Contributions to a TFSA are not deductible, but the income earned within a TFSA and withdrawals from the account are not taxed. They also have no effect on eligibility for federal income-tested benefits and tax credits, such as Old Age Security and the Guaranteed Income Supplement, the Canada Child Tax Benefit and the Goods and Services Tax Credit.

Commenting on the announcement, Minister of Finance, Jim Flaherty explained that: "Canadians can benefit by using the TFSA to start saving early for a range of needs they may have in the future. The TFSA also provides seniors with a vehicle to meet ongoing savings needs."

At the same time, the government announced guidance pertaining to automobile expense deduction limits and the prescribed rates for the automobile operating expense benefit that will apply in 2010. All of the limits and rates in effect in 2009 will continue to apply in 2010. Specifically:

• The ceiling on the capital cost of passenger vehicles for capital cost allowance (CCA) purposes will remain at CAD30,000 (plus applicable federal and provincial sales taxes) for purchases after 2009. This ceiling restricts the cost of a vehicle on which CCA may be claimed for business purposes.
• The maximum allowable interest deduction for amounts borrowed to purchase an automobile will remain at CAD300 per month for loans related to vehicles acquired after 2009.
• The limit on deductible leasing costs will remain at CAD800 per month (plus applicable federal and provincial sales taxes) for leases entered into after 2009. This limit is one of two restrictions on the deduction of automobile lease payments. A separate restriction pro-rates deductible lease costs where the value of the vehicle exceeds the capital cost ceiling.
• The limit on the deduction of tax-exempt allowances paid by employers to employees using their personal vehicle for business purposes for 2010 will remain at 52 cents per kilometre for the first 5,000 kilometres driven and 46 cents for each additional kilometre. For Yukon, the Northwest Territories and Nunavut, the tax-exempt allowance will remain at 56 cents for the first 5,000 kilometres driven and 50 cents for each additional kilometre.
• The general prescribed rate used to determine the taxable benefit relating to the personal portion of automobile operating expenses paid by employers for 2010 will remain at 24 cents per kilometre. For taxpayers employed principally in selling or leasing automobiles, the prescribed rate will remain at 21 cents per kilometre. The additional benefit of having an employer-provided vehicle available for personal use (i.e., the automobile standby charge) is calculated separately and is also included in the employee’s income.

The government reviews these rates and limits annually, and announces any planned changes prior to the end of the calendar year. This practice ensures that businesses are aware of the new rates before the beginning of the year in which they apply.