Life After Zero
Life After Zero
2015-2016 Federal Budget
by Andre Bardoun, Financial Security Advisor, Desjardins Financial Security Independent Network
When a finance minister is brandishing a pair of New Balance shoes on the eve of the budget, you can be sure that a balanced budget will play a starring role in his presentation. But what else?
Read on!
It has been the goal of just about every government since 2008: a zero deficit. According to the federal finance minister, this will finally be achieved for Canada in 2015-2016. In fact, the country will record a surplus of $1.4 billion for the year, and this surplus should grow to almost $5 billion by 2019-2020. For the record, the federal budgetary balance was about $14 billion 10 years ago, before tumbling to a $55 billion deficit in 2009 in the wake of the economic crisis.
Points of interest
This first Oliver budget contains a range of economic measures intended to stimulate economic activity, notably through a new Public Transit Fund and support for business innovation. If you work in the targeted sectors, these measures might eventually have some effect on your professional situation. For the moment, however, you will probably be more interested in the following tax measures, some of which come into force immediately. To begin with, a confirmation: if you are one of those families with children under 18 who have started to use income splitting to reduce your tax bill, note that this measure has been extended. Another confirmation: the increase in the universal child care benefit. This means that parents can receive an annual benefit of over $1,900 for each child age six or under, and over $700 for each child older than six, up to age 17. Be aware, however, that the Child Tax Credit has been eliminated.
If you use a tax-free savings account (TFSA) to shelter your savings from taxes, note that your annual contribution limit is going from $5,500 to $10,000. On the other hand, this limit will not necessarily be indexed to inflation.
If you are in the situation of being a caregiver for a loved one, two measures apply to you. First, the duration of compassionate care benefits has been extended from six weeks to six months.
This program provides Employment Insurance benefits for family caregivers who need to take time off from work. In addition, the minister announced the introduction of a tax credit of up to $1,500 if money is spent on home renovations to improve accessibility for persons with disabilities or reduced independence.
If you are retired, note that the annual minimum withdrawals you are required to make from your registered retirement income fund (RRIF) are dropping from 7.38% to 5.28% of the value of
your plan. This means that you can withdraw your savings more gradually, thus potentially reducing your annual income tax and increasing your Old Age Security benefits. This measure will come
into force as of 2015. If you have already withdrawn more than the new minimum since the beginning of this year, don’t worry: you can recontribute the difference.
If you have foreign investments, you may appreciate the simplified tax reporting requirements if the total cost of this property does not exceed $250,000.
Do you want to support a cause that you believe in? The budget offers a new tax exemption on capital gains from the disposal of private company shares and real estate. This measure might
influence the way you choose to plan your donation.
If you own a small business, you will be happy to know that a reduction of 0.5% per year in your company’s federal tax rate will kick in on January 1, 2016. This rate will drop from 11% today to 9% in 2019. Don’t be too quick to celebrate, however: what the government gives you as a business, it will take away from you as a shareholder. The tax rate on ineligible dividends will be increased. A similar adjustment was announced in 2013 and came into force in 2014. You might do well to start now to integrate this factor into your tax planning for 2015. Finally, if you have a business in fishing or agriculture, note that the government is proposing to raise the cumulative capital gains exemption for your eligible assets to $1 million.
Is that all?
Not really. Along with these measures, Joe Oliver’s first budget obviously contains all kinds of announcements that could affect you, depending on your situation. If you don’t mind a little – or
rather, a lot – of reading, you can find all the documents on Government of Canada website. One thing is certain; this budget gives you plenty of reasons to take stock of your tax situation between now and the end of the year!
