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2019 Federal Budget

On March 19, 2019, the federal government released their 2019 budget which proposed to help younger home-buyers get into the housing market, increased support for skills training as well as for research and development, and introduced steps toward a national pharmacare strategy. The federal government also proposed clean energy vehicle incentives and other changes that will affect individuals and businesses.

There were no changes to the personal or corporate tax rates, nor to the inclusion rate on taxable capital gains.

Please click here for our Federal Budget Commentary 2019.

Harmonized Sales Tax for Ontario

On March 26, 2009, the Ontario government announced in its annual budget that Ontario will eliminate its existing provincial sales tax (PST) and introduce a harmonized sales tax (HST) with the Federal GST. This will take effect on July 1, 2010. The HST rate in Ontario will be 13% of which 5% will represent the federal part and 8% will represent the provincial part.

On October 14, 2009, the Ontario Ministry of Finance released Information Notice No. 3, General Transitional Rules for Ontario HST. Further details of how the HST will be implemented will be released in the coming months. The complete policy and administrative details will be released by the end of March 2010.

Unlike the GST, many Ontario businesses pay PST on business expenses and assets with no ability to recover the tax. This embedded PST forms part of the costs of the business. Under a harmonized sales tax system, input tax credits (ITCs) will be available to recover the provincial component of the tax, which should result in lower costs – those savings can be passed on to consumers through lower prices.

Small Businesses

To compensate small businesses (generally, annual taxable revenue of less than $2 million) for the increased administrative burden of the change to HST, a credit will be allowed for the first reporting period after harmonization.

Total taxable revenues in first full fiscal quarter commencing after June 30, 2010 Amount of transition credit
Up to and including $15,000 $300
Over $15,000 and up to and including $50,000 2% of taxable revenue for the quarter
Over $50,000 and up to and including $500,000 $1,000

Individuals

To compensate individuals, a sales-tax transition credit will be paid to individuals and families in three approximately equal instalments, in June and December 2010 and June 2011, totaling a maximum of $300 for single individuals and $1,000 for single parents and families. The credits are reduced by 5% of income over a threshold of $80,000 per individual and $160,000 per family or single parent. The credits phase out for an individual at an income level of $82,000 and for single parents and families at an income level of $166,700. You must file your 2009 and 2010 income tax returns to qualify for the 2010 and 2011 payments, respectively.

Phase-in of ITCs for Larger Businesses

Large businesses with annual taxable sales in excess of $10 million, and financial institutions, will be unable to claim ITCs for the Ontario portion of the HST for the first 5 years of the new system. Full ITCs on these purchases will be phased in, in equal amounts, over a three-year period. The restricted groups of expenses are as follows:

  • Energy (except for energy used for farming or the production of goods for sale);
  • Telecommunication services other than internet access or toll-free numbers;
  • Road vehicles weighing less than 3,000 kg (and parts and certain services) and fuel to power those vehicles and
  • Food, beverages and entertainment.

Preparing for HST

Businesses will need to think about certain items as harmonization approaches:

Conversion – invoices, sales receipts, purchase orders, expense reports, identification numbers, billing cycles, treatment of refunds over transition period, collecting HST from customers that were previously PST exempt, maintain information on percentage completion before and after implementation date

Budgeting and cash flow – ability to recover HST, collection and remittance of HST on a broader range of services and goods, payment of HST on business assets and expenses, implementation costs, importance of quick collection of receivables. Small businesses may want to purchase items after June 30, 2010 while individuals and the MUSH (Municipalities, Universities and Colleges, School Boards, Hospitals) and Charities and Qualifying Non-Profit Organizations sectors may want to purchase goods and services before July 1, 2010. Businesses may want to consider filing more frequently – note that an election must be filed before your fiscal year.

Contractual obligations, leasing and service agreements – ensure the implications are taken into account with contracts straddling the July 1, 2010 implementation date

Retail sector

HST will tax a much broader range of goods and services. Businesses must also ensure that their systems will be equipped to distinguish between items which are fully taxable from those that are subject to the new point-of-sale rebate for the provincial portion of the HST for certain items:

  • Print newspapers
  • Qualifying prepared food and beverages ≤ $4
  • Books
  • Children’s clothing – not costumes, sports protective clothing
  • Children’s footwear – not skates, cleats, ski boots
  • Children’s car seats and booster seats
  • Diapers
  • Feminine hygiene products

Public Service Bodies

Many supplies made by entities in the MUSH and Charities and Qualifying Non-Profit Organization sectors are exempt from GST/HST – no tax is collected on these supplies. Consequently, these entities are unable to claim ITCs on most of their purchases. To compensate these entities for the difference in tax content, these entities will be entitled to rebates of a portion of the Ontario portion of the HST. The rate for municipalities, universities and colleges is 78%, for school boards is 93%, for hospitals is 87% and for charities and qualifying non-profit organizations is 82%.

Construction and Real Estate Development

Currently, new housing is only subject to 5% GST with a GST rebate available of 36% of the tax paid on the first $350,000 of the purchase price (this is phased out for homes priced between $350,000 and $450,000). Under harmonization, new homes will be subject to the 13% HST. To ease the burden of the new tax, Ontario will provide a new housing rebate equal to 75% of the provincial portion of the HST up to a maximum of $24,000 for new homes purchased as primary residences across all price ranges. The transitional rules are quite complex and vary depending on the type of property and the date that the agreement to rent or purchase was entered into.

Transition – Key Dates

July 1, 2010 – implementation of the HST in Ontario

May 1, 2010 – HST has to be collected on amounts that are paid or become payable on or after May 1, 2010 for goods or services provided on or after July 1, 2010

October 14, 2009 – date of Ontario’s Notice regarding transitional rules. Certain businesses and public service bodies may be required to self-assess the Ontario component of the HST on amounts payable after October 14, 2009 and before May 2010 for goods or services provided on or after July 1, 2010

October 31, 2010 – date on which any outstanding PST becomes payable under the transitional rules to ensure an efficient wind-down of the PST. Watch out for the impact of this on returns and exchanges.

Sales – The HST will generally apply to any consideration that becomes due or is paid without having become due, on or after May 1, 2010 for a supply by way of sale of tangible personal property (i.e., goods) to the extent that the consideration is for TPP that is delivered and for which ownership is transferred, to the recipient of the supply on or after July 1, 2010. The HST would not apply to a supply by way of sale of TPP if the TPP is delivered orownership of the TPP is transferred to the recipient of the supply before July 2010 regardless of when the consideration for the supply becomes due or is paid without having become due.

Example A:

A customer orders and pays for a refrigerator on June 15, 2010 and it is delivered in July 2010.

GST is payable at 5% on June 15, 2010

PST is not payable

The Ontario portion of the HST is payable at 8% on July 1, 2010.

Example B:

A customer orders and pays for a refrigerator on April 30, 2010 and it is delivered in July 2010.

