On October, 19, 2015, Canadians voted in new Liberal party Prime Minister, Justin Trudeau.
During the course of the election campaign, the party announced they would make certain changes related to income tax rate calculations. Although it is unclear when these changes will be enacted, they could be introduced soon after the new government takes office.
Some of the proposed changes announced are as follows:
- Tax cuts for the middle class: Taxable income between $44,700 and $89,401 taxed at a lower rate of 20.5% instead of 22%.
- Tax increases for high income earners: A new tax bracket of 33% for annual income over $200,000.
- TFSA limit decrease: The annual TFSA contribution limit would be decreased from $10,000 to the previous limit of $5,500.
- Elimination of income splitting: Currently, income splitting allows the higher-earning spouse in a family with children under 18 to transfer up to $50,000 of income to the lower-earning spouse so it can be taxed at a lower rate. It is anticipated that income splitting will be eliminated.
- New Canada Child Benefit to replace Universal Child Tax Benefit: The new government proposes a non-taxable child benefit calculated on a sliding family income scale.
- OAS age to remain at 65: The new government has stated that they will not proceed with plans to gradually increase the age of eligibility for Old Age Security by 2023.
- CPP Enhancement: The new government has discussed working with the provincial jurisdictions in order to enhance the Canada Pension Plan benefits. There is speculation this could provide the “solution” to the Ontario government’s concern about insufficient retirement savings, making the proposed Ontario Retirement Pension Plan no longer necessary.
PRESCRIBED INTEREST RATES FOR THE FOURTH CALENDAR QUARTER
On September 16, 2015, the Canada Revenue Agency (CRA) announced the prescribed annual interest rates that will apply to any amounts owed to the CRA and to any amounts the CRA owes to individuals and corporations. These rates are calculated quarterly in accordance with applicable legislation and will be in effect from October 1, 2015 to December 31, 2015. There have been no changes to the prescribed interest rates since last quarter with the exception of corporate tax payer’s interest on pertinent loans and indebtedness.
- The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance premiums will be 5%.
- The interest rate to be paid on corporate taxpayer overpayments will be 1%.
- The interest rate paid on overpaid remittances will be 3%.
- The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans will be 1%.
- Change: The interest rate for corporate taxpayers’ pertinent loans or indebtedness will be 4.52%.
ALBERTA BUDGET (OCTOBER 27, 2015)
The Honourable Joe Ceci, President of Treasury Board and Minister of Finance for the new government, tabled the Alberta Budget for 2015 in the Alberta Legislature on October 27, 2015.
The Budget resulted in no additional income tax increases to those which have been in effect since October 1, 2015; nor were there any other changes impacting payroll.
The government did announce it will incur additional expenses that would create a deficit; however the government decided to increase alcohol and tobacco taxes in order to assist with additional funding. They also indicated that the tax on insurance premiums will be increased by 1% effective April 1, 2016.
For more information on the Alberta Provincial Budget changes, view our September 1st blog article.
If you would like more information or have any questions, feel free to contact us at 780.466.6204, or click here to send us an email.
Thanks to Janet Crawford of KWB Chartered Accountants for providing this content.