Region–provided $324,000. The Real Estate Foundation of B.C. granted $50,000.

Energy and Resources Canada provided funding to cover the costs of a solar water heater. The B.C. Ministry of Energy, Mines and Petroleum Resources provided $15,000 toward the cost of a solar hot water system, heat pumps and upgraded insulation through its Community Action on Energy Efficiency (CAEE) program.

The Islands Trust, the provincial body responsible for planning on Salt Spring Island, agreed to increase the density it would allow and reduce the parking requirement because of the project’s affordability target. An Island resident provided an interest-free loan during construction of $500,000. The total capital cost was slightly over $5 million. CMHC insured the $1,800,000 mortgage. After four years of hard work by the Murakamis, the Society and its development team, Murakami Gardens was officially opened in October 2008.

Rents are $560 for a studio, unit $667 for a one-bedroom unit, $839 for a two- bedroom suite and $1,065 for a three- bedroom suite. The people who have become tenants of Murakami Gardens met eligibility criteria as required by the various funding partners and the Islands Trust, which includes maximum income limits. Tenants also have access to services provided by Salt Spring Island Community Services, which may help them enhance their self- sufficiency.

The Society, founded in 1975, delivers a broad range of services on Salt Spring and the other southern Gulf Islands, says Tanya Hutchens, including family and parenting support, emergency housing for youth, wellness programs for seniors, mental health and addictions services, recreation and recycling programs.

Tags: B.C, British Columbia, Canada, capital, CMHC, Community, Energy, funding, Housing, loan, Murakami, Murakamis, project, Proposal, Rose, Society, Tanya Hutchens