With the Liberal Government’s December budget a month old and having received only first reading, should we prepare for possible changes in Canada’s tax policy? Here are some key items announced.
The big tax picture includes a tax rate reduction from 22 per cent to 20 per cent for those earning over $45,000 but less than $90,000. At the same time, those with earnings over $200,000 will see a new 33 per cent tax bracket. This income used to be taxed at 29 per cent.
The Family Tax Cut introduced by the Conservatives in 2014 should be eliminated and replaced with a revamped all inclusive child tax benefit. The Universal Child Care Benefit, Canada Child Tax Benefit and its national supplement should be rolled into an income tested Child Benefit. Income tested meaning high income earning families won’t receive it – high income has not been clearly tested.
The Children’s Fitness and Arts Credits introduced by the Conservatives a few years back should be eliminated, the Liberals arguing that these credits only benefit wealthy taxpayers.
While Student Tuition claims will remain intact, the accompanying Education Amounts calculated on months of full time or part time studies designed to help offset the cost of books and supplies should be eliminated.
The Liberals plan to shift the tax savings to the Student Grant Program to increase funds available.
Staying with education, a new Teacher School Supplies Credit has been put forward that will give teachers up to a $150 tax credit for school items purchased out of their own pocket.
The Northern Allowance rate should increase by about 35 per cent for those living in a prescribed zone.
The Home Buyer’s Plan currently open to first time home buyers should be extended to include people impacted by a sudden change in lifestyle or forced re-location – a vague descriptor at this time. This plan allows people to remove monies from their RRSP to purchase a home on the premise that the funds will be repaid to their RRSP.
Changes to investment tax incentives include rolling back from $10,000 to $5,500 per year for investments into a Tax Free Savings Accounts, limiting the Exploration Expense Deduction, and enhancing tax policies surrounding green technology.
Organized labour and registered charities should experience favourable changes.
Small business should expect the previously announced tax rate reduction to be implemented, and there should be a broader definition of a Canadian Controlled Private Corporation for the small business deduction claim.
Finally, the Liberals promised a two prong approach to the pursuit and collection of tax revenue.
On the one hand, the Liberals want to offer a softer gentler approach for those needing help in filing their tax return including easier and clearer tax information and instructions, along with permission to file paper returns.
On the other hand, the Liberals propose to spend millions of dollars to help Canada Revenue Agency aggressively pursue tax evaders.
Let’s see what happens.
Ron Clarke has his MBA and is a business owner in Trail, providing accounting and tax services. Email him at ron.clarke@JBSbiz.ca. To read previous Tax Tips & Pits columns visit www.JBSbiz.net.