Sep
5
By Fin MacDonald
Fin MacDonald has over 20 years’ experience providing retirement and Income tax planning advice. Readers are however cautioned that responsibility falls on the taxpayer to ensure that all information is adequate and correct.
In this article I’m going to look at the announced tax and benefit measures from the four main parties. Bear in mind I am writing this on August 11th, the second week of the campaign, for the September issue of The Beacon. I invite any of the parties to make corrections they think are needed (FinTaxService@Hotmail.com), and these I will share in the October issue.
Child Tax Benefit Expansion
The governing Conservative party rolled out a package of changes to child tax and benefits in their April budget. The changes increased the Child Tax Benefit (UCTB) to $160 per month (from $100) for children under six; and brought in a new benefit for 6-17 year olds of $60 per month. This is payable to all children, and is taxable in the hands of the lower income spouse. With this increase came the elimination of the Federal Non-Refundable Child Tax Credit (CTC) of $2,255 per child. For low income recipients the elimination of the CTC may not have a negative effect; for others it will reduce the after-tax cash in hand after the increase in the UCTB.
The reactions of the other parties vary. The NDP has said they will leave the changes in place. The Liberals say they will income-test the UCTB, increase it for families with incomes below $150,000, and eliminate it for those above that amount. The Greens would roll a number of federal direct and indirect transfers into a Guaranteed Liveable Income; including the OAS/GIS, UCTB, EI, Working Income Tax Benefit and federal transfers to the provinces for social assistance.
Federal Tax Rates
The Green Party promises to eliminate federal taxes on incomes below $20,000. It also proposes to increase the tax credit for charitable donations. The Liberals would rejig the federal tax brackets; currently the brackets are: 15% on first $43,953; 22% to $87,907; 26% to $136,270 and 29% above $136,270. The Liberals would change the 22% bracket to 20.5%; and add a new 33% bracket for incomes above $200,000. The NDP promises to not raise personal income tax rates. The Conservatives have not made any tax rates announcements.
Income Splitting for Families
The Conservatives brought in Income splitting for pensions in 2007. Last year they brought in income splitting for those with children under 18. The amount that could be transferred was limited to $50,000 and the tax savings to $2,000. As of this writing the Conservatives have not announced whether these limits would be changed or left in place. Both the Liberals and NDP would cancel the Income Splitting for Families – saying the benefits go to the wealthy. The Greens would also eliminate this form of income splitting.
Increase in Tax Free Savings Account (TFSA) limits
In the April budget the Conservatives increased the annual contribution limit from $5,500 to $10,000; this gives a person who has not made any TFSA contributions a limit of $41,000. Both the NDP and the Liberals have said they would reverse the change. Our local Green candidate is personally opposed to the increase.
Child Care
The NDP promises to bring in $15/day/child childcare; phased in over 10 years. The Greens propose a $1,500/year direct tax credit to employers (or groups of small employers) to create child care spaces. In May of this year the Liberal leader spoke in favour of increases in childcare; no details have been released as of the time of my writing.
Business Taxation
The Conservatives, Greens and NDP all promise to further reduced the Small Business Tax rate from 11% to 9%. The Greens and Conservatives promise this by 2019, the NDP don’t specify a time. The Liberals speak of retaining the current tax breaks for small business.
The NDP promises to extend for two years the accelerated Capital Cost Allowance for all business to encourage business investment. They further promise to raise tax rates for large business to above where they were before the Conservatives lowered them from 22% to 15%. The Greens promise to increase those rates to 19%.
Old Age Security/ Canada Pension Plan
The three opposition parties are all in favour of rolling back the age for the Old Age Pension back to 65. The Conservative government brought in legislation increasing the age to start receiving to 67, effective in 2023. All three opposition parties are also in favour of increasing both contributions and payments from the Canada Pension Plan. The Conservatives have resisted this, although they did bring in the compulsory Post Retirement Benefit for those collecting CPP and working, from age 60 to 65.
Next month
Using my lens of Helping You to keep More of YOUR Money, I will bring updates from this article and look at Year End Tax Planning.