FALL ECONOMIC STATEMENT

On October 24, 2017, Finance Minister Bill Morneau released the federal government’s Fall Economic Statement. This summary contains highlights of these new announcements which are not yet law. Clients should contact their Investors Group Consultant for information on how these proposals may affect their financial plans.

Indexation of the Canada Child Benefit

The Canada Child Benefit (CCB) is a non-taxable and income-tested amount paid on a monthly basis to eligible families. This amount was scheduled to be indexed to keep pace with the cost of living as of July 2020. The Fall Economic Statement proposes that the indexation of the CCB amounts begin two years earlier in July 2018.

Enhancement of the Working Income Tax Benefit

The Working Income Tax Benefit (WITB) is a federal refundable tax credit available to low-income individuals and families who earn employment or business income. The federal government proposes to enhance the WITB by raising maximum benefit levels and expanding the income range, starting in 2019. Details will be released in the 2018 federal budget.

Decrease to the small business tax rate

Pursuant to announcements made last week, the Fall Economic Statement confirms that the small business tax rate will decrease from the current 10.5% to 10% effective January 1, 2018, and to 9% effective January 1, 2019.

Decrease in the gross-up and dividend tax credit for non-eligible dividends

In light of the reduction in the small business tax rate and to preserve integration, the gross-up factor for non-eligible dividends will be reduced from 17% to 16% for the 2018 taxation year, and to 15% for the 2019 and subsequent taxation years. The non-eligible dividend tax credit will also be reduced from 10.5% of the grossed-up dividend to 10% for the 2018 taxation year, and to 9% for the 2019 and subsequent years.

Proposals on private corporations

Pursuant to announcements made last week, the Fall Economic Statement confirms the government’s intent to move forward on restricting income sprinkling by private corporations effective for the 2018 and subsequent tax years. The government proposes to release draft legislation related to these measures later this fall. The government confirmed that it will proceed with measures targeting the accumulation of passive investments in private corporations with more details to be released in the 2018 federal budget. It is also confirmed that the government will not be moving forward with previously proposed measures limiting access to the Lifetime Capital Gains Exemption, and relating to the conversion of income into capital gains.

For highlights on last week’s proposals, please refer to our Taxation Update.

This report specifically written and published by Investors Group is presented as a general source of information only, and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide legal or tax advice. Clients should discuss their situation with their Consultant for advice based on their specific circumstances.