Proposed tax measures

Several federal tax changes are expected in 2016 based on the Liberal Government's Tax Platform.

Personal tax rates. The Liberal Party has proposed to reduce the tax rate for the second lowest tax bracket ($44,700 to $89,401 of taxable income) from 22% to 20.5%, stating that this can result in tax relief of up to $670 per person. The Liberal Party has also proposed a new top federal tax rate of 33% for individuals with taxable income in excess of $200,000. For 2015, the top federal tax rate is 29% on taxable income over $138,586. As the new 33% federal tax rate may become effective for 2016, you may consider reviewing the timing of discretionary bonus and/or dividend payments, and accelerating such payments to this year. Please contact your Crowe MacKay tax advisor to discuss such planning further.

The Liberal Party Tax Platform also mentions the following items that the party plans to implement:

  • Eliminate the education and textbook tax credits and increase access to student grants
  • Introduce a refundable tax credit for teachers and early childhood educators who purchase certain supplies for their students
  • Cancel the increase of the Tax Free Savings Account annual contribution limit to $10,000
  • Eliminate the Family Tax Cut tax credit
  • Replace the Universal Child Care Benefit, the Canada Child Tax Benefit and the National Child Benefit with a new tax-free Canada Child Benefit
  • Restore the Old Age Security and Guaranteed Income Supplement eligibility age to 65 and increase the Guaranteed Income Supplement
  • Increase the Northern Residents Deduction to a maximum of $8,000 per year and index the amount in subsequent years
  • Limit the stock option deduction for individuals with more than $100,000 in annual stock option gains

Child care expenses

Starting in 2015, the maximum annual amounts that can be claimed for child care expenses will increase by $1,000. The following annual limits will apply:

  • Age 6 and under – $8,000
  • Age 7 to 16 – $5,000
  • Over 16 infirm dependent children – $5,000
  • Children eligible for the disability tax credit – $11,000

Capital gains exemption

For 2015, the capital gains exemption for qualified small business corporation shares has risen from $800,000 to $813,600. This exemption will be indexed for inflation in subsequent years. Furthermore, the capital gains exemption for qualified farm or fishing property was raised to $1,000,000 for dispositions occurring after April 20, 2015.

First-time donor's super credit

The first time donor super credit on up to $1,000 of donations will be available again in 2015. This increased tax credit adds 25% to the current credit and only applies to cash donations; donations in kind are not eligible.

This credit is only available to individuals if neither the individual nor the individual's spouse has claimed a donation tax credit in the preceding five tax years.

Home accessibility tax credit

Starting in 2016 a new federal tax credit, the home accessibility tax credit, will be available for seniors (age 65 and older) and individuals who qualify for the disability tax credit. The credit will allow these individuals to claim a tax credit on up to $10,000 of expenses incurred to perform a "qualifying renovation" on their home. Such a renovation must allow the individual to gain access to, or be mobile or function within the home, or reduce the risk or harm of the individual within or gaining access to the home.

Offshore investments

CRA's on-going efforts to strike a balance between what is reasonable versus what is required reporting has led to further changes to Form T1135 Foreign Income Verification Statement. For 2014 and subsequent tax years, taxpayers may only have to report aggregate amounts (by country) for specified foreign property held in accounts with registered securities dealers and Canadian trust companies rather than providing the detail of each such property.

Specified foreign property continues to include debt and equity securities of foreign entities, cash held in foreign bank accounts and foreign rental property. Where the aggregate cost of all specified foreign property exceeds $100,000 CAD at any time in the year, all such property is reportable. Although these rules do not result in any additional tax payable, there are substantial penalties for failing to make these disclosures when required. It is best to contact your Crowe MacKay tax advisor now if you are unsure as to whether these rules apply to you. Planning ahead will help ensure you obtain the necessary information ahead of the filing deadline.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.