GST is payable at 5% on April 30, 2010

PST is payable at 8% on April 30, 2010

The Ontario portion of the HST is not payable.

Services – To determine whether GST or HST applies to services performed during the period that includes July 1, 2010, suppliers must consider:

  • When the service is performed;
  • When an amount for the service becomes due; and
  • Whether an amount is paid without having become due.

Example C:

I provide an accounting service from January 2010 to June 2010, and issue an invoice for my service in August 2010. The client pays me after receiving the invoice.

GST is payable at 5%

Since all of the service is performed before July 2010, the OHST does not apply to the consideration for this service.

Example D:

I provide a decorating service in June and July 2010. 60% of the service is performed in June 2010. I issue an invoice for my service in August 2010. The client pays me after receiving the invoice.

HST applies to the portion of the consideration that relates to the 40% of the service that is performed on or after July 1, 2010.

The OHST does not apply to the portion of the consideration that relates to the 60% of the service that is performed before July 2010.

2019 Tax Tips and Reminders

2019 TFSA limit is $6,000

The Tax-Free Savings Account (TFSA) limit was $5,500 for 2018, 2017 and 2016, $10,000 for 2015, $5,500 for 2014 and 2013. For 2009 to 2012, the limit was $5,000. The total room available in 2019 for someone who has never contributed and has been eligible for the TFSA since its introduction in 2009 is $63,500.

Contributions can be made by Canadian residents aged 18 or over. Any unused contribution room can be carried forward. There is no lifetime limit to the amount of the contributions. If a person has contribution room, but no funds to contribute, he or she may contribute funds given to them by their spouse or common-law partner, with no attribution of income to the spouse or common-law partner. Note that a withdrawal in any year does not increase the TFSA room until the following calendar year. If you are thinking of making a withdrawal close to year end, make sure it is done by December 31 so you can have the withdrawal amount added back to the TFSA room sooner.

2019 RRSP Limit

The RRSP contribution limit is $26,500 in 2019 ($26,230 in 2018). The limit will increase to $27,230 in 2020. If you or your employer do not contribute to a pension plan, your 2019 “earned income” for RRSP purposes must be at least $151,278 to create RRSP contribution room of $27,230 in 2020. Please see the news release.

2019 Employment Insurance Rates

Employment Insurance (EI) rates for 2019 have changed to 1.62% (vs 1.66% for 2018) of earnings for employees. The maximum annual premium increases to $860.22 (from $858.22 in 2018). The rate for employers is 1.4 times the employee rate or 2.268%. The maximum insurable earnings for 2019 increases to $53,100 from $51,700 in 2018.

2019 Canada Pension Plan Rates

The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2019 will be $57,400 – up from $55,900 in 2018. Contributors who earn more than $57,400 in 2019 are not required or permitted to make additional contributions to the CPP.

The basic exemption amount for 2019 remains at $3,500. Individuals who earn less than that amount do not need to contribute to the CPP.

The employee and employer contribution rates for 2019 have increased to 5.10% from 4.95% in 2018, and the self-employed contribution rate will increase to 10.2%.

The maximum employer and employee contribution to the plan for 2019 will be $2,748.90 and the maximum self-employed contribution will be $5,497.80. The maximums in 2018 were $2,593.80 and $5,187.60.

Canada Pension Plan Changes for Persons Between Ages 60 and 70

Beginning in 2012, employers must withhold and remit CPP on wages paid to employees between ages 60 and 70, even if the employee is collecting CPP benefits. If the employee is between 65 and 70, he or she may file an election to opt out of paying CPP. These rules also apply to self-employed individuals. In order to avoid paying CPP, the election must be filed with CRA to take effect on the first of the following month. There are several other changes related to CPP benefits. Please contact us for information.

Employer Health Tax

Effective January 1, 2019, the EHT exemption has increased from $450,000 to $490,000. More information on Employer Health Tax: https://www.fin.gov.on.ca/en/tax/eht/index.html

Accelerated Capital Cost Allowance (CCA)

Accelerated CCA is available on additions from November 21, 2018 to December 31, 2027. Prior to the rule change, the “half-year rule” allowed half a year of capital cost allowance in the year of acquisition.  Now, for most assets, the usual half year of CCA available in the year of acquisition will be tripled for acquisitions to December 31, 2023.  For example, a Class 10 vehicle which is normally subject to a 15% CCA claim in the first year would now be allowed a 45% CCA claim.  For acquisitions in calendar years 2024 to 2027, the usual half year of CCA will effectively be doubled rather than tripled. After the acquisition year, CCA will return to the normal rate on the remaining pool in the CCA class.

Tuition and Textbook Credits

For 2018 federal tax purposes, the tuition credit is available; however, the textbook credit is no longer available.  For 2018 Ontario tax purposes, the tuition and textbook credits are no longer available.

Climate Action Incentive Payment

The climate action incentive (CAI) is a refundable credit which consists of a basic amount and a supplement for residents of small and rural communities. The basic amount is $154 and the spouse or common-law partner amount is $77 and $38 for each qualified dependant. More information on Climate Action Incentives:

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-449-climate-action-incentive.html

Capital Gains Exemption

The lifetime capital gains exemption for capital gains on qualified small business corporation shares has increased to $866,912 in 2019 from $848,252 in 2018.  The lifetime capital gains exemption for capital gains on qualified farm property is $1,000,000 for 2019 and 2018.

Prescribed Interest Rates

The prescribed rates for the first quarter of 2019 is as follows:

  • The interest rate paid on overpayments is 6%.
  • The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans is 2%.
  • The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance premiums is 6%.

For more information please see CRA’s website on prescribed interest rates.

2019 Combined Federal and Ontario Tax Brackets for Individuals

Taxable Income Regular Income% Ineligible (Private Corporation) Dividends % Eligible Canadian Dividends % Capital Gains %
$0 to $43,906 20.05 8.89 0.00 10.03
$43,907 to $47,630 24.15 13.61 0.00 12.08
$47,631 to $77,313 29.65 19.93 6.39 14.83
$77,314 to $87,813 31.89 22.04 8.92 15.74
$ 87,814 to $91,101 33.89 24.81 12.24 16.95
$91,102 to $95,259 37.91 29.43 17.79 18.95
$95,260 to $147,667 43.41 35.76 25.38 21.70
$147,668 to $150,000 46.41 39.21 29.52 23.20
$150,001 to $210,371 47.97 41.00 31.67 23.98
$210,372 to $220,000 51.97 45.60 37.19 25.98
$220,001 and up 53.53  47.40 39.34 26.76

(This table does not include the Ontario Health Premium)

2019 Federal and Ontario Combined Corporate Income Tax Rates

Canadian Controlled Private Corporations Other Corporations
Small Business Income(up to $500,000) Investment Income** General Manufacturing and Processing General Active Business Income
12.50% 50.17%* 25.00% 26.50%
*30.667% of investment income is eligible for refund at a rate of $1 for every $2.61 of dividends paid.
**Canadian taxable dividend income (not from a connected corporation) is taxed federally only under Part IV at a rate of 38.33%. This tax is eligible for refund at a rate of $1 for every $2.61 of dividends paid.

