The tax system that is
in place allows individuals to earn an amount of income that is not
taxed. In 2004, this amount was $8,012. The budget proposes that by
2009 this tax-free amount will increase to $10,000. Between now and
then the increases are scheduled as follows:
Year
Increase
2005
Inflation
2006
$100
2007
$100
2008
$400
2009
Greater of
$600 and the amount that is required to bring the Basic Personal
Amount to $10,000
Spousal Credit
Analogously, the
non-refundable tax-credit system allows for additional tax-free income
in respect of a spouse or a common-law partner. This credit eliminates
tax on an additional $6,803. This amount is scheduled to increase to
$8,500 by 2009.
RRSP Limits
This budget proposes to increase the deductible limits as follows:
Year
Proposed Limits
Existing Limits
2005
$16,500
$16,500
2006
$18,000
$18,000
2007
$19,000
Indexed
2008
$20,000
2009
$21,000
2010
$22,000
Foreign Property Rule
The budget proposes to
repeal the traditional limit on foreign investments of 30%. For 2005
and beyond, there will be no limit on foreign investments that are held
in deferral income plans, such as RRSP’s and Pension Plans.
Pensions with Disabilities
Numerous initiatives
that affect persons who claim the Disability Tax Credit were tabled.
These include a change in the criteria, which enables a person to be
eligible for the Disability Tax credit. In the past, Form T2201,
Disability Tax Credit Certificate, dealt with the concept of “severe and
prolonged mental and physical impairment”. The new wording is “severe
and prolonged physical and mental functions.” The key issues that seem
to be expanded are the basic limits of mental functions that are
required for everyday life. These include:
1)Memory;
2)Problem solving, goal setting and judgment;
3)Adaptive functioning.
Suffice it to say,
there has been considerable changes in this area and if any reader
requires clarification on any of these issues, please do not hesitate to
contact us.
Corporate Tax Reductions
The budget proposes to
reduce corporate income taxes to 19% from 21% by 2010 (Federal component
only). The general corporate rate will be reduced to 20.5% effective
January 1, 2008, 20% effective January 1, 2009 and to 19% effective
January 1, 2010.
This tax reduction
will apply to all types of corporate income other than the small
business rate that is presently at 12% (again, Federal rate only), and
to investment income.
Corporate Surtax
The corporate surtax,
which effectively is 1.12% will be eliminated on January 1, 2008, and it
will be pro-rated for the taxation years that include that date.
