The big scary budget 2016

The Big Scary

2016 Budget

Presented by:

Tim Miron, CPA, CA

Overview

• Children related items

• Changes not in the budget

• Corporations with partnerships

• Other stuff

Children Stuff

• What happened in 2015

• Universal Child Care Benefit (UCCB)

• Fitness Credit

• Arts Credit

• Canada Child Tax Benefit

Meet the families

• Miron family – 3 kids under 6

• Bauer family – 1 child over 6, 1 under

• Knight family – 2 children over 6

UCCB

• Children under 6 = $160 / month

• Children 6 to 17 = $60 / month

• This amount was taxable

• Ending June 2016

Children’s Activities

• Fitness credit = $150 per child

• Arts credit = $75 per child

• Going away ½ for 2016 non for 2017

CCTB

• The Canada Child Tax Benefit

• Was only eligible for lower income families

Tally it up – High rate

Miron Bauer Knight

UCCB 5,760 2,640 1,440

Fitness 450 300 300

Arts 225 150 150

Tax (47.97%) (2,763) (1,266) (691)

Net benefit 3,672 1,824 1,119

Tally it up – Max rate

Miron Bauer Knight

UCCB 5,760 2,640 1,440

Fitness 450 300 300

Arts 225 150 150

Tax (53.53%) (3,083) (1,413) (771)

Net benefit 3,352 1,677 1,119

Canada Child Benefit

Family income Miron Bauer Knight

150,000 5,750 2,230 1,230

185,000 2,950 235 0

220,000 150 0 0

Net CCB Benefit

Family Income Miron Bauer Knight

150,000 2,078 406 31

185,000 (722) (1589) (1199)

220,000 (3522) (1824) (1199)

Other child related changes

• Education amount goes away

• $168 a year for PT students

• $558 a year for FT students

• This will not likely impact parents

• Only the tuition carry forward students upon

graduation

Other child related changes

• $1,000 credit to educators

• Saving them $150 a year

Other child related changes

• The Family Tax Cut has been eliminated

• This was a savings of up to $2,000 for

families with children

• Most of our tax planning made this credit

redundant

Change in Tax Rates

• Higher personal tax rate

• Change to corporate investment rates

Personal TaxIn Ontario the top tax rate is 53.53%

Personal Tax

• Canada works on a staircase system

• The higher up the staircase the more tax

you pay

• But only on the income above that stair

Personal Tax

• Personal income > $200,000 increased 4%

• Top tax rates

150K = 47.97%

200K = 51.97%

220K = 53.53%

If your income is $250K your tax rate just went

up $2,000.

Corporate Investment Rate

• Tax rates on investments increased 4%

• The increase is on refundable tax

Only an issue if investment income is >

dividends paid out to SH

Tax Free Savings Account

2016 Contribution room back down to $5,500

Corporation change

http://www.budget.gc.ca/

Corporation change

Corporation change

http://www.budget.gc.ca/

Corporation change

The Loss of the Small Business limit is not

the end of the world.

Corporate Income Tax

26%

15%

Tax Comparison

46% Tax

rate

53.53% Tax

Rate

15% Tax

Rate

26% Tax Rate

Extra Income $20,000 $20,000 $20,000 $20,000

Income Tax 9,200 10,706 3,000 5,200

Net after tax

Cash

$10,800 9,294 17,000 14,800

Increase in after tax cash 57% / 83% 37% / 59%

Corporate Income

15% Tax 26% rate Capital

Gains

Dividend

Income

Interest

(other)

Extra Income $10,000 $10,000 $10,000 $10,000 $10,000

Corp Tax 1,500 2,650 975 - 1,950

Refundable tax - - 1,533 3,833 3,067

Total Tax 1,500 2,650 2,508 3,833 5,017

High Div. rate 36.97% 29.52%

Max Div. rate 45.30% 39.34%

Scenario

Old way No SBL

Corporate Income 117,647 117,647

Corporate Tax 17,647 30,588

Dividend 100,000 87,059

Personal Income Tax 16,379 6,432

Net after tax Cash 83,621 80,629

Cost of change 2.5% 2,992

Corporation change

What will be slowed is the amount of

savings.

If you had $1,000 going to investments

monthly you could have as little as $870

left.

Small Business Limit

Previously Scheduled Tax Rates

• 2015 – 15.5%

• 2016 – 15.0%

• 2017 – 14.5%

• 2018 – 14.0%

• 2019 – 13.5%

Small Business Limit

Newly Scheduled Tax Rates

• 2015 – 15.5%

• 2016 – 15.0%

• 2017 – 14.5%

• 2018 – 14.0%

• 2019 – 13.5%

Other Items

• Fund switches will now be taxable

• OAS pension age is back down to 65

Thank you!

Tim Miron CPA, CA

Burlington Office

905-333-5066

tim@blrca.ca

@TJMiron@BLRcpas

facebook.com/BLRcpas