Flaherty put forth nearly the same spending plan that sparked the recent general election. But this time his party is in control of Parliament. There are no real tax changes, but individuals receive several new or enhanced credits and businesses get some tax breaks as well. To help reach a surplus in 2014 Ottawa plans to close some tax loopholes, including some involving RRSPs and the kiddie tax. Here are highlights of Budget 2011.

Finance Minister Jim Flaherty reintroduced his pre-election budget that was nearly identical with just a few updated economic projections.

Business Breaks    The Budget contains some tax benefits for businesses. Among other changes, the budget: Extends the 50 per cent capital cost allowance on manufacturing and processing equipment to include assets acquired in 2012 and 2013. A full write-off can be claimed over three years; Expands Capital Cost Allowance Class 43.2, which covers clean energy generation equipment, to include equipment that generates electricity in processes where all or more of the energy input is from certain waste heat; Broadens stop-loss rules to include any deemed dividend received on a redemption of shares held by a corporation – directly or indirectly through a partnership or trust regardless of level or length of ownership. However, the budget allows the continuation of a narrow exception for shares of the capital stock of a private corporation that are held by another private corporation (other than a financial institution); and Extends the Mineral Exploration Credit for a year on flow-through share agreements entered into on or before March 31, 2012. The mineral exploration tax credit equals 15 per cent of specified mineral exploration expenses incurred in Canada.

Flaherty, whose Conservative Party won a majority in last month's election, says he aims for a budget surplus by 2014 through spending cuts and the elimination of tax loopholes.

One way the budget plans to plug loopholes is by bolstering Registered Retirement Savings Plan (RRSP) anti-avoidance mechanisms. The budget imposes rules on advantages, and prohibited and non-qualified investments.

Advantages, or benefits from transactions that exploit the tax attributes of an RRSP, will be taxed at an amount equaling the fair market value of the benefit. In the case of debt, the tax will be the amount of the debt. Tax benefit is a reduction, avoidance or deferral of tax or other payable amount, or an increase in a tax refund. The move is aimed at sophisticated strategies that often yield unintended tax advantages.

These advantages will be subject to a tax that is generally equal to their fair market value. Generally, the RRSP annuitant will be liable for the tax.

Prohibited RRSP investments will comprise plan holder's debt as well as investments in which the holder or a non-arm's length person owns 10 per cent or more. A penalty tax of 50 per cent of the fair market value will be imposed on each prohibited investment.

Non-qualified investments will be taxed at 50 per cent of their fair market value at the time they are acquired or when they become non-qualified. This category includes shares in private investment holding companies or foreign private companies, and real estate.

Refundable Penalties

The penalty taxes are refundable if the assets are shed by the end of the year after the year the tax was applied. However, taxes on non-qualified investments will not be refunded if the annuitant knew, or ought to have known, that the assets were non-qualified. Income earned on a non-qualified asset will remain taxable to the RRSP.

Another loophole-closing move limits income splitting with minors. The budget extends the kiddie tax to capital gains realized by a minor from a disposition of shares of a corporation to a person who does not deal at arm's length with the minor, if taxable dividends on the shares would have been subject to the kiddie tax. These capital gains will be treated as dividends, included in the minor's split income and subject to the kiddie tax. In addition, because the gains are treated as dividends, they will not qualify for the capital gains exemption.

New and Improved Tax Credits

For individuals, there were no tax changes but they will get several new or enhanced tax credits. The credits are calculated using the 15 per cent marginal tax rate and start with the 2011 tax year, unless otherwise noted. The tax breaks include:

Children's Arts Credit: This is a 15 per cent non-refundable credit for a wide range of activities that don't meet the criteria for the Children's Fitness Tax Credit. The credit will be provided on as much as $500 of eligible fees for each child under the age of 16.  Enhanced credits can be claimed for children under age 18 who are eligible for the Disability Tax Credit.

Family Caregiver Credit: Effective 2012, this 15 per cent, nonrefundable credit on $2,000 and will be available to those who care for mentally or physically disabled dependents, including spouses, common-law partners and minor children. The credit enhances existing dependency-related credits and increases the dependent's income threshold at which the combined credit amount is phased out.

Medical Expense Credit for Other Dependants: The budget eliminates the $10,000 ceiling on claiming eligible medical expenses of a related dependent that exceed the lesser of three per cent of the dependent's net income and an indexed dollar threshold -- $2,052 in 2011. Related dependents include children 18 and older, grandchildren, parents, grandparents, brothers, sisters, aunts, uncles, nieces and nephews.

Tuition, Education and Textbook Tax Credits: The budget reduces to three weeks, from 13 weeks, the minimum course duration requirement that a Canadian student at a foreign university must meet to claim these credist. This is to recognize that many programs at foreign institutions are based on semesters shorter than those in Canada. The budget also imposes the same shorter requirement for claiming education assistance payments when students are enrolled at a foreign university in a full-time course.

Tuition Credit: This tax break is being extended to include examination fees paid to an educational institution, professional association, provincial ministry or other similar entity to acquire professional status or be licensed or certified for a profession or trade. Entrance exam fees do not qualify.

Child Credit: The budget eliminates the rule that limits this 15 per cent, non-refundable credit on an indexed amount ($2,131 in 2011) to one claimant in each household. The tax benefit applies only to children under the age of 18 at the end of a tax year.

Volunteer Firefighter Credit: A non-refundable credit is available for individuals who perform at least 200 hours of volunteer firefighting services in a tax year for one or more fire departments. The amount of the credit is based on $3,000.

Other Personal Tax Benefits

The budget also includes other tax measures, such as:

• Beneficiaries of Registered Disability Savings Plans (RDSP) with a life expectancy of five years or less can withdraw as much as $10,000 in taxable amounts annually from their RDSP without having to repay Canada Disability Savings Grants (CDSGs) and Canada Disability Savings Bonds (CDSBs) received in the preceding 10 years.

• Parents and grandparents saving for several related children can now open family RESPs. The family plans are subject to the same contribution limits as regular RESPs but allow plan assets to be transferred among siblings.  All plan beneficiaries must be connected to the original subscriber by blood or adoption generally be added to the plan before turning 21. Subscribers may allocate plan assets among siblings regardless of their age.

• A shortening to three consecutive weeks from 13 weeks the minimum length of courses studied abroad that are eligible for the Tuition, Education and Textbook Tax Credits. The same shorter durations will apply for full-time students at foreign universities who want to withdraw educational assistance payments from a Registered Education Savings Plan (RESP).

• A requirement that members of Individual Pension Plans (IPPs) withdraw minimum annual amounts from their plans when they turn 72. The cost of past service contributions to an IPP must first be satisfied by transfers from RRSP assets, or a reduction in accumulated RRSP contribution room, before any new past service contributions can be made.