The 2016 Federal Budget was tabled today in Ottawa and the Budget included some interesting changes for individuals and businesses. You are probably first questioning why I am so excited when it is Budget Day, whether it be Provincial or Federal. Federal Budget Day is another Super Bowl for Accountants. We have our chips out, made our predictions and were anxiously counting down before “kick-off”. Budgets give us an opportunity to flex our problem solving skills because there are typically tax changes that affect both individuals and corporations.
First to tackle about the 2016 Budget, what did the Budget have in store for individuals.
Canada Child Benefit
The CCB will provide a maximum annual tax free benefit of $6,400 per child under age 6 and a maximum annual tax free benefit of $5,400 for children age 6 to 17. Families with less than $30,000 in net income will receive the maximum benefit. The Child Disability Benefit will continue providing an additional amount of up to $2,730 for a child with a disability. Payments of the CCB will begin in July 2016.
The Government of Canada website has launched a CCB Calculator which can be found here: https://www.budget.gc.ca/2016/tool-outil/ccb-ace-en.html
Eliminating Income Splitting for Couples with Children
Income splitting for couples with children under the age of 18 will disappear in 2016. This opportunity provided tax savings of up to $2,000 per family. Pension Income Splitting will not be affected by this change.
Elimination of the Children’s Fitness and Arts Tax Credit
The current Fitness credit allowed for a $1,000 credit per child and the Arts credit allowed for $500 per child. Both credits will be reduced by 50% in 2016 and then eliminated for the 2017 personal tax year.
Enhancement to Canada Student Grants
There will be increases to the Canada Student Grant program that will increase the grants by $1,000 for students from low income families, $400 for middle income and $600 for part time students. New eligibility thresholds will be introduced for the 2017-18 academic year.
Canada Student Loan Program Repayment Assistance Plan has changed under the Budget and the new measures will ensure that no student will have to repay their Canada Student Loan if their income is less than $25,000 per year.
Elimination of the Education and Textbook Tax Credit
The Education and Textbook Tax Credit will be eliminated starting in the 2017 taxation year. The credit currently provides students with
Teacher and Early Childhood Educator School Supply Credit
A proposed new credit will see a 15% refundable income tax credit will apply on the $1,000 of eligible supplies purchased by a Teacher or an Early Childhood Educator. This credit will be apply to the 2016 taxation year.
Old Age Security Eligibility
The age for Old Age Security eligibility has been rolled back from age 67 to age 65. There will also be changes to the Guaranteed Income Supplement.
Businesses and Corporations
Second, what do small business corporations have to celebrate or stop their feet and have a fit about. Well, I am going to tell you.
Small Business Income Tax Rate
The Small Business Income Tax Rate, available to Canadian Small Businesses will remain at 10.5% on the first $500,000 of taxable income and previously announced reductions in this rate will be deferred.
Elimination of Eligible Capital Property/Creation of a New CCA Class
Eligible capital property such as goodwill and licenses will be changed and now included in a new CCA class that will allow simplification. As well, small balances of Eligible capital property will be able to be transferred and written off more quickly. The new legislation will allow for $3,000 of incorporation costs to be written off as a current expense.
Other Items…
Two other items that are going to be huge and will be discussed in subsequent blogs will be the reform of the Employment Insurance program that will extend benefits for a longer period of time in hard hit areas of job losses.
The key item that we will be reviewing and following closely will be the Improvement to Client Services at the Canada Revenue Agency, Improvements to Tax Compliance and the Crack Down on Tax Evasion and Tax Avoidance. We look forward to this discussion!
Overall, the Budget had some expected outcomes and some rumours did not come to bear, especially the increase to the Capital Gains Inclusion rate which could have significantly impacted many Canadians at all income levels and age.
I will be providing more in depth analysis on the topics outlined in today’s blog once the Budget has been digested and the passing of the Notice of Ways and Means by the current Government which will enacted the above discussed changes.
Budget Day today was a Super Bowl that did not disappoint…
Jason