Our 2016 Federal Budget Commentary

On March 22, 2016, the Liberals introduced their first Federal budget in 11 years.  The highlights of this budget, the details of which can be found in the link below, are as follows:

  • The small business tax rate will remain at 10.5 per cent. The former government had scheduled regular decreases in the rate over the next few years to reduce the federal portion of the small business tax rate to 9% by 2019.
  • Business owners will face stricter rules with regard to using partnerships or corporations to multiply access to the small business deduction and avoid tax.
  • The Eligible Capital Property (ECP) regime will be repealed and ECP will fall under a new Capital Cost Allowance class with a 100 per cent inclusion rate and 5 per cent annual depreciation rate. The transition will begin January 2017.
  • Beginning July 2016, the new Canada Child Benefit (CCB) will provide up to $6,400 for each child under age 6 and up to $5,400 for children aged 6–17. Only families with incomes below $30,000 per year will receive the full The CCB will replace the Canada Child Tax Benefit and Universal Child Care Benefit.
  • The family tax cut credit for families with at least one child under 18 at home and the children’s fitness and arts tax credits will also be eliminated.

 

Some changes that were hinted at, were not actually made:

  • A statement made by the current Liberal government during the fall election campaign indicated that the 50 per cent reduction in the amount included in income in connection with certain stock option benefits would be limited to $100,000 of benefits realized in a particular year. The Budget made no mention of this measure.
  • There was speculation that the portion of a capital gain that would be taxable would be increased above the present 50 per cent inclusion rate. No such measure was introduced.
  • There was also speculation that the income earned by certain service corporations (such as professional corporations) would not be eligible for the small business deduction (SBD) unless the corporation had a certain minimum number of employees. No such measure was introduced.

Article contributed by Sharon Henshaw

Full Commentary: