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Debbie Pearl-Weinberg, executive director, tax and estate planning, CIBC Financial Planning and Advice.
So, here are some of my top tax take-aways from the October 21st federal election. We now have a Liberal minority government, so I’m going to review today some of the Liberals’ election platform promises. Now, we need to keep in mind that, because we have a Liberal minority government, that whether or not some of these changes come into fruition will be less certain than if we had a majority government.
So, firstly, in terms of changes that businesses can see, there is not that much in the Liberal platform. For instance, we can’t expect to see any changes to the tax on split income rules and the limitation to the small business deduction rules, as was in the Conservative platform. But, for most part, the liberals have made only some broad-based changes to look into anti-avoidance rules for multinational companies and cracking down on certain corporate tax loopholes. We’ll have to wait to see what those changes actually are. For clean-tech companies, they had promised lowering the corporate tax rate for both large and small clean-tech companies.
On the personal side, the Liberals did have a number of items in their platform. First and foremost, what will impact the most Canadians is changes to the basic personal amount. Now, this is the amount of income that any individual can earn that is not subject to tax. So, every Canadian taxpayer is eligible for this. It’s currently $12,069 in 2019. It rises annually with inflation. In the Liberal platform, they promise to increase this amount over four years by 15%. So by 2023, it will reach $15,000.
Now, unlike some of the promises in the Conservative election platform, this was not described as universal because it will not apply for those individuals who were described as being Canada’s wealthiest 1%. How the Liberals intend to implement this restriction is that this increase in the basic personal amount will be reduced for those Canadians earning over $147,667. Now those are people in the second-highest federal tax bracket.
It is to be completely eliminated for those in the highest federal tax bracket, which in 2019 corresponds to those earning over $210,371. Now, those people will continue to receive the current basic personal amount and it still will be adjusted for inflation.
There are a couple of other groups of Canadian individuals who can expect to see changes based on the Liberal election platform. And the first of these groups that I want to talk about is seniors. Firstly, for seniors who are over the age of 75 and receive Old Age Security or OAS, they can expect to see the rate of OAS raised by 10% once they reach age 75. And this could mean as much as $729 per year, according to the Liberal documents. And it will start in July of 2020. The full increase should apply to those earning less than approximately $77,500 a year.
For those individuals who have had a spouse or a common-law partner pass away, they may be receiving something called Canada Pension Plan or Quebec Pension Plan survivor’s benefits. And those are the benefits a spouse or common-law partner receives after their partner passes away. Currently, they receive approximately 60% of what their deceased spouse or common-law partner received in benefits. The Liberals have pledged a 25% increase in these survivor’s benefits and this could mean as much as an additional $2,080 per year in benefits for those seniors.
For parents, they may see some changes coming up. First of all, in employment insurance, maternity and paternity benefits, the Liberals have pledged that starting in 2020, both EI maternity and paternity benefits will be received tax-free. And they’ve indicated that recipients should see the net amount of the benefit they receive from every payment rise, as there should be no federal tax-deducted at source. According to the Liberal platform, this would mean approximately $1,800 more annually to somebody receiving EI benefit who earns roughly $45,000 a year. Adoptive parents — so adopt a child — could also see a change to their EI benefits because the Liberals proposed introducing a 15-week leave for those who adopt, which would be equivalent to the current maternity leave available to an individual who gives birth.
For those parents with a young child under the age of one, they should see the Canada Child Benefit increase. The Liberals have proposed a 15% increase in the Canada Child Benefit for children under one year of age and this could result in an increased benefit of up to $1,000 starting in July of 2020. The base benefit should be $7,750 for these children. Those parents having a child living with a disability, they should see an immediate increase in the Child Disability Benefit. And this is a tax-free benefit that families caring for a child under the age of 18 who is also eligible for the Disability Tax Credit receive. According to the Liberal platform, this could result in more than $2,800 in extra assistance by increasing the annual benefit to $5,664 per year.
There are some other changes that the Liberals have indicated they’d like to do in the real estate market. And the first is a vacancy tax, and this is based on the tax that was implemented in British Columbia. And what they have proposed doing is to put in place a consistent national tax on vacant residential properties that are owned by non-Canadians who don’t live in Canada. And their stated purpose in this is limiting housing speculation that drives up house prices. In connection with this, they also indicated a desire to crack down on financial crime in the real estate sector. They have indicated that they would like to work with interested provinces, territories and communities so that there is a national approach so that not only law enforcement but also tax authorities have the tools necessary to, what they say is, “crack down” on financial crime in the real estate sector.
And the final thing that I’d like to mention is although these weren’t in the Liberal platform as new announcements, because they have retained power, at least as a minority government, taxpayers may expect to see tax credits that were announced in the Liberals’ last federal budget to continue. And these are two credits. One is the Canada Training Credit. And this was a credit that is to kick in in 2020 and it’s to provide a financial support to help cover up to half of eligible tuition and fees associated with training. And the second is a nonrefundable 15% credit for eligible digital new subscriptions. That is to apply just for a couple of years, and it is a maximum tax credit of $75 annually to start in 2020.