The Liberal Party proposed several changes during the 2015 Election. To date, nothing has been formally announced, enacted into law, or proposed in a budget.
For illustration purposes, our comments are based on the assumption that changes are made effective January 1, 2016.
Proposed Federal Tax Rates
- Decrease to the federal tax rate for individuals with income between $44,702 and $89,401 (based on 2015 thresholds) from 22% to 20.5%.
- New top federal bracket to begin at $200,000 instead of the current $220,000.
- Increase to the top federal tax rate from 29% to 33% for those with income over $200,000.
- Top combined Ontario/Federal tax rate for those with income over $220,000 to 49.53% from 53.53%.
- Increased dividend income tax rates of over 5% for those in the top tax brackets.
Planning point: Accelerate income into 2015, from 2016, if you find yourself in the top tax bracket.
Tax Free Savings Account (TFSA) Limit
The TFSA limit for 2015 was increased to $10,000. CRA administratively allowed Canadians to contribute up to $10,000 to their TFSA in 2015 from the day the budget was announced, resulting in a cumulative contribution room of $41,000 per Canadian.
The Liberal Party has indicated they will reduce the TFSA limit back to $5,500.
Planning point: Take advantage of the one year increased limit and contribute the full $10,000 allowable in 2015.
Universal Child Care Benefit (UCCB) vs. Canada Child Benefit (CCB)
UCCB payments had increased to:
- $160/month for each child under six years of age ($1,920/year); and
- $60/month for each child aged six to 17 ($720/year).
A retroactive lump sum payment for January to June 2015 was made in July 2015, and subsequent payments have been adjusted to reflect this change. These benefits are taxable to Canadians.
The Liberal platform proposed to replace the UCCB program with the CCB program, which would be a tax free benefit paid to Canadians with children under 18. However, unlike the UCCB, the CCB will be income tested and, therefore, families with combined income over $200,000 will not receive any benefits under this proposed plan.
The maximum amount receivable is:
- $6,400 per annum per child under the age of six; and
- $5,400 per annum per child aged six to 17.
The CCB would be increased for inflation each year, and is adjusted based on prior year income.
Family Tax Cut
The Liberal platform proposed to remove the Family Tax Cut (Family Income Splitting), which would allow families who have spouses in different federal tax brackets, and at least one child under the age of 18, to artificially split up to $50,000 of income for a maximum tax savings of $2,000.
Planning point: Take advantage of income splitting before it no longer exists.
Small Business Tax Rates
The Liberals indicated they will maintain the decrease to the federal small business rate from 11% in 2015 to 9% in 2019.
Old Age Security (OAS)
The Liberals proposed to keep the age of OAS payments at 65.
If you have any questions please don’t hesitate to contact us.
This commentary is based on information current as of November 10, 2015.