2018 Tax Tips and Reminders

Proposed changes to private corporation taxation in Canada – July 18, 2017 and subsequent amendments October 2017 and December 2017

On July 18th, 2017, the federal Department of Finance released draft legislation, explanatory notes and a consultation paper on the system of taxation for private corporations and shareholders. Subsequently, on October 16, 2017, finance announced that it would not be moving forward with proposed measures to limit access to the Lifetime Capital Gains Exemption. The same week, on October 18, 2017, finance announced a modification of the corporate investment savings rules that will be further clarified in the 2018 Federal budget. Finally, on December 13, 2017, finance released its revised simplified measures to restrict income sprinkling. For further information, see our Newsletter section.

2018 TFSA limit is $5,500
The Tax Free Savings Account (TFSA) limit was $5,500 for 2017, $5,500 for 2016, $10,000 for 2015, $5,500 for 2014 and 2013. For 2009 to 2012, the limit was $5,000. The total room available in 2018 for someone who has never contributed and has been eligible for the TFSA since its introduction in 2009 is $57,500.

Contributions can be made by Canadian residents aged 18 or over. Any unused contribution room can be carried forward. There is no lifetime limit to the amount of the contributions. If a person has contribution room, but no funds to contribute, he or she may contribute funds given to them by their spouse or common-law partner, with no attribution of income to the spouse or common-law partner. Note that a withdrawal in any year does not increase the TFSA room until the following calendar year. If you are thinking of making a withdrawal close to year end, make sure it is done by December 31 so you can have the withdrawal amount added back to the TFSA room sooner.

2018 RRSP Limit
The RRSP contribution limit is $26,230 in 2018 ($26,010 in 2017). The limit will increase to $26,500 in 2019. If you or your employer do not contribute to a pension plan, your 2018 “earned income” for RRSP purposes must be at least $147,222 to create RRSP contribution room of $26,500 in 2019. Please see the news release.

2018 Employment Insurance Rates
Employment Insurance (EI) rates for 2018 have changed to 1.66% (vs 1.63% for 2017) of earnings for employees. The maximum annual premium increases to $858.22 (from $836.19 in 2017). The rate for employers is 1.4 times the employee rate or 2.324%. The maximum insurable earnings for 2018 increases to $51,700 from $51,300 in 2017.

2018 Canada Pension Plan Rates
The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2018 will be $55,900 – up from $55,300 in 2017. Contributors who earn more than $55,900 in 2018 are not required or permitted to make additional contributions to the CPP.

The basic exemption amount for 2018 remains at $3,500. Individuals who earn less than that amount do not need to contribute to the CPP.

The employee and employer contribution rates for 2018 will remain unchanged at 4.95%, and the self-employed contribution rate will remain unchanged at 9.9%.

The maximum employer and employee contribution to the plan for 2018 will be $2,593.80 and the maximum self-employed contribution will be $5,187.60. The maximums in 2017 were $2,564.10 and $5,128.20.

Canada Pension Plan Changes for Persons Between Ages 60 and 70
Beginning in 2012, employers must withhold and remit CPP on wages paid to employees between ages 60 and 70, even if the employee is collecting CPP benefits. If the employee is between 65 and 70, he or she may file an election to opt out of paying CPP. These rules also apply to self-employed individuals. In order to avoid paying CPP, the election must be filed with CRA to take effect on the first of the following month. There are several other changes related to CPP benefits. Please contact us for information.

Prescribed Interest Rates
The prescribed rates for the first quarter of 2018 is as follows:

  • The interest rate paid on overpayments was 3%.
  • The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans was 1%.
  • The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance premiums was 5%.

For more information please see CRA’s website on prescribed rates.

2018 Combined Federal and Ontario Tax Brackets for Individuals and Corporations

2018 Combined Federal and Ontario Tax Brackets for Individuals

Taxable Income Regular Income

%

Ineligible (Private Corporation) Dividends % Eligible Canadian Dividends % Capital Gains %
$0 to $42,960 20.05 8.00 0.00 10.03
$42,961 to $46,605 24.15 12.76 0.00 12.08
$46,606 to $75,657 29.65 19.14 6.39 14.83
$75,658 to $85,923 31.48 21.26 8.92 15.74
$85,924 to $89,131 33.89 24.06 12.24 16.95
$89,132 to $93,208 37.91 28.72 17.79 18.95
$93,208 to $144,489 43.41 35.10 25.38 21.70
$144,490 to $150,000 46.41 38.58 29.52 23.20
$150,001 to $205,842 47.97 40.39 31.67 23.98
$205,843 to $220,000 51.97 45.03 37.19 25.98
$220,001 and up 53.53 46.84 39.34 26.76

(This table does not include the Ontario Health Premium.)

2018 Federal and Ontario Combined Corporate Income Tax Rates

Canadian Controlled Private Corporations Other Corporations
Small Business Income(up to $500,000) Investment Income** General Manufacturing and Processing General Active Business Income
13.50% 50.20%* 25.00% 26.50%
*30.667% of investment income is eligible for refund at a rate of $1 for every $2.61 of dividends paid.
**Canadian taxable dividend income (not from a connected corporation) is taxed federally only under Part IV at a rate of 38.33%. This tax is eligible for refund at a rate of $1 for every $2.61 of dividends paid.

2017 Tax Tips and Reminders

Year End Tax Planning

  1. Consider paying reasonable salaries to family members before year end. Reasonable salaries can be deducted by you and taxable to them at possibly lower rates.
  2. Businesses should purchase capital assets before year end. Assets purchased and in use before the business year end are eligible for one half of the usual capital cost allowance rate.
  3. Owner-managers should consider their salary/dividend mixfrom their corporation. If you have drawn funds from your corporation throughout the year, you should determine whether these amounts should be characterized as salary or dividends before the year end. Ritchie Shortt & Tully LLP can help you with this decision.
  4. Consider gifting funds or making interest-free loans to your spouse or an adult child to contribute to the Tax Free Savings Account.
  5. Consider selling investments with accrued losses before the end of the year to offset any gains you have had during the year. Capital losses in excess of gains can be carried back three years and forward indefinitely.
  6. Contribute to your RRSP by March 1, 2017 to make the contribution deductible for 2016. Also remember to make your required Home Buyer’s repayment by March 1, 2017.
  7. Charitable donations, medical expenses, political donations, child care expenses, investment counsel fees and professional dues should be paid by December 31, 2017 to be creditable or deductible in the 2017 year.
  8. Contribute to Registered Education Savings Plans for your children by December 31. Rather than an annual RESP contribution limit there is now a lifetime contribution limit of $50,000. When you contribute money to any RESP, the federal government will deposit an additional amount – the Canada Education Savings Grant (CESG) – equal to 20% of your contribution up to certain limits. The maximum CESG each year is $500 (20% x $2,500 contribution). The lifetime CESG limit is $7,200.
  9. Family caregiver tax credit -beginning in 2012, there is a $2,000 tax credit available to caregivers of infirm relatives including spouses, common-law partners and minor children.
  10. Direct Deposit – Canada Revenue Agency will soon stop mailing tax refunds and other benefits. We urge you to set up direct deposit at this time. This can be done online through “My Account” (if you are registered), by phone (call 1-800-959-8281), by completing and mailing the Direct Deposit Enrolment Form, or by providing us with a void cheque (we will submit this information to CRA when we electronically file your return).
  11. Ontario Healthy Homes Renovation Tax Credit – effective in 2012, this credit is a 15% refundable credit on up to $10,000 of eligible expenses per year incurred on or after October 1, 2011 for permanent home modifications that improve mobility and accessibility for seniors. The individual does not have to be disabled. Eligible expenses include ramps, stair lifts, walk-in tubs, handrails and more.

