Corporate Income Tax, Personal Income Tax, Small Business

The Federal Liberal government made some significant promises during the election.  The budget released on March 22, 2016 was their chance to put some of those promises into place.

CPA Canada has provided the following comments on this 2016 Federal Budget:

Businesses

  • The small business tax rate will remain at 10.5%, which would put the rate for BC small businesses at 12.5%
  • Eligible capital property will be replaced by a new capital cost allowance class
  • No change to treatment of stock option benefits
  • No change to tax treatment of professional corporations (it was speculated that these businesses would not be eligible for the small business tax rate)
  • Tax free roll out of life insurance proceeds will be reduced by the adjusted cost base of the policy
  • Special CCA classes for electric vehicle charging stations
  • The mineral exploration tax credit program has been extended yet again
  • Relief elections for GST rules under certain circumstances for groups of closely related corporations

Individuals

  • The second tier tax bracket will be reduced from 22% to 20.5%
  • A new top tax rate of 33% for income over $200,000
  • TFSA contribution limit will be reduced to $5,500 per year (down from $10,000) and indexed to inflation
  • Elimination of the Family Tax Cut
  • Beginning July 2016 a new Canada Child Benefit will replace the Child Tax Benefit and Universal Child Care Benefit.  The CCB will provide up to $6,400 for each child under 6 and up to $5,400 for children aged 6-17.  These benefits will begin to be eroded with family incomes over $30,000 and $65,000 respectively
  • Children’s fitness and arts tax credits are to be phased out by 2017
  • Teachers and educators will be eligible for a refundable tax credit of up to $1,000
  • Elimination of GST charged on insulin pens

Overall

  • $12 billion is to be spent over five years on infrastructure, affordable housing, water management for First Nations communities, climate change mitigation, early learning and childcare
  • No change to the capital gain inclusion rate

Click here for the full CPA Canada Federal Budget Commentary 2016

2016 Federal Budget Commentary

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