The 2016 Federal Budget was tabled yesterday by Finance Minister Bill Morneau. The budget projects big deficits over the next five years in exchange for infrastructure investment and a tax reduction for the middle class.
Millards Chartered Professional Accountants has released it’s annual Federal Budget Commentary in response to the new budget. John Carr, CPA, CA and Partner from Millards Chartered Professional Accountants says the commentary offers a quick overview of the budget highlights as they relate to individuals and businesses in Canada.
“We encourage our clients to download and review it. The 2016 Budget offers tax advantages to many but may be negative for higher earners. We’re here to help our clients understand the implications and we offer this commentary as a quick and easy read that explains how the new budget might apply to them.”
In a 269-page document just over half the size of the Conservative government’s last budget, The Liberal government’s first budget is scrapping many of the personal tax credits enacted by the Conservatives, with a budget focusing on Canada’s middle class and economic growth.
The new Government calls the $290-billion spending plan a “bold transformative” kickstart to a sluggish Canadian economy. Only time will tell if the Liberals will be successful but there are many budget items that have an immediate impact on Canadians.
“As with all budgets, there are winners and losers. Whether you benefit or lose depends on your situation. This budget appears to favour some families, students, the environment, veterans, infrastructure and First Nations. It may not be received so positively by higher income earners and small business.”
Although promised in the last Conservative budget, the government will not proceed with reductions in the small business tax rate. The rate would have dropped from 11 per cent to nine per cent on the first $500,000 of qualifying income. The reduction is now frozen at 10.5 per cent and plans for future cuts have been deferred.
While the new budget is not be as helpful to small business, there are many budget changes that will be helpful to Canadians.
The new Child Benefit commits $10-billion to provide tax-free cheques of as much as $6,400 per child.
Student grants will increase to $3,000 from $2,000 for low-income students. Middle-income students and part-time students will also receive higher grant amounts.
Low income seniors are on the winning side of the new budget receiving $3.4 billion dollars over five years to increase the Guaranteed Income Supplement. The government has also restored the eligibility age of Old Age Security to age 65.
The budget introduces a decrease in income tax of 22 per cent to 20.5 per cent for those making between $45,282 and $90,563. Those making above $200,000 will pay 33 per cent instead of 29 per cent retroactive to January 2016. These are Federal rates. Provincial rates will be added to this.
Ottawa plans to spend almost $30 billion more than it takes in this coming fiscal year, a big jump from the $5.6-billion deficit for the current year. A large portion of that deficit spending is targeted at infrastructure projects.
The new infrastructure commitments include $3.4 billion for public transit, $1.4 billion for affordable housing, $518 million for climate change mitigation technologies and $2.2 billion for water and waste management systems for First Nations.
The 2016 budget includes a number of promises to Canada’s First Nations communities.
$4.22 billion has been committed over five years to improvements like on-reserve education, child and family services, education infrastructure and housing needs.
CPA Canada says that despite failing to make good on “key election promises relating to fiscal management,” there are enough positive indicators in the budget that they are taking a wait-and-see approach, calling it a “down payment on a long-term fiscal plan that charts a course to strengthen the Canadian economy.”
Do you have questions about the Federal Budget Commentary or the 2016 Federal Budget? Millards has 7 Southern Ontario locations to serve you. Contact us today and find out more about our wide range of accounting, auditing and assurance services.
A partner with Millards since 1988, John Carr’s practice areas range from negotiations and tax planning for mergers, acquisitions and divestitures to reorganizations of corporate and other business structures. He has a variety of skills sets including expertise in commodity taxes, general corporate tax planning and estate and will planning.