2017 Combined Federal and Ontario Tax Brackets for Individuals and Corporations

2017 Combined Federal and Ontario Tax Brackets for Individuals

Taxable Income

Regular Income

%

Ineligible (Private Corporation) Dividends %

Eligible Canadian Dividends %

Capital Gains %

$ 0 to $ 42,201

20.05

6.13

0.00

10.03

$ 42,201 to $ 45,916

24.15

10.93

0.00

12.08

$ 45,916 to $ 74,313

29.65

17.37

6.39

14.83

$ 74,313 to $ 84,404

31.48

19.51

8.92

15.74

$ 84,404 to $ 87,559

33.89

22.33

12.24

16.95

$ 87,559 to $ 91,831

37.91

27.03

17.79

18.95

$ 91,831 to $142,353

43.41

33.46

25.38

21.70

$142,353 to $150,000

46.41

36.97

29.52

23.20

$150,000 to $202,800

47.97

38.80

31.67

23.98

$202,800 to $220,000

51.97

43.48

37.19

25.98

$220,000 and up

53.53

45.30

39.34

26.76

(This table does not include the Ontario Health Premium.)

2017 Federal and Ontario Combined Corporate Income Tax Rates

Canadian Controlled Private Corporations

Other Corporations

Small Business Income

(up to $500,000)

Investment Income

General Manufacturing and Processing

General Active Business Income

15.00%

50.17%*

25.00%

26.50%

*30.667% of investment income is eligible for refund at a rate of $1 for every $2.61 of dividends paid. **
Canadian taxable dividend income (not from a connected corporation) is taxed federally only under Part IV at a rate of 38.33%. This tax is eligible for refund at a rate of $1 for every $2.61 of dividends paid. **
** These rules may change with the July 18, 2017 federal tax proposals.

2016 Tax Tips and Reminders

2014 Employer Health Tax Changes
As of January 1, 2014, the EHT exemption increased to $450,000 from $400,000. To better target EHT relief, the exemption is eliminated for private-sector employers (including groups of associated employers) with annual Ontario payrolls over $5 million. Registered charities will continue to claim the exemption at all payroll sizes.

2015 Combined Federal and Ontario Tax Brackets for Individuals

Taxable Income

Regular Income %

Ineligible (Private Corporation) Dividends %

Eligible Canadian Dividends %

Capital Gains %

$0 to $40,922

20.05

5.35

0.00

10.03

$40,922 to $44,701

24.15

10.19

0.00

12.08

$44,701 to $72,064

31.15

18.45

9.63

15.58

$72,064 to $81,847

32.98

20.61

10.99

16.49

$81,847 to $84,902

35.39

23.45

14.31

17.70

$84,902 to $89,401

39.41

28.19

19.86

19.70

$89,401 to $138,586

43.41

32.91

25.38

21.70

$138,586 to $150,000

46.41

36.45

29.52

23.20

$150,000 to $220,000

47.97

38.29

31.67

23.98

$220,000 and over

49.53

40.13

33.82

24.76

(This table does not include the Ontario Health Premium)

2015 Federal and Ontario Combined Corporate Income Tax Rates

Canadian Controlled Private Corporations

Other Corporations

Small Business Income

(up to $500,000)

Investment Income

General Manufacturing and Processing

General Active Business Income

15.5%

46.17%*

25%

26.5%

*26.667% of investment income is eligible for refund at a rate of $1 for every $3 of dividends paid.

Canadian taxable dividend income (not from a connected corporation) is taxed federally only under Part IV at a rate of 33.33%. This tax is eligible for refund at a rate of $1 for every $3 of dividends paid.

Universal Child Care Benefit (UCCB)

The UCCB was introduced in 2006 as a taxable benefit designed to help Canadian families. On January 1, 2015, the UCCB was expanded to include a new benefit for children aged 6 through 17, and the payments that parents receive for children under the age of 6 were increased. The UCCB was increased from $100 to $160 per month for each child under the age of 6. The UCCB was expanded to children aged 6 through 17. Parents will receive a benefit of up to $60 per month for each child in their care aged 6 through 17.

For more information on how to apply for the UCCB, visit the CRA website UCCB information.

Note that on December 7, 2015, Finance Minister Bill Morneau commented on two Liberal platform commitments. He announced that the proposed Canada Child Benefit, which will replace the Universal Child Care Benefit, Child Tax Benefit and National Child Benefit Supplement, will begin July 1, 2016. The Finance Minister also announced the intention to eliminate the Family Tax Cut for 2016 and subsequent tax years.

Investing in the UCCB

The UCCB is taxable in the hands of the lower-income spouse. However, recent changes to the law mean that you can invest the UCCB money in your child’s name so that all the investment earnings are taxed in your child’s hands. In 2015, everyone can earn up to $11,327 tax-free, so your child is not likely to owe tax on the earnings.

For information on how to apply for the UCCB, visit the CRA website UCCB information.

2016 Combined Federal and Ontario Tax Brackets for Individuals and Corporations

Taxable Income

Regular Income

%

Ineligible (Private Corporation) Dividends %

Eligible Canadian Dividends %

Capital Gains %

$0 to $41,536

20.05

6.13

0.00

10.03

$41,536 to $45,282

24.15

10.93

0.00

12.08

$45,282 to $73,145

29.65

17.37

6.39

14.83

$73,145 to $83,075

31.48

19.51

8.92

15.74

$83,075 to $86,176

33.89

22.33

12.24

16.95

$86,176 to $90,563

37.91

27.03

17.79

18.95

$90,563 to $140,388

43.41

33.46

25.38

21.70

$140,388 to $150,000

46.41

36.97

29.52

23.20

$150,000 to $200,000

47.97

38.80

31.67

23.98

$200,000 to $220,000

51.97

43.48

37.19

25.98

$220,000 and over

53.53

45.30

39.34

26.76

(This table does not include the Ontario Health Premium)

2016 Federal and Ontario Combined Corporate Income Tax Rates

Canadian Controlled Private Corporations

Other Corporations

Small Business Income

(up to $500,000)

Investment Income**

General Manufacturing and Processing

General Active Business Income

15%

50.17%*

25%

26.5%

*30.667% of investment income is eligible for refund at a rate of $1 for every $2.61 of dividends paid.

**Canadian taxable dividend income (not from a connected corporation) is taxed federally only under Part IV at a rate of 38.33%. This tax is eligible for refund at a rate of $1 for every $2.61 of dividends paid.

2015 Tax Tips and Reminders

2015 TFSA limit is $5,500
The Tax Free Savings Account (TFSA) limit is $5,500 for 2015. The limit was $5,500 for 2014 and 2013. For 2009 to 2012, the limit was $5,000. Contributions can be made by Canadian residents aged 18 or over. Any unused contribution room can be carried forward. There is no lifetime limit to the amount of the contributions. If a person has contribution room, but no funds to contribute, he or she may contribute funds given to them by their spouse or common-law partner, with no attribution of income to the spouse or common-law partner. Note that a withdrawal in any year does not increase the TFSA room until the following calendar year. If you are thinking of making a withdrawal close to year end, make sure it is done by December 31 so you can have the withdrawal amount added back to the TFSA room sooner.

2015 RRSP and Pension Limits
The RRSP contribution limit increases to $24,930 in 2015 from $24,270 in 2014. Please see the news release.

2014 Employer Health Tax Changes
As of January 1, 2014, the EHT exemption increased to $450,000 from $400,000. To better target EHT relief, the exemption is eliminated for private-sector employers (including groups of associated employers) with annual Ontario payrolls over $5 million. Registered charities will continue to claim the exemption at all payroll sizes.

2015 Employment Insurance Rates
Employment Insurance (EI) rates for 2015 have remained unchanged at 1.88% of earnings for employees. The maximum annual premium increased to $930.60 (from $913.68 in 2014). The rate for employers is 1.4 times the employee rate or 2.632%. The maximum insurable earnings for 2015 increased to $49,500 from $48,600 in 2014.

2015 Canada Pension Plan Rates
The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2015 will be $53,600 – up from $52,500 in 2014. Contributors who earn more than $53,600 in 2015 are not required or permitted to make additional contributions to the CPP.

The basic exemption amount for 2015 remains $3,500. Individuals who earn less than that amount do not need to contribute to the CPP.

The employee and employer contribution rates for 2015 will remain unchanged at 4.95%, and the self-employed contribution rate will remain unchanged at 9.9%.

The maximum employer and employee contribution to the plan for 2015 will be $2,479.95, and the maximum self-employed contribution will be $4,959.90. The maximums in 2014 were $2,425.50 and $4,851.00.

Canada Pension Plan Changes for Persons Between Ages 60 and 70
Beginning in 2012, employers must withhold and remit CPP on wages paid to employees between ages 60 and 70, even if the employee is collecting CPP benefits. If the employee is between 65 and 70, he or she may file an election to opt out of paying CPP. These rules also apply to self-employed individuals. In order to avoid paying CPP, the election must be filed with CRA to take effect on the first of the following month. There are several other changes related to CPP benefits. Please contact us for information.

Prescribed Interest Rates
The prescribed rates for the first quarter of 2015 and for all four quarters of 2014 were as follows:

  • The interest rate paid on overpayments was 3%.
  • The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans was 1%.
  • The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance premiums was 5%.

For more information please see CRA’s website on prescribed rates.

2014 Tax Tips and Reminders

2014 TFSA limit is $5,500
The Tax Free Savings Account (TFSA) limit is $5,500 for 2014 and was increased in 2013 to $5,500 from $5,000 in previous years beginning in 2009. Contributions can be made by Canadian residents aged 18 or over. Any unused contribution room can be carried forward. There is no lifetime limit to the amount of the contributions. If a person has contribution room, but no funds to contribute, he or she may contribute funds given to them by their spouse or common-law partner, with no attribution of income to the spouse or common-law partner. Note that a withdrawal in any year does not increase the TFSA room until the following calendar year. If you are thinking of making a withdrawal close to year end, make sure it is done by December 31 so you can have the withdrawal amount added back to the TFSA room sooner.

2014 RRSP and Pension Limits
The RRSP contribution limit increases to $24,270 in 2014 and to $24,930 in 2015. The RRSP contribution limit was $23,820 in 2013. Please see the news release.

2014 Employer Health Tax Changes
As announced in the 2013 Ontario Budget, to provide greater Employer Health Tax (EHT) relief to small businesses, the government proposes to increase the amount of annual payroll that is exempt from the tax from $400,000 to $450,000 and index this amount for inflation. To better target EHT relief, the exemption would be eliminated for private-sector employers (including groups of associated employers) with annual Ontario payrolls over $5 million. Registered charities would continue to claim the exemption at all payroll sizes. The government proposes to introduce legislation to implement these proposed changes that would, subject to the approval of the Legislature, be effective January 1, 2014.

2014 Employment Insurance Rates
Employment Insurance (EI) rates for 2014 have remained unchanged at 1.88% of earnings for employees. The maximum annual premium increased to $913.68 (from $839.97 in 2013). The rate for employers is 1.4 times the employee rate or 2.632%. The maximum insurable earnings for 2014 increased to $48,600 from $47,400 in 2013.

2014 Canada Pension Plan Rates
The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2014 will be $52,500 – up from $51,100 in 2013. Contributors who earn more than $52,500 in 2014 are not required or permitted to make additional contributions to the CPP.

The basic exemption amount for 2014 remains $3,500. Individuals who earn less than that amount do not need to contribute to the CPP.

The employee and employer contribution rates for 2014 will remain unchanged at 4.95%, and the self-employed contribution rate will remain unchanged at 9.9%.

The maximum employer and employee contribution to the plan for 2014 will be $2,425.50, and the maximum self-employed contribution will be $4,851.00. The maximums in 2013 were $2,356.20 and $4,712.40.

Canada Pension Plan Changes for Persons Between Ages 60 and 70
Beginning in 2012, employers must withhold and remit CPP on wages paid to employees between ages 60 and 70, even if the employee is collecting CPP benefits. If the employee is between 65 and 70, he or she may file an election to opt out of paying CPP. These rules also apply to self-employed individuals. In order to avoid paying CPP, the election must be filed with CRA to take effect on the first of the following month. There are several other changes related to CPP benefits. Please contact us for information.

Prescribed Interest Rates 2014
The prescribed rates for 2014 were as follows:

  • The interest rate paid on overpayments was 3%.
  • The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans was 1%.
  • The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance premiums was 5%.

For more information please see CRA’s website on prescribed rates.

2013 Tax Tips and Reminders

2013 TFSA limit has increased to $5,500
The Tax Free Savings Account limit has increased in 2013 to $5,500 per year (from $5,000). Contributions can be made by Canadian residents aged 18 or over. Up to $5,000 per year ($5,500 for 2013) can be contributed, with unused contribution room being carried forward. There is no lifetime limit to the amount of the contributions. If a person has contribution room, but no funds to contribute, he or she may contribute funds given to them by their spouse or common-law partner, with no attribution of income to the spouse or common-law partner. Note that a withdrawal in any year does not increase the TFSA room until the following calendar year. If you are thinking of making a withdrawal close to year end, make sure it is done by December 31 so you can have the withdrawal amount added back to the TFSA room sooner.

2013 Employment Insurance Rates
Employment Insurance (EI) rates for 2013 have increased to 1.88% of earnings for employees (from 1.83% in 2012) as has the maximum annual premium of $839.97 (from $786.76 in 2012). The rate for employers is 1.4 times the employee rate or 2.632%. The maximum insurable earnings for 2013 increased to $47,400 from $45,900 in 2012.

2013 Canada Pension Plan Rates
The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2013 will be $51,100 – up from $50,100 in 2012. Contributors who earn more than $51,100 in 2013 are not required or permitted to make additional contributions to the CPP.

The basic exemption amount for 2013 remains $3,500. Individuals who earn less than that amount do not need to contribute to the CPP.

The employee and employer contribution rates for 2013 will remain unchanged at 4.95%, and the self-employed contribution rate will remain unchanged at 9.9%.

The maximum employer and employee contribution to the plan for 2013 will be $2,356.20, and the maximum self-employed contribution will be $4,712.40. The maximums in 2012 were $2,306.70 and $4,613.40.

Reminder of 2012 Canada Pension Plan Changes
Beginning in 2012, employers must withhold and remit CPP on wages paid to employees between ages 60 and 70, even if the employee is collecting CPP benefits. If the employee is between 65 and 70, he or she may file an election to opt out of paying CPP. These rules also apply to self-employed individuals. In order to avoid paying CPP, the election must be filed with CRA to take effect on the first of the following month. There are several other changes related to CPP benefits. Please contact us for information.

Prescribed Interest Rates For First Quarter 2013
The CRA announced December 6th, the prescribed interest rates for the first calendar quarter of 2013:

  • The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance premiums will be 5%.
  • The interest rate paid on overpayments will be 3%.
  • The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans will be 1%.

For more information please see CRA’s website on prescribed rates.The prescribed rate has remained the same since April 1, 2009.

2013 RRSP and Pension Limits
The RRSP contribution limit increases to $23,820 in 2013 and to $24,270 in 2014 . The RRSP contribution limit was $22,970 in 2012. Please see the news release.

Please note: this material is general in nature and should not be relied upon to replace the requirement for specific professional advice.

2012 Tax Tips and Reminders

2012 Employment Insurance Rates.
Employment Insurance (EI) rates for 2012 have increased to 1.83% of earnings for employees (from 1.78% in 2011) as has the maximum annual premium of $840 (from $787 in 2011). The rate for employers is 1.4 times the employee rate or 2.56%. The maximum insurable earnings for 2012 increased to $45,900 from $44,200 in 2011.

2012 Canada Pension Plan Rates
The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2012 will be $50,100 – up from $48,300 in 2011. Contributors who earn more than $50,100 in 2012 are not required or permitted to make additional contributions to the CPP.

The basic exemption amount for 2012 remains $3,500. Individuals who earn less than that amount do not need to contribute to the CPP.

The employee and employer contribution rates for 2012 will remain unchanged at 4.95%, and the self-employed contribution rate will remain unchanged at 9.9%.

The maximum employer and employee contribution to the plan for 2012 will be $2,307, and the maximum self-employed contribution will be $4,613. The maximums in 2011 were $2,218 and $4,435.

2012 Canada Pension Plan Changes
Beginning in 2012, employers must withhold and remit CPP on wages paid to employees between ages 60 and 70, even if the employee is collecting CPP benefits. If the employee is between 65 and 70, he or she may file an election to opt out of paying CPP. These rules also apply to self-employed individuals. In order to avoid paying CPP, the election must be filed with CRA to take effect on the first of the following month. There are several other changes related to CPP benefits. Please contact us for information.

Prescribed Interest Rates For First Quarter 2012
The CRA announced December 8th, the prescribed interest rates for the first calendar quarter of 2012:

  • The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance premiums will be 5%.
  • The interest rate paid on overpayments will be 3%.
  • The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans will be 1%.

For more information please see the news release.

2012 RRSP and Pension Limits

The RRSP contribution limit increases to $22,970 in 2012. The RRSP contribution limit was $22,450 in 2011. Please see the news release.

Please note: this material is general in nature and should not be relied upon to replace the requirement for specific professional advice.

2012 Combined Federal and Ontario Tax Brackets for Individuals and Corporations

2012 Combined Federal and Ontario Tax Brackets for Individuals

Taxable Income

Regular Income %

Ineligible (Private Corporation) Dividends %

Eligible Canadian Dividends %

Capital Gains %

$0 to $39,020

20.05

2.77

0.00

10.03

$39,020 to $42,707

24.15

7.90

3.80

12.08

$42,707 to $68,713

31.15

16.65

13.43

15.58

$68,713 to $78,043

32.98

17.81

14.19

16.49

$78,043 to $80,955

35.39

20.82

17.51

17.70

$80,955 to $85,414

39.41

23.82

19.88

19.71

$85,414 to $132,406

43.41

28.82

25.40

21.71

$132,406 to $500,000

46.41

32.57

29.54

23.21

$500,000 and over

47.97

34.52

31.69

23.99

(This table does not include the Ontario Health Premium)

Ontario Personal Tax Rates

In 2012, the 20% Ontario surtax will apply where the basic Ontario tax exceeds $4,213 and the additional 36% surtax will apply to basic Ontario tax over $5,392. This tax affects individuals with taxable income over $500,000. As shown in the tax chart above, this has pushed the top marginal tax rate in Ontario from 46.41% to 47.97% in 2012 and to 49.53% in 2013.Tax planning to limit the amount of income taxed at this top rate is now more important than ever.

Strategies include:

  1. Income splitting with family members. Current legislation requires interest at 1% be charged on spousal loans making shifting income to a low income spouse very inexpensive.
  2. Leave earnings in a corporation rather than paying out bonuses or dividends.
  3. Transferring investments into a corporation.
  4. If your income is temporarily over $500,000, consider purchasing flow-through shares in that year to create a tax deduction.

2012 Federal and Ontario Combined Corporate Income Tax Rates

Canadian Controlled
Private Corporations

Other Corporations

Small Business Income
(up to $500,000)

Investment Income

General Manufacturing and Processing

General Active Business Income

15.5%

46.17%*

25%

26.5%**

*26.667% of investment income is eligible for refund at a rate of $1 for every $3 of dividends paid.

