The budget 2016, released on March 22, has introduced significant revisions to the previous budget with the key objective to help the middle-class by targeting the wealthy Canadians to bridge the economic gap in the country. Major changes have been made to the tax structure and investments for infrastructure and economic growth have been prioritized. Senior citizens and families with children will receive support in the form of attractive child care and senior citizen benefits.
Here is a detailed look at how the budget 2016 will affect you.
1) Tax deduction for middle-class
The tax for middle-income brackets has been cut from 22% to 20.5% starting this year. This means that individuals with an income in the range of $45,282 to $90,563 will pay less with a tax savings of $330 per year and couples in this income bracket will see a savings of $540 per year.
2) Tax hike for high net worth individuals
The budget 2016 has introduced a 33% tax on incomes of $200,000 and above which will be utilized to compensate for the tax deduction of middle-class income groups and help middle-class income groups to pay off their household debt.
In addition to increasing tax rates for high net worth individuals, the Canadian government will invest $444.4 million in strengthening the Canadian Revenue Agency by hiring Tax auditors and specialists to curb tax evasion and increase revenue. Loopholes in the tax system will also be closed to prevent high net worth individuals from using a life insurance policies to make distributions tax free and save taxes.
3) GIS benefits increased by 10% for low-income seniors
Low-income seniors will benefit from this hike in Guaranteed Income Supplement, especially those who rely solely on Old Age Security for survival. This increase in GIS benefit will help senior citizens living on $4,000 per year to receive an additional $947 annually.
The retirement age for senior citizens has also been rolled back to 65 to enable them to receive GIS benefits earlier and will provide low-income seniors with the much-needed support to reduce the risk of falling below the poverty line.
4) Senior couples can split their GIS benefits
Senior couples eligible for GIS and Allowance benefits qualify for higher benefits if they are forced to live apart, due to health reasons. This amendment would extend the benefits to couples eligible for Allowance payouts.
5) Introduction of the Child Care Benefit
Under the current system, families with one child and with annual earnings of $30,000 would receive $4,852, after tax, if their child was under age 6, or $3,916 if their child is aged 6 to 17.
Under the newly introduced Canada Child Benefit, these low-income families will receive $6,400 per child under age 6 and up to $5,400 per child per year for children aged 6 to 17. As such, most Canadian families will see an average increase in child benefits of almost $2,300 starting this year.
6) Child Disability Benefit increased
The Child Disability Benefit has been continued this year with a higher amount of $2,730 per child qualifying for the Disability Tax Credit.
7) Elimination of the Children’s Fitness and Art Tax Credit
Currently, families can get a tax credit of $150 and $75 per child through Children’s Fitness and Arts Tax Credits (up to $1,000 and $500 in eligible expenses, respectively).
The budget 2016 will initiate a 50% reduction of the maximum eligible expenses for the Children’s Fitness and Arts Tax Credits in 2016, and a complete elimination of both credits by 2017.
8) Canada student loan amounts increased
The amount students will receive through the Canada Student Loan will increase by 50%:
from $2,000 to $3,000 per year for students from low-income families;
from $800 to $1,200 per year for students from middle-income families; and
from $1,200 to $1,800 per year for part-time students.
Student debt payment policy has also been relaxed with students not required to repay their student loans unless they are earning, at least, $25,000 per year.
Student Textbook and Education Tax credit have been eliminated by the budget 2016.
Overall, the budget 2016 reforms and policies will increase the country’s revenue and aid the growth of the public by helping them save taxes and receive additional child care benefits. Provisions for senior citizens will be crucial in helping the low-income Canadian Senior citizens who are most susceptible to falling below the poverty line.
If you require assistance in grasping how budget 2016 affects your financial situation and debt, get in touch with a debt expert.