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The 2015 Federal Budget

Posted under: News

Our take: Large on promise, low on the medicine that the sugar helps go down.

Finance Minister Joe Oliver’s first budget delivered on its promise to be balanced and sets forth the Conservative Government’s Election Platform for 2015.

Measures that assist families, seniors, and small businesses, were the major focus for the 2015 Federal Budget.

Tabled highlights include:

  • An increase in the TFSA Limits from $5,500 to $10,000 per year;
  • Previously announced income splitting between spouses as well as child care benefits;
  • A relaxing of the RRIF Withdrawal rules (a 2.1% decrease for age 71 withdrawals);
  • A reduction to the small business tax rate of 0.5% per year to 9% in 2019, and
  • Measures to provide relief to our veterans.

Spared in the 2015 Budget were any changes to section 148 with regards to the non-arm’s length transfer of life insurance to a corporation. There was a fair amount of conjecture as to whether the tax advantage would be muted or eliminated altogether, but at this point, the rules have been kept intact.

In terms of the Budget’s impact to RCAs or IPPs there were no discernable changes. The RRIF withdrawal rules should prove to be beneficial to IPP withdrawals as CRA has required the withdrawals to match at a minimum those of RRIFs. This has a significant impact not only on taxable pension payments in the early years but it also provides for much more income in the later years when it may be needed the most.

There was some concern that the reduction of the small business tax rate from 0.5% per year from 2016-2019 may create issues with regards to integration between non-eligible dividends and T4 income, but there was a counter-balance provided in terms of an increase to the federal tax rate on these dividends. Starting in 2016, the Small Business Tax Rate will be reduced to 10.5%, but at the same time the gross up and dividend tax rates are being adjusted accordingly to ensure integration is maintained.

In short, the 2015 Federal Budget is one that was large on promise and low on the medicine that the sugar normally helps to go down. But that said we have seen some forward-thinking changes from the Conservatives in line with demographics when we look at advantages to seniors and larger tools for savings for all Canadians.