In its first budget, Bill Morneau, the Minister of Finance revealed the new government’s 2016-2017 Federal budget.

• Tax measures affecting individuals ¹
  • A new Canada child benefit (CCB) is proposed which will replace the current Canada child tax benefit and universal child care benefit. CCB payments begin in July 2016.
  • CCB provides an annual benefit, paid monthly, of up to $6,400 per child under six years of age and up to $5,400 per child aged six through 17 years old for eligible families.
    • Add $2,730 per child who is eligible for the disability tax credit.
    • The CCB will not be taxable nor will it reduce the amount eligible for the goods and services tax (GST) credit, the guaranteed income supplement, the Canada education savings grant, or the Canada learning bond and the Canada disability savings grant.
    • As the adjusted family net income increases the benefit will be phased out.
  • The second marginal tax rate is decreased from 22% to 20.5%.
  • There is a new top marginal tax rate of 33% for income above $200 thousand.
  • A proposal to restore the Old Age Security and Guaranteed Income Supplement age of eligibility for to 65 from 67.
  • 28% to 33% tax rate increase on personal service business income earned by corporations applicable to 2016 and subsequent taxation years.
    • the 33% rate also applies to excess employee profit sharing plan contributions.
  • There will be an increase in the northern residents’ deductions proposed as of the 2016 taxation year: increasing from $8.25 to $11 per day (or from $16.50 to $22 per household).
    • One-half the above amount will also apply for residents in the intermediate zone.
  • Proposals made in the budget ²
    • Eliminate the income splitting tax credit for couples with at least one child under the age of 18.
    • Eliminate the Children’s Fitness and Arts tax credit as well as the education and textbook tax credit effective as of January 1, 2017.
    • The maximum Children’s Fitness and Arts tax credit will be halved for 2016, and the ability to carry forward unused amounts in respect of the textbook and education tax credits will remain unaffected.
    • Exchanges of shares of a mutual fund corporation (or an investment corporation) that occur after September 2016, and that result in the investor switching between classes to switch economic exposure to different underlying assets, are proposed to result in a deemed disposition at fair market value for tax purposes. These new “switch fund” rules will not apply to mere switches between series of shares within a class.
• Economic outlook ³
  • The deficit for 2015-2016 will be $5.4 billion while a deficit of $29.4 billion is predicted for 2016-2017. The deficit is projected to decline gradually reaching $14.3 billion by 2020-2021. The federal debt-to-GDP ratio is estimated to be approximately 32.5% for 2016-2017. This rate is expected to decline, reaching 30.9% in 2020-2021.
  • GDP is expected to grow by 1.4% in 2016 and by 2.2% in future years.
  • 2016 inflation rate is estimated at 1.6%, expecting to be 2% in subsequent years.
  • The unemployment rate is currently 7.1%, hoping to decrease to 6.3% by 2020.

^{1 CRA Source}

^{2 Deloitte Canada}

^3 Ibid