Budget 2016 Hightlights

Some of the highlights of the Federal Budget tabled Tuesday by Liberal Finance Minister Bill Morneau:

• Deficit – $29.4 billion this year, $29 billion the next before falling – but no surplus forecast before the next election.
• Debt – Expected to grow by $113 billion by 2020-21, but debt-to-GDP ratio to stay mostly flat at around 32 per cent.
• Growth – Deficit based on 0.4% annual growth – much lower than economists predict.
• Infrastructure – $120 billion over 10 years, focusing first on public transit, water, waste management and housing infrastructure.
• First Nations – $8.4 billion over five years, with $2.6 billion of that to improve primary and secondary education on reserves. Other funding for drinking water and housing, as well as family and child services.
• Corporate Class Mutual Funds – Tax-free switching within corporate class mutual funds is over: After September 2016, moving from one share class to another is a taxable event.
• Small Business Tax Rate – The previous government introduced a plan to reduce the tax rate on the first $500,000 of active business income from 11% to 9% by 2019. The Liberals are freezing the rate at its current level of 10.5%.
• Donations Of Private Company Shares And Real Estate – The previous government introduced a proposal that would have made donations involving the proceeds from the sale of private company shares or real estate exempt from capital gains tax, as long as the donation took place within 30 days of the sale. The Liberal government will not proceed with this proposal.
• Income Splitting – An end to income splitting for families with children under 18 (the Family Tax Cut, which allowed for savings of up to $2,000 per year), and a phasing out of the children’s fitness tax credit and the children’s arts tax credit. The fitness and arts tax credits, worth up to $150 and $75 respectively for those who claim them, will be cut in half for 2016 and eliminated for 2017.
• New Canada Child Benefit Program – A new Canada Child Benefit program that replaces the current Canada Child Tax Benefit, National Child Benefit and Universal Child Care Benefit. The new program will pay up to $6,400 per child under six and up to $5,400 per child for those aged six through 17. However, the benefits begin to phase out starting at $30,000 in net family income.
• Labour-Sponsored Venture Capital Corporations – To facilitate access to venture capital for small and medium-sized businesses and support saving by the middle class, the budget restores the Labour-Sponsored Venture Capital Corporations (LSVCC) tax credit to 15% for share purchases of provincially registered LSVCCs for 2016 and subsequent tax years.
• RRSPs – In their election campaign the Liberals said they would change the rules to allow people to dip into their RRSPs more than once to buy a home. This was not in the budget.
• Stock Options Spared – After outcry over possible changes to the taxation of stock options, the Liberal government has left the existing regime in place – at least for now.

·         Capital Gains Inclusion Rate – The Liberal government didn’t change the capital gains rate in today’s federal budget. Many had speculated the government would increase the capital gains inclusion rate from 50% to 66.67%, or even as high as 75%. Instead, it’s been kept at 50%.