On Tuesday, March 22, 2016, Finance Minister Bill Morneau tabled the Liberal Government’s 2016 federal budget. Read our condensed commentary and find out how the changes impacts you, your business and your family.

Some key highlights from this federal budget include:

Personal Tax Changes

  • Family Tax Cut Credit that currently permits limited income splitting for couples with at least one child under the age of 18 will be eliminated, and the Children’s Fitness and Arts Tax Credits will be phased out by 2017. The Education and Textbook Tax Credits will also be eliminated by January 1, 2017.
  • The current Canada child tax benefit (CCTB), a non-taxable benefit, and the Universal Child Care Benefit (UCCB), a taxable benefit, will be replaced by a new Canada Child Benefit, which will provide a maximum benefit of $6,400 per child under the age of 6 and $5,400 per child aged 6 to 17, adjusted based on size of family and its net income. Use this Canada Child Benefit Calculator to forecast your new entitlement.
  • Guaranteed Income Supplement top-up benefit will be increased by up to $947 annually for the most vulnerable single seniors



Small Business Tax Changes

  • Small business deduction rate will remain at 10.5%
  • The current specified partnership income rules are intended to prevent the multiplication of the SBD where a corporate partnership is utilized since each corporate partner is only entitled to an SBD equal to its share of the partnership’s active business income multiplied by $500,000. Structures have been implemented to circumvent these rules through the utilization of a separate Canadian-controlled private corporation (CCPC) which is not a member of the partnership. Such corporation (which would be owned by the shareholder of one of the corporate partners or by a person who is not at arm’s-length with the shareholder) would be paid by the partnership for services provided.

    The Budget proposes to deem this separate CCPC to be a member of the partnership, which in effect, causes the active income earned by this CCPC from services billed to the partnership to still be subject to its prorated share of the annual SBD.
  • Guaranteed Income Supplement top-up benefit will be increased by up to $947 annually for the most vulnerable single seniors

The full version (271 pages) budget document, titled “Growing the Middle Class”, can be found at http://www.budget.gc.ca/2016/docs/plan/budget2016-en.pdf. Additionally, we have provided you a copy of CPA Canada’s commentary, available for viewing and download here.

Feel free to contact us for further discussion on how your personal or business finances might be affected. We are glad to help you navigate through these changes.