Proposed Liberal and Implemented NDP Tax Policy Implications
Wednesday, December 02, 2015
1. Personal Tax
The Liberals have proposed that they will cut the income tax rate for middle class Canadians, and increase the marginal rate on higher earning income individuals. The following rates highlighted in yellow represent the only changes to the personal federal tax rates.
Federal Tax Rates:
Prior Rate %
Proposed 2016 Rate %
|$0 - $44,701||15||15|
|$44,701 - $89,401||22||20.5|
|$89,401 - $138,586||26||26|
|$138,586 - $200,000||29|
This middle class tax cut will save taxpayers up to $670 per year per person.
However taxpayers earning more than $200,000 a year will see increases in federal taxes payable.
Alberta’s new NDP government has introduced a progressive tax system to replace the current flat tax system. Taxpayers earning over $125,000 will see an increase to their provincial taxes. For the 2015 tax year, lower prorated rates will be used, reflecting an October 1 introduction of the full rates. For 2015, tax filers will be assessed based on their total 2015 taxable income, and the prorated tax rates.
Provincial Tax Rate:
Prior Rate %
2015 Rate %
2016 and Later %
$0 - $125,000
$150,000 - $200,000
$200,000 - $300,00
Taxpayers earning less than $125,000 will continue to pay the 10% flat tax on their personal income.
2. Corporate Tax Rates
a) Small Business Tax Rate:
This rate applies to Canadian Controlled Private Corporations on their active business income up to the limit of $500,000.
b) General Corporate Tax Rate:
Income ineligible for the small business deduction will be affected in the following ways under the new Federal and Provincial governments:
1. Canada Child Benefit
The Canada Child Benefit is planned to replace the existing Universal Child Care benefit. This new benefit is tax free and is dependent on income. Families earning over $200,000 are ineligible for this Child Benefit; however the families that earn less than $200,000 will see greater benefit cheques than under the previous Universal Child Care Benefit. The benefit will slowly phase out the closer the household income reaches $200,000.
Universal Child Care Benefit
Canada Child Benefit
How it is calculated
Same amount given to each family
Dependant on Income
None. Every family regardless of income receive this benefit
Families earning an excess of $200,000 do not qualify
2. Old Age Security and Guaranteed Income Supplements
Eligibility age is planned to be restored to 65 from 67.
The Guaranteed Income Supplement will be increased by 10% for single, lower income seniors. This will give the most vulnerable seniors almost $1,000 more each year.
3. Employment Insurance Compassionate Care Benefit
This benefit will be more flexible and easier to access so that those who are caring for seriously ill family members can access 6 months of benefits. Instead of the previous rule that only applied to family members who are at risk of death.
1. Northern Residents Deduction
The residency component of the Northern Residents Deduction is proposed to be increased by 33% to a maximum of $22 per day. This benefit will be indexed so it keeps up with inflation.
2. Income Splitting
Previously, higher income earning spouses were able to transfer up to $50,000 of income to the lower- earning spouse through the use of spousal RRSP’s. This resulted in significant tax savings since the income was taxed in the lower tax bracket. This tax break is planned to be eliminated under the new liberal policy.
3. Stock Option Deduction:
Currently half of the gain on stock options can be deducted from taxable income. The Government is looking at putting a cap on how much can be claimed through a stock option deduction. The new cap will not affect employees with up to $100,000 in stock option gains.
4. Pension Splitting
Pension income splitting will not be effected by the new Liberal government. Canadian taxpayers will still be able to split their pension income for tax purposes with their spouse or partner to reduce taxable income.
Non- Refundable Tax Credits
1. Teacher and Early Childhood Educator School Supply Tax Benefit
To help offset costs incurred by teachers and educators paying out-of-pocket for classroom supplies, a new Teacher and Early Childhood Educator School Supply Tax Benefit is proposed to be introduced effective for the 2015 tax year. This benefit will operate as a refundable tax credit and will apply to purchases up to $1,000 each year.
2. Education and Textbook Credits
The education and textbook tax credits are planned to be cancelled under the proposed platform; however, the tuition tax credit will be maintained.
3. Labour-sponsored Venture Capital Corporation (LSVCC) Tax Credit:
The Liberal Government proposes to reinstate the LSVCC tax credit that was previously being phased out under the prior government. This tax credit provides a 15% federal tax credit for investments up to $5,000 per year into labour sponsored funds.
Other Tax Credits
1. Family Tax Cut:
The family tax cut is planned to be eliminated under the new Government. The benefits previously associated under this tax credit will be realized under the new Canada Child Benefit discussed above.
Other Changes and Information
1. Parental Benefits
Flexible parental benefits will be introduced that will:
2. Tax Free Savings Contribution Limit
Earlier this year the TFSA contribution limit was raised to $10,000. The new government has proposed to repeal this increase, and the TFSA limit will return to $5,500. The reduction to the TFSA will start in 2016.
3. Home Buyers Plan
The Liberal government plans to modernize the current Home Buyers Plan to make it more accessible for Canadians looking to purchase a home. This will allow Canadians impacted by sudden and significant life changes to buy a house without a tax penalty. This change will ease the burden on Canadians facing job relocation, the death of a spouse, marital breakdown, or a decision to accommodate an elderly family member.
5. GST on Capital Investments
In order to encourage construction of new rental housing, the Liberals have proposed they will remove all GST charged on new capital investments in affordable rental housing. This will provide tax incentives for growing and renovating the supply of rental housing across Canada.
6. Employment Insurance Premiums
7. Seniors Price Index
A Seniors Price Index is planned to be introduced to ensure that senior benefits keep up with inflation. This will take into consideration that the cost of goods typically purchased by seniors rises faster than those bought by non- seniors. Old Age Security and Guaranteed Income Supplements will be indexed to the Seniors Price Index rather than to the Consumer Price Index.