Tax Changes Announced December 7, 2015

The new federal government announced its first significant income tax changes on December 7, 2015.  Many of the changes were expected based on their election platform, while proposed changes to corporate tax rates were unexpected.  Once enacted into law, the changes will be effective January 1, 2016.  The key changes include:

·         Reducing the second personal income tax rate to 20.5% from 22%

·         Introducing a 33% personal income tax rate on individual taxable income in excess of $200,000 (a 4% increase).  This increased rate will also apply for the purposes of trusts and estates which do not qualify for graduated rates and tax on split income with minor children

·         Returning the Tax-Free Savings Account (TFSA) annual contribution limit to $5,500 from $10,000 and reinstating indexation of the TFSA annual contribution limit

·         A number of changes will be made to corporate income tax rates to account for higher personal tax rates.  These changes are meant to ensure that high rate taxpayers holding investments inside a corporation are not advantaged in any way

·         Additional proposals are expected with regards to the Canada Child Benefit

For more information about the proposed income tax changes, please do not hesitate to contact us or visit: http://www.fin.gc.ca/n15/15-086-eng.asp