Grant Thornton: Tax Breaks, Pending Surplus Mark 2015 Federal Budget

Federal Finance Minister Joe Oliver presented his last budget before the next federal election, announcing several tax measures and plans for a balanced budget by 2015-16.

Characterizing the budget as focused on “jobs, growth, and long-term prosperity,” Oliver said that after a $1.4 billion deficit for the fiscal year 2014-15, the government projects surpluses of $1.4 billion and $1.7 billion over the next two years. The government also indicated that it would introduce balanced-budget legislation.

Tax measures for individuals

A number of tax measures were included in the budget. Most significantly, contribution limits to the Tax-Free Savings Account (TFSA) will be raised to $10,000 from the current $5,500. “This helps Canadians on both ends of the saving spectrum,” said Keith MacIntyre, National Tax Leader, Grant Thornton LLP in Canada. “It’s a positive move for younger people saving to buy a home and also great for those nearing retirement who want more flexibility than they get with their RSP.”

In addition to changes to TFSAs, many Canadians will benefit from amendments to the rules governing Registered Retirement Income Funds (RRIFs). Specifically, minimum withdrawal limits will be reduced, thereby reducing the tax burden for Canadians over 71 years of age.

Tax measures for business

Private businesses will benefit from today’s budget as the small business tax rate will be incrementally reduced from 11% to 9% by 2019. This move, coupled with no tax increases for medium and large businesses will be applauded in the private business community. “While Canadian corporate tax rates were already competitive on a global basis, this reduction ensures Canada’s attractiveness for business investment will translate into continued opportunities for growth and innovation,” explained MacIntyre.

Investing in infrastructure and security

Cities across the country also received a welcome boost in the form of $5.8 billion over six years to help pay for new infrastructure. The new Public Transit Fund provides an additional $750 million over two years starting in 2017 – 18, and $1 billion per year ongoing thereafter. National security was also a highlight, with resources earmarked to help security agencies carry out enhanced responsibilities under Canada’s new anti-terrorism legislation, which is currently before the Senate.

Grant Thornton has released a detailed summary of the tax measures that were announced in this budget. Below are some of the highlights:

Personal measures

• Increase the annual contribution limit for TFSAs to $10,000 per year, starting in 2015.
• Reduce the minimum withdrawal factors for Registered Retirement Income Funds (RRIFs) for Canadians aged 71 to 94, starting in 2015.
• Launch a new Home Accessibility tax credit for seniors and persons with disabilities.
• Increase the lifetime capital gains exemption for qualified farm or fishing property from $813,600 (in 2015) to $1 million, starting in 2015.

Business measures

• Reduce the small business corporate tax rate from 11% to 9% on the first $500,000 per year of active business income by 2019. This is good news for small businesses as it will allow them to retain more after-tax cash for investment purposes.

Charities and non-profit organizations

• Extend the exemption of capital gains tax on donated corporate stock or real estate, subject to certain conditions.

International tax measures

• Simplify the foreign asset reporting system for tax years that begin after 2014 where the cost of relevant foreign assets held at any time in the year is less than $250,000.
• Provide non-resident employers with an exemption from withholding tax requirements for their non-resident employees.

Manufacturing

• Extend the accelerated Capital Cost Allowance rate for manufacturing and processing machinery and equipment acquired after 2015 and prior to 2026. This is good news for manufacturers and is intended to encourage investment in manufacturing capacity and efficiency.

About Grant Thornton LLP in Canada

Grant Thornton LLP is a leading Canadian accounting and advisory firm providing audit, tax and advisory services to private and public organizations. We help dynamic organizations unlock their potential for growth by providing meaningful, actionable advice through a broad range of services. Together with the Quebec firm Raymond Chabot Grant Thornton LLP, Grant Thornton in Canada has approximately 4,000 people in offices across Canada. Grant Thornton LLP is a Canadian member of Grant Thornton International Ltd, whose member and correspondent firms operate in over 100 countries worldwide. A listing of Grant Thornton offices and contact information can be found at: www.GrantThornton.ca.