2011 Tax Tips and Reminders

2011 Employment Insurance Rates
Employment Insurance (EI) rates for 2011 have increased to 1.78% of earnings for employees (from 1.73% in 2010) as has the maximum annual premium of $786.76 (from $747.36 in 2010). The rate for employers is 1.4 times the employee rate or 2.492%. The maximum insurable earnings for 2011 increased to $44,200 from $43,200 in 2010.

2011 Canada Pension Plan Rates
The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2011 will be $48,300 – up from $47,200 in 2010. Contributors who earn more than $48,300 in 2011 are not required or permitted to make additional contributions to the CPP.

The basic exemption amount for 2011 remains $3,500. Individuals who earn less than that amount do not need to contribute to the CPP.

The employee and employer contribution rates for 2011 will remain unchanged at 4.95%, and the self-employed contribution rate will remain unchanged at 9.9%.

The maximum employer and employee contribution to the plan for 2011 will be $2,217.60, and the maximum self-employed contribution will be $4,435.20. The maximums in 2010 were $2,163.15 and $4,326.30.

Prescribed Interest Rates For First Quarter 2011
The CRA announced December 8th, the prescribed interest rates for the first calendar quarter of 2011:

  • The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance premiums will be 5%.
  • The interest rate paid on overpayments will be 3%.
  • The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans will be 1%.

For more information please see the news release.

2011 RRSP and Pension Limits

The RRSP contribution limit increases to $22,450 in 2011. The RRSP contribution limit was $22,000 in 2010. Please see the news release.

Please note: this material is general in nature and should not be relied upon to replace the requirement for specific professional advice.

2011 Combined Federal and Ontario Tax Brackets for Individual and Corporations

2011 Combined Federal and Ontario Tax Brackets for Individuals

Taxable Income

Regular Income %

Ineligible (Private Corporation) Dividends %

Eligible Canadian Dividends %

Capital Gains %

$0 to $37,774

0 – 20.05

0 – 2.77

0.00

0 – 10.03

$37,774 to $41,544

24.15

7.90

3.88

12.08

$41,544 to $66,514

31.15

16.65

11.72

15.58

$66,514 to $75,550

32.98

17.81

12.50

16.49

$75,550 to $78,361

35.39

20.82

15.90

17.70

$78,361 to $83,088

39.41

23.82

18.32

19.71

$83,088 to $128,800

43.41

28.82

23.96

21.71

$128,800 and over

46.41

32.57

28.19

23.21

(This table does not include the Ontario Health Premium)

2011 Federal and Ontario Combined Corporate Income Tax Rates

Canadian Controlled
Private Corporations

Other Corporations

Active Business Income
(up to $500,000)

Investment Income

Manufacturing and Processing

General

15.50%

46.42%*

26.5%

28.25%**

*26.667% of investment income is eligible for refund at a rate of $1 for every $3 of dividends paid.

** The general corporate tax rate is scheduled to be reduced to 25% by 2014.

2010 Tax Tips and Reminders

2010 Employment Insurance Rates
Employment Insurance (EI) rates for 2010 remain unchanged at 1.73% of earnings for employees as does the maximum annual premium of $747.36. The rate for employers is 1.4 times the employee rate or 2.422%. The maximum insurable earnings for 2010 increased to $43,200 from $42,300 in 2009.

2010 Canada Pension Plan Rates
The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2010 will be $47,200 – up from $46,300 in 2009. Contributors who earn more than $47,200 in 2010 are not required or permitted to make additional contributions to the CPP.

The basic exemption amount for 2010 remains $3,500. Individuals who earn less than that amount do not need to contribute to the CPP.

The employee and employer contribution rates for 2010 will remain unchanged at 4.95%, and the self-employed contribution rate will remain unchanged at 9.9%.

The maximum employer and employee contribution to the plan for 2010 will be $2,163.15, and the maximum self-employed contribution will be $4,326.30. The maximums in 2009 were $2,118.60 and $4,237.20.

Prescribed Interest Rates For First Quarter 2010
The CRA announced December 3rd, the prescribed interest rates for the first calendar quarter of 2010:

  • The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance premiums will be 5%.
  • The interest rate paid on overpayments will be 3%.
  • The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans will be 1%.

For more information please see the news release.

2010 RRSP and Pension Limits

The RRSP contribution limit increases in 2010 to $22,000. Please see the news release.

2010 Combined Federal and Ontario Tax Brackets for Individuals and Corporations

2010 Combined Federal and Ontario Tax Brackets for Individuals

Taxable Income

Regular Income %

Ineligible (Private Corporation) Dividends %

Eligible Canadian Dividends %

Capital Gains %

$0 to $37,106

0 – 20.05

0 – 2.77

0.00

0 – 10.03

$37,107 to $40,970

24.15

7.89

3.96

12.08

$40,971 to $65,344 31.15 16.64 9.76 15.58
$65,345 to $74,214

32.98

17.81

10.55

16.49

$74,215 to $76,986

35.39

20.82

14.03

17.70

$76,987 to $81,941

39.41

23.82

16.49

19.70

$81,942 to $127,021 43.41 28.82 22.25 21.70
$127,022 and over

46.41

32.57

26.57

23.20

(This table does not include the Ontario Health Premium)

2010 Federal and Ontario Combined Corporate Income Tax Rates

Canadian Controlled
Private Corporations
Other Corporations

Active Business Income
(up to $500,000)

Investment Income

Manufacturing and Processing

General

16.00%*

47.67%**

29.00%

31.00%***

*Ontario decreased the small business corporate tax rate from 5.5% to 4.5%, effective July 1, 2010.

**26.667% of investment income is eligible for refund at a rate of $1 for every $3 of dividends paid.

***The general federal corporate tax rate was decreased from 19% to 18%, effective January 1, 2010. The general Ontario corporate tax rate was decreased from 14% to 12% effective July 1, 2010.

Note that the general corporate tax rate will be reduced from 31% in 2010 to 25% by July 1, 2013.

2009 Tax Tips and Reminders

  • Automobiles – The automotive rates for 2009 are $0.52 per kilometre for the first 5,000 km and $0.46 per kilometre for each additional kilometre in excess of 5,000 kilometres. The taxable operating benefit for company-owned vehicles is $0.24 per kilometre per personal use kilometre. See FAQ for details on allowed automobile amounts.
  • CRA prescribed interest rates for the first quarter of 2009 are 2% for calculating taxable benefits, 4% on refunds of income tax overpayments and 6% on payments of overdue accounts.
  • Maximum Employment Insurance premiums for 2009 are: employee $731.79; employer $1,024.51 for a total of $1,756.30 ($1,706.47 in 2008).
  • Maximum Canada Pension Plan pensionable earnings for 2009are $46,300 with an exemption of $3,500, leaving a maximum contributory earnings of $42,800 at 4.95% equalling $2,118.60. The employer (or self-employed person) matches this amount for a total of $4,237.20 ($4,098.60 in 2008).
  • Effective March 31, 2009, the general minimum wage will increase from $8.75 to $9.50 per hour. The minimum wage for students under 18 who do not work more than 28 hours a week will rise from $8.20 per hour to $8.90 per hour. For more information on minimum wage, including the upcoming increases to the rates, visit the Ontario Ministry of Labourwebsite.

