How do new tax changes affect you?

Jun 20, 2016

How do new tax changes affect you?



The March 22 federal budget included a variety of tax changes, some that were effective immediately, others that are being rolled out through the year. Here are highlights of the changes that may affect you.


New Canada Child Tax Benefit


Effective July 1, the Canada Child Tax Benefit (CCTB) replaces the Canada Child Taxand Universal Child Care benefits. This a monthly non-taxable benefit is available to families with children under age 18. You can use the Canada Child Tax Benefit calculator at to find out the benefit amount for your family.


Changes to tax brackets


The budget includes two tax bracket changes effective for the 2016 tax year. Taxable income between $45,282 and $90,563 will now taxed be taxed at 20.5% instead of 22%, for a maximum savings of $679. This change is known as the “middle-class cut.” A new tax bracket has been established for taxable income over $200,000, with a tax rate of 33%. Anyone earning $200,000 to $217,000 still comes out ahead as savings from the middle-class cut outweigh the increase in this range.


Say goodbye to…


As expected, the Family Tax Cut was eliminated and the Tax-Free Savings Account (TFSA) limit was rolled back to $5,500 per year. In addition, the children’s fitness tax credit and arts tax credit are cut by 50% for 2016, and both will be eliminated for the 2017 tax year.


Mutual fund surprise


Until now, unit-holders could switch between funds with no tax consequences, but as of October 1, 2016, a switch will trigger a capital gain or loss. Corporate class funds do offer other potential advantages, including potentially lower taxable distributions during wealth accumulation years and tax-efficient income during retirement. If you hold these funds or are considering corporate class funds, talk to us to see if the change may affect your