2015 Canadian Federal Budget – Tax Cuts and Reliefs

Tabled on the 21st of April, the 2015 Canadian Federal Budget while premised on fiscal austerity, looks to expand on existing benefits and tax reliefs for individuals, families, seniors and small business owners. Let’s take a look at how this impacts the varying demographic groups and what this may potentially mean for you.

Individuals and Families

For families, the budget centred on expanding on a number of different childcare expenses. New income splitting initiatives had already been announced back in October of 2014 under the new ‘Family Tax Cut’ and is available for usage in the 2014 tax year. While not actually income splitting, the FTC allows a family with two parents and at least one child to receive a tax credit of up to $2000.  More information about the FTC can be found here on the top five myths of the family tax cut. 

The second major component of the budget involves the increase of the Tax Free Savings Account (TFSA) contribution limit to an annual limit of $10,000. This is an almost 50% increase from the previous limit of $5,500. For those that have never contributed to a TFSA, the total cumulative contribution room is now $41,000.

Families with children will be glad to see a boost in a number of different childcare benefits. The Universal Child Care Benefit will be enhanced and will now provide families with $160 per month for each child under 6 years old; which equates to $1960 per year. Children between the ages of six and 17 will receive $60 a month/$720 annually.

Seniors

For seniors, the budget amends the existing rules governing the minimum withdrawal limit for registered retirement income funds (RRIF). The proposed budget would decrease the current minimum withdrawal limit of 7.38 percent to 5.28 percent which would allow seniors to leave more funds in their RRIFs for future investments. In some cases, this will allow them to defer on taxes if they expect to have additional sources of income.

Another benefit for seniors and people with disability is the introduction of a new non-refundable tax credit for home renovations that are aimed at better accommodating their physical limitations. This will provide a 15 percent credit up to a maximum of $1500. Only individuals who are eligible for the disability tax credit will be able to receive this credit.

The final benefit for seniors is the extension of the Compassionate Care Employment Insurance program from six weeks to six months. This provides employment insurance to family members who have to forgo work in order to take care of a senior relative that is terminally ill.  Seniors looking to save more on tax should take a look at this article on tax tips for seniors.

Small Business Owners

As an increasingly essential cog of Canada’s economy, it is no surprised that the budget offered tax relief for small business owners. Starting in 2016, the small business tax rate will gradually be reduced from 11 percent to 9 percent by January 2019. Once fully implemented, this is expected to save small business owners up to $10,000 per year.

Owners of farming and fishing businesses also benefit from the budget by seeing an increase in the lifetime capital gains exemption to $1 million; an enlargement from the prior indexed amount of $813,600. This will take effect for qualified dispositions of property and or small business corporation shares on or after April 21, 2015.

Manufacturing companies and other eligible small businesses can also continue to benefit from the accelerated capital cost allowance (ACCA). The ACCA had a 2015 expiration date but has now been extended for 10 years. This will allow businesses in this sector to make quicker write-offs for machinery and other equipment.  For more information on tax savings for small business owners, please read tax loopholes for small business owners in Canada.

It is important to note that at this point in time, all these proposals are still pending approval from the House of Commons. However, both the increases in the lifetime capital gains exemption and the TFSA contribution room take immediate effect.

To read the full budget, take a look at the 2015 Canadian Federal Budget.

ABOUT THE AUTHOR

ALLAN MADAN

CPA, CA

Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.

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