Update on the Federal Budget

The Federal Budget was tabled this afternoon in Ottawa.  There will be detailed analysis available of the proposals from various sources so we will not expand at great length in this report.  However, we have provided below a brief summary of the tax measures that we feel may be most relevant to our clients:

PERSONAL TAX MEASURES

  1. Spousal and Equivalent to Spouse credits are increased to match the basic personal amount.
  2. Phased retirement will be allowed whereby someone receiving a partial pension can still accumulate credit for continued work.
  3. The WITB is supplemented for disabled individuals.
  4. The $4,000 annual contribution limit to the RESP is eliminated and the lifetime limit is increased to $50,000.  The maximum Canada Education Savings Grant is increased to $2,500.  RESP funds can now be used for qualifying part time education.
  5. The Mineral Exploration Tax Credit has been extended to March 2008.
  6. CCA rates are tinkered with by increasing the rate of CCA for the following equipment:  Buildings used for manufacturing (from 4% to 10%), Other non-residential buildings (from 4% to 6%), Computer equipment (from 45% to 55%).  There were other rate changes for assets that we may not see with out clients.
  7. Interest will no longer be deductible on funds borrowed to acquire shares of a foreign affiliate.
  8. Currently, a corporation must pay federal income tax installments if its corporate tax for the prior year exceeds $1,000.  This threshold is increasing to $3,000.
  9. Employers are allowed to remit source deductions quarterly if their average monthly remittance for either of their two preceding calendar years is under $1,000.  This threshold is increasing to $3,000.

 BUSINESS TAX MEASURES

  1. CCA rates are tinkered with by increasing the rate of CCA for the following equipment:  Buildings used for manufacturing (from 4% to 10%), Other non-residential buildings (from 4% to 6%), Computer equipment (from 45% to 55%).  There were other rate changes for assets that we may not see with out clients.
  2. CCA on manufacturing and processing machinery and equipment is increased temporarily to 50% for Class 43 for assets acquired before 2009.
  3. Interest will no longer be deductible on funds borrowed to acquire shares of a foreign affiliate.
  4. A new 25% non-refundable investment tax credit for employers who create licensed child care spaces for children of their employees.  The maximum credit will be $10,000 per space
  5. Currently, a corporation must pay federal income tax installments if its corporate tax for the prior year exceeds $1,000.  This threshold is increasing to $3,000.
  6. The frequency of remitting corporate tax installments will become quarterly from the current monthly requirement for corporations who qualify for the small business deduction, have taxable income of less than $400,000, taxable capital of under $10 million and no compliance irregularities.
  7. Employers are allowed to remit source deductions quarterly if their average monthly remittance for either of their two preceding calendar years is under $1,000.  This threshold is increasing to $3,000.

COMMODITY TAX MEASURES

  1. GST registrants can file annually and remit quarterly if their annual taxable sales are under $500,000.  This threshold is increasing to $1.5 million.  Further, if their net annual remittance is under $1,500, the remittance can be made annually.  This threshold is increasing to $3,000.
  2. A special levy of up to $4,000 will be payable on the purchase of fuel inefficient vehicles.