December 8, 2015
Income Taxes - The Liberal Plan for the New Government of Canada
The October 19th, 2015 election in Canada has changed from a Conservative to a Liberal government. This means a new direction is being implemented for taxpayers. Here are some of the items that taxpayers are going to see in the Federal budgets to come if the government moves forward with the policies they said they would implement.
a) Cut the middle class income tax bracket from 22 percent to 20.5 percent $44,701 to $89,401
Taxable income between $44,700 and $89,401 per year will see their income tax rate fall.
This tax reduction is worth up to $670 per year, per person – or $1,340 per year for a two-income household.
Offset by those over $200,000.
b) Introduce a new tax bracket of 33 percent (up from 29% ) for annual incomes over $200,000. The current top bracket is $220,000 in Ontario in 2015.
So tax rate hike starts on $20,000 sooner and up 4%. Top rate in Ontario would go from 49.53% to 53.53% starting at $200,000. This is likely to be implemented in 2016.
They say it is revenue neutral a) offset by b).
Stock options are a useful compensation tool for start-up companies, and we would ensure that employees with up to $100,000 in annual stock option gains will be unaffected by any new cap.
d) Pension Splitting for Seniors
They will keep – not cut – pension income splitting for seniors. Cancel family income splitting (not pension income splitting)
e) TFSA limit increase from $5,500 to $10,000 would be cancelled for 2016 and onward.
f) Ensuring CRA correspondence is user-friendly.
g) Proactive in contacting Canadians when they are entitled to them, but are currently not receiving tax benefits.
h) OAS back to Age 65 vs 67
The plan for seniors lowers the eligibility age for Old Age Security and the Guaranteed Income Supplement to 65, and boosting the Guaranteed Income
Supplement for single low-income seniors by 1-%. This was moving to age 67 for those born in 1958 and later.
i) Child Tax Benefit
All families, with children, that have annual incomes below $150,000 will receive more in monthly child benefit payments than under current system. That is 9 out of every 10 Canadian families.
Typical two-parent family, with two kids, earning $90,000 per year will get $490 tax-free every month. Old plan, the same family only receives around $275 a after-tax each month. Over the course of a year, the Canada Child Benefit will provide $215 X 12 $2,580 more tax-free.
j) Pursue a national carbon pricing plan to combat climate change.
As these are only the items promised, it should be an interesting first budget in early 2016 to see what actual is implemented. As with all change, it will require time to understand the policies and make adjustments.
Wish you and your family a great holiday season and all the best in 2016!
Notice to Reader - Warning and Disclaimer
This monthly update was prepared on December 8, 2015.
When considering any of ideas from this article, please contact the writer directly before acting on them. This will ensure that any information has been updated.
Without contacting the writer before implementing any of these items you will bear all the responsibility for any tax assessments and or business issues that may arise from this information.
Copyright @ 2015