Income Tax changes for 2019-2020
- Starting Jan. 1, 2020, it will cost $9.20 more to renew your vehicle registration. Licence plate fees for motor vehicles jump under the new budget, with costs for operator/passenger vehicles rising from $75 to $80 and the price for non-commercial trailers going from $100 to $150. These costs do not include service fees.
- Some parts of land title fees double, with registration fees for land transfers or mortgages rising from $1 to $2 per $5,000 of the value of the land, in addition to base fees.
- The fee to receive a statement of benefits paid from a visit to a public health provider is rising from $25 to $75. »
There are also going to be new fees on vaping — but those details are yet to be announced.
Indexation Frozen
Elimination of Tuition/Education Amounts
New Alberta Child and Family Benefit
The ACFB includes both a base component and a working component with combined benefits increasing to a maximum of $5,120, subject to certain family income limits. The ACFB will be paid out quarterly and the amounts are non-taxable. The lower-income taxpayers will receive marginally more under the new program, but fewer people will get it. For a family of four with working income, the Family Employment Tax Credit is currently phased out when net income exceeds $96,120. Under the new program, it will be fully phased out when net income exceeds approximately $61,000.
Canada Workers’ Benefit
Canada Workers Benefit (CWB) – Alberta will reconfigure the CWB to better align with the existing income support program and to shift slightly more benefits to single individuals without children recognizing that the ACFB will provide additional benefits to families with children. The phase-in threshold will remain at $2,760 (as opposed to $3,000 for most of the other provinces) so as to offset the claw-back of benefits under the Income Supports program above this threshold.
Alberta is gradually reducing the general corporate tax rate from 12% to 8% over the next 3 years, with the first reduction to 11% having already been implemented effective July 1, 2019 and will continue to decrease by 1% every 1 January until 2020.
As of July 1, 2019, Alberta already has the lowest general corporate tax rate in Canada. According to the budget papers, by the time the cuts are fully implemented in 2022, it will also have a lower combined federal/provincial tax rate than 44 U.S. states.
The cut in corporate tax rates will require tweaking of the dividend tax credit mechanism for 2019 and all subsequent years for which cuts are planned.
Elimination of Business-Related Tax Credits
The elimination of five tax credits:
- The Alberta Investor Tax Credit
- The Community Economic Development Corporation Tax Credit
- The Capital Investment Tax Credit
- The Interactive Digital Media Tax Credit
- The Scientific Research and Experimental Development Tax Credit (SR&ED)
The SR&ED credit will be eliminated for expenses incurred after December 31, 2019. For the other credits, no new approvals will be granted after October 24, 2019. However, tax credits may still be claimed on the 2019 tax return for investments made under the Alberta Investment Tax Credit and Community Economic Development Tax Credit programs before the end of the year.
Extension of Tourism Levy to Airbnb
The government intends to bring forward legislation in spring 2020 to level the playing field on short-term rentals offered through online marketplaces. Short-term rentals (STRs) like Airbnb, HomeAway and VRBO are becoming increasingly popular but aren’t currently required to pay the four-per-cent tourism levy.
The levy is currently imposed at the rate of 4% on temporary accommodation provided primarily by hotels.
Changes to Federal Budget: We hope they know what they are doing?!
CORPORATE TAX CHANGES
The federal small business rate was reduced from 10 percent to 9 percent, effective January 1, 2019. The combined federal and provincial corporate tax rates for calendar 2019 are as follows:
Climate Action Incentive
As part of the Government of Canada’s climate change plan, residents of New Brunswick, Ontario, Manitoba and Saskatchewan receive a new tax credit called the Climate Action Incentive when they filed their 2018 tax return in early 2019. If you live in these provinces you are charged a federal carbon tax starting from April 2019 – It’s called a “fuel charge.” Residents of other provinces do not pay the fuel charge so they are not eligible for the Climate Action Incentive.
Employee stock options
Budget 2019 introduced changes to align Canada’s employee stock option tax treatment with that of the U.S. The government plans to apply a $200,000 annual cap on employee stock option grants (based on the fair market value of the underlying shares) for employees of large, long-established, mature companies. For start-ups and rapidly growing Canadian businesses, employee stock option benefits would remain uncapped.
Carrying on business in a Tax-Free Savings Account
The trustee of a TFSA (i.e. financial institution) was jointly and severally liable to pay tax under Part I of the Income Tax Act on income from a business carried on by the TFSA or from non-qualified investments. Budget 2019 extended the joint and several liability for tax owing on income from carrying on a business in a TFSA to include the TFSA holder.
This measure applies to the 2019 and subsequent taxation years.
Business investment in zero emission vehicles
Budget 2019 provides a temporary enhanced first-year CCA rate of 100% in respect of zero-emission vehicles. This would include new vehicles that are fully-electric, plug-in hybrids with a battery capacity of at least 15 kWh or fully powered by hydrogen.
This measure applies to eligible zero-emission vehicles acquired on or after March 19, 2019 and that become available for use before 2028, subject to a phase-out for vehicles that become available for use after 2023.
PERSONAL TAX CHANGES
Support for skills training
Budget 2019 introduced two key measures to help working Canadians upgrade their skills:
- A new, non-taxable Canada Training Credit will allow eligible workers aged 25 to 64 a credit balance of $250 per year, which can accumulate to a lifetime limit of $5,000 to be used to cover up to half of eligible fees
- A new Employment Insurance Training Support Benefit will provide income support when an individual needs time to take off work for skills training
Support for home ownership
Budget 2019 increases the Home Buyers’ Plan (HBP) withdrawal limit to $35,000 from $25,000 for first-time home buyers. This increased limit applies to the 2019 and subsequent calendar years in respect of withdrawals made after March 19, 2019.
Also, eligibility for the HBP is extended to help Canadians maintain home ownership after marital or common-law relationship breakdowns.
Additional types of Annuities under Registered Plans
To provide Canadians with greater flexibility in managing their retirement savings, Federal Budget 2019 broadens the tax rules for certain registered plans to allow new types of annuities:
- Advanced life deferred annuities (ALDA)
- Variable payment life annuities (VPLA)
An ALDA will be a life annuity, the commencement of which may be deferred until the end of the year in which the annuitant attains 85 years of age. Previous rules allowed the purchase of annuities with registered plan to commence in the year when the annuitant turns 71 years old.
An ALDA will be subject to limits, including a comprehensive lifetime ALDA dollar limit of $150,000 from all qualifying plans and certain specified annuity requirements.
As with the ALDA, a VPLA will be subject to certain rules and specified annuity requirements.
PKF PFC ACCOUNTING
This publication is produced by PKF PFC Accounting as an information service to clients and friends of the firm, and is not intended to substitute for competent professional advice. No action should be initiated without consulting your professional advisors. Your use of this document is at your own risk.
Please note that PFC Accounting is prepared to provide accessible formats and communication supports upon request.
