Finance Minister Bill Morneau released his Inaugural Federal Budget (entitled “Growing the Middle Class”) yesterday, March 22, 2016, with significant spending promises and benefits to the low & middle class, families with children and retirees. The Budget forecasts deficits of $5.4B for 2015/2016, $29.4B for 2016/2017 and continued deficits until at least 2020/2021.
Some of the more significant personal tax changes in the 2016 Budget include:
- Elimination of family income splitting for couples with children under 18
- Elimination of the child fitness tax credit and arts credit by 2017
- Significant enhanced means adjusted child tax benefits for families with children under 18
- Elimination of the education and textbook credits for post-secondary students
- Increase in the Guaranteed Income Supplement for low income seniors
- Reversion of Old Age Security eligibility age to 65
There were no changes to the capital gains tax rate nor to the taxation of stock options as many had expected.
There were also some significant business tax changes, including:
- Elimination of the Eligible Capital Property regime for the purchase and sale of goodwill and other “nothings” and substitution with the capital cost allowance system with a new CCA class
- A freeze of the Federal small business tax rate for Canadian-controlled private corporations (“CCPC”) at 10.5% (it was scheduled to be reduced to 9% by 2019)
- A restriction on the small business tax rate for a CCPC which provides property and services to either a “connected” partnership or a private corporation in which the CCPC, a shareholder of the CCPC of a non-arm’s length person has a direct or indirect interest
If you need further information or would like to discuss these matters, please contact your DMCL advisor.