October 30, 2007 Economic Statement's Tax Reductions

Here are the highlights of the October 30, 2007 Economic Statement’s Tax Reductions:

  • The general federal corporate tax rate will be reduced from 22.12% in 2007 to 15% by 2012
  • The small business tax rate will be reduced to 11% effective January 1, 2008 instead of 2009 as previously proposed
  • The GST rate will be reduced to 5% effective January 1, 2008
  • The lowest personal income tax rate will be reduced retroactively to January 1, 2007
  • The basic personal amount tax credit for 2007 will be increased to $9,600 and to $10,100 in 2009
  • The employer and employee Employment Insurance (EI) contributions will be reduced in 2008
  • The national debt will be reduced by $10 billion this fiscal year

To read full details on the Department of Finance Canada’s website, please click here.

2007 Tax Tips and Reminders

  • Automobiles – The automotive rates for 2007 are $0.50 per kilometre for the first 5,000 km and $0.44 per kilometre for each additional kilometre in excess of 5,000 kilometres. The taxable operating benefit for company-owned vehicles is $0.22 per kilometre per personal use kilometre. See FAQ for details on allowed automobile amounts.
  • CRA prescribed interest rates for the fourth quarter of 2007 are 5% for calculating taxable benefits, 7% on refunds of income tax overpayments and 9% on payments of overdue accounts.
  • Maximum Employment Insurance premiums for 2007 are: employee $720.00; employer $1,008.00 for a total of $1,728.00 ($1,750.32 in 2006).
  • Maximum Canada Pension Plan pensionable earnings for 2007are $43,700 with an exemption of $3,500, leaving a maximum contributory earnings of $40,200 at 4.95% equalling $1,989.90. The employer (or self-employed person) matches this amount for a total of $3,979.80 ($3,821.40 in 2006).
  • Effective February 1, 2007, the general minimum wage increased from $7.75 to $8.00 per hour. The minimum wage for students under 18 who do not work more than 28 hours a week rose from $7.25 per hour to $7.50 per hour. The minimum wage for liquor servers rose from $6.75 per hour to $6.95 per hour. For more information on minimum wage visit the Ontario Ministry of Labour website.

CPP Changes for 2007

The Canada Revenue Agency recently announced that the maximum pensionable earnings under the Canada Pension Plan (CPP) for 2007 will be $43,700, up from $42,100 in 2006. The new ceiling was calculated according to a CPP legislated formula that takes into account the growth in average weekly wages and salaries in Canada.

Contributors who earn more than $43,700 in 2007 are not required or permitted to make additional contributions to the CPP.

The basic exemption amount for 2007 remains $3,500. Individuals who earn less than that amount do not need to contribute to the CPP.

The employee and employer contribution rates for 2007 will remain unchanged at 4.95%, and the self-employed contribution rate will remain unchanged at 9.9%. The maximum employee and employer contributions to the plan for 2007 will be $1,989.90, and the maximum self-employed contribution will be $3,979.80. The maximums in 2006 were $1,910.70 and $3,821.40.

2006 Federal Budget Highlights

On May 2, 2006, changes that may affect you or your business were announced in the federal budget. Click here for the highlights.

Provincial tax changes effective July 1, 2004

Ontario Health Premium – On May 18, 2004, the Minister of Finance for Ontario announced changes to the Ontario tax for 2004. The Ontario Health Premium will be payable on annual taxable income in excess of $20,000. The Ontario Health Premium is not related to the Employer Health Tax for Ontario. Effective July 1, 2004, the Ontario Health Premium is calculated as follows:

Health Premium Payable (per individual)

Taxable Income 2004 Taxation year 2005 Taxation year
Up to $20,000 Nil Nil
$20,000 to $25,000 3% of income > $20,000 6% of income > $20,000
$25,000 to $36,000 $150 $300
$36,000 to $36,600 $150 + 12.5% of

income > $36,000

$300 + 25% of

income > $36,000

$36,600 to $48,000 $225 $450
$48,000 to $48,600 $225 + 12.5% of

income > $48,000

$450 + 25% of

income > $48,000

$48,600 to $72,000 $300 $600
$72,000 to $72,600 $300 + 12.5% of

income > $72,000

$600 + 25% of

income > $72,000

$72,600 to $200,000 $375 $750
$200,000 to $200,600 $275 + 12.5% of

income > $200,000

$750 + 25% of

income > $200,000

$200,600 and over $450 $900

Click here to access Frequently Asked Questions regarding the Ontario Health Premium on the CRA website

2004 Federal Budget Highlights

Unless otherwise noted the changes are effective March 22, 2004.

  • Fines and Penalties – The Budget proposes that, with exceptions, all fines or penalties imposed by federal, provincial or municipal governments in Canada or by a foreign country are not deductible. This includes any fines or penalties imposed by any person with a statutory authority to levy a fine or penalty. Penalty interest imposed under the Excise Act, the Air Travelers Security Charge Act and the GST/HST portions of the Excise Tax Act will continue to be deductible.
  • Capital Cost Allowance on Computer Equipment – The Budget proposes that the CCA rate for “general purpose electronic data processing and system software” (computer equipment) increase from 30% to 45%. The separate class election provisions for rapidly depreciating electronic equipment will not be available for this new class. As an interim measure, taxpayers may elect to include acquisitions of computer equipment before 2005 in class 10 (30%) and still be eligible for the separate class election.
  • Small Business Deduction – For 2005 and subsequent years, the Small Business Deduction available to Canadian Controlled Private Corporations (CCPCs) has a new proposed business limit of $300,000. Taxpayers with taxation years that are not calendar years will be required to pro-rate the increase to the limit.
  • Carry-forward Periods for Business Losses – For losses and credits that arise in taxation years ending after March 22, 2004, non-capital losses will now be eligible for a ten year carry-forward period. This is an increase from the current seven year carry-forward period.
  • Taxpayer-Request Adjustments – Generally, the Income Tax Act (ITA) prevents the Minister from assessing tax after the “normal reassessment period”, which is three or four years after the day of mailing an original Notice of Assessment. However, the ITA provides the Minister with discretion with respect to any year since 1985 to:
    • accept late, amended or cancelled elections from any taxpayer,
    • waive or cancel interest for any taxpayer,
    • reassess returns to refund taxes beyond the normal reassessment period for individuals and testamentary trusts to correct any error or omission on their return.

The Budget proposes that the discretion will now only apply to requests that are in respect of a taxation year that ended in the previous ten calendar years. This amendment is to be effective in 2005. Therefore, taxpayers have the remainder of 2004 to review their records and make any requests for earlier years.

Please contact us to determine how these measures may affect you or your business.

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