Changes the Liberal Government plans to set in place
5 Election promises that the Liberal government campaigned for and many should expect quick passage into law:
- Increase the highest federal tax rate to 33% from 29% (the top combine Ontario rate is 53.8% over $220,000 of income
- Reduce the middle class federal rate from 22 to 20.5% for people with taxable income between $44,701 to $89,401.
- Reduce the TFSA contribution room from $10,000 to $5,500
- Elimination of the Family Tax Cut, to stop wage sharing between spouses
- Elimination of the Universal Child Care Benefit , replaced by the tax free Canada Child Benefit
Fortunately, the impact of these anticipated first 4 changes do not impact the Lifecycle Wealth Plan.
If you have children, the new Canada Child Benefit is a tax free benefit and tied to income. The link below provides a chart comparing the Trudeau plan versus the Harper plan, as well a benefit calculator (for larger families with larger household incomes).
Click on the link - Canada Child Benefit Chart and Calculator
The chart within the link compares the benefit you will receive under each plan, and illustrates that the new plan will cost most clients with children, some money. For example, if a household’s income is $140,000, the cost is $195 with one child under 6, and $1,075 with one child under 6 and one child between 6-17 years of age. Another example is if a household’s income is $200,000, the cost is $1,425 with one child under 6, and $1,950 with one child under 6 and one child between 6-17 years of age.
In regards to the Small Business Tax Rate, the Liberals have pledged to maintain the Conservative promise to lower the tax rate 2% over the next four years; hence 15.5% in Ontario will fall to 13.5%. In addition, our new Prime Minister promised to look at “tweaking” the small business deduction because 80% of the top .01% of 1% top tax payers has a small business.
One guess, is that the Liberals may introduce a “number of employees test”, similar to Quebec. In Quebec, starting in 2017, if you have less than 4 full time employees, your company must pay tax at the general rate of tax. If the Federal law was changed along the same lines, your corporation would have to pay 26.5% tax in Ontario rather than the current 15.5%. Unfortunately, this would reduce the benefit of a company for most business owners and professionals.