TaxTips.ca - 2007 Federal budget

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Federal Budget -> 2007 Budget

October 2007 Economic Statement and Tax Relief Package

The government announced proposed tax reductions on October 30, 2007. These tax reductions are included in Bill C-28, which received Royal Assent on December 14, 2007. Tax changes include:

GST reduction from 6% to 5% effective January 1, 2008

GST credit for low and modest-income Canadians will be maintained at its current level.

personal income tax reductions retroactive to January 1, 2007:

basic personal amount, spousal amount, and equivalent to spouse amount increased to $9,600 for 2007 and 2008, and to $10,100 for 2009

lowest tax rate reduced to 15% from 15.5%

corporate tax changes:

general corporate tax rate reduced to 15% by 2012, starting with 1% reduction in 2008 beyond already scheduled reductions

reducing small business tax rate to 11% in 2008, one year earlier than scheduled

Proposed federal corporate income tax rates:

	2008 19.5%
	2009 19.0%
	2010 18.0%
	2011 16.5%
	2012 15.0%

The Canadian Tax Calculator includes the personal tax rate reductions.

The tax rate tables for all provinces and territories, which are found on the marginal tax rates page, have been updated to reflect the reduced personal federal tax rate.

Federal Budget March 2007

The government presented its 2007 budget on March 19, 2007. The budget documents are available on the Department of Finance Budget 2007 web page. The Budget was approved in the House of Commons on March 27, 2007.

Canada Revenue Agency also has a Budget 2007 web page providing links to more information on the budget.

Bill C-52, which was created to implement some of the provisions of the Budget, is now law. It received Royal Assent on June 22, 2007. The following income tax changes are included in Bill C-52:

	new tax on income trusts, effective 2007 tax year
	corporate income tax rate reduction effective Jan 1, 2001
	age credit increase, effective Jan 1, 2006
	pension income splitting, effective 2007 tax year
	new child amount tax credit, effective 2007 tax year
	spouse and equivalent amounts increased, effective 2007 tax year
	age limit increased to 71 for maturing RRSPs, RPPs, and deferred profit sharing plans, effective 2007 tax year
	expand types of investments eligible for RRSPs and other deferred income plans, effective Mar 19, 2007
	increase contribution limits for RESPs and expand eligible payments for part-time studies, effective 2007 tax year
	increase maximum grant payable on contributions made to an RESP after 2006

On October 2, 2007, the Department of Finance announced proposed legislation to implement the remaining Budget 2007 tax measures. These tax measures were included in Bill C-28, which received Royal Assent on December 14, 2007.

The personal tax changes in Budget 2007 include:

child amount tax credit for dependent children under 18 - new non-refundable tax credit beginning 2007:

	based on $2,000 per year per child
	where the child lives with both parents, may be claimed by either spouse, with unused portion transferable to spouse or common-law partner
	In other cases, may be claimed by the parent who is eligible to claim the equivalent to spouse credit for the child (or would be eligible, if that child were the parent's only child).

spousal amount non-refundable tax credit increased to same as basic personal amount, starting in 2007. The credit is reduced for spousal income greater than zero (previously greater than $759 in 2007). See tables of non-refundable tax credits.

working income tax benefit (WITB) refundable tax credit, beginning in 2007

age limit for conversion of RRSPs to RRIF increased from 69 to 71, and RRSP contributions can be made up to and including the year in which the contributor turns 71.

changes to Registered Education Savings Plans (RESPs) effective for 2007:

	annual Canada Education Savings Grant (CESG) increased from $400 to $500
	$4,000 annual limit on contributions has been eliminated
	lifetime contribution limit increased from $42,000 to $50,000
	"specified educational program" will now include part time programs of at least three consecutive weeks duration, requiring the student to spend not less than 12 hours per month on courses in the program. Up to $2,500 of educational assistance payments may be made for each 13-week semester of study.
	maximum CESG receivable for a student remains at $7,200.

meal expense deductibility for long-haul truckers will be increased from the current 50% to

	60% for expenses incurred March 19 to December 31, 2007 inclusive
	65% for 2008, 70% for 2009, 75% for 2010, and 80% for years after 2010.

public transit passes - non-refundable tax credit revised effective January 1, 2007:

weekly passes will qualify for the tax credit where the taxpayer purchases them for at least 4 consecutive weeks, and the passes provide the holder with unlimited use of the public transit system for a period of 5 to 7 days.

electronic payment cards will qualify for the tax credit, where

	the cost relates to the use of public transit for at least 32 one-way trips during an uninterrupted period not exceeding 31 days, and
	that transit usage, and cost of those trips, are recorded and receipted to the purchaser by the relevant transit authority, in sufficient detail as to allow the Canada Revenue Agency to verify eligibility for the credit.

lifetime capital gains exemption for qualified farm property, fishing property, or small business corporation shares increased from $500,000 to $750,000 for dispositions occurring on or after March 19, 2007.

instalment payment threshold for personal income taxes will be increased from $2,000 to $3,000 (from $1,200 to $1,800 in Québec) beginning in 2008

donations to private foundations - capital gains tax eliminated effective March 19, 2007

Registered Disability Savings Plan (RDSP) introduced:

	lifetime maximum contributions of $200,000, with contributions permitted to be made until the end of the year in which the beneficiary turns 59.
	annual contributions will attract Canada Disability Savings Grants (CDSG) depending on family income and amount contributed. Lifetime CDSG limit is $70,000.
	Canada Disability Savings Bonds (CDSBs) of up to $1,000 per year for RDSPs established by low and modest-income families. Lifetime maximum CDSB limit is $20,000.
	For more information see our article on registered disability savings plans

Tax changes relating to businesses include:

Increased capital cost allowance (CCA) rates for purchases on or after March 19, 2007:

computer equipment increased from 45% to 55% (new CCA class 50)

buildings used for manufacturing or processing increased from 4% to 10%

other non-residential buildings increased from 4% to 6%

natural gas distribution lines increased from 4% to 6%

liquefied natural gas facilities increased from 4% to 8%

accelerated CCA for manufacturing and processing equipment purchased before 2009

50% straight-line CCA, which results in CCA of 25% in year of purchase, 50% in year 2, and remaining 25% in year 3.

accelerated CCA for clean energy generation extended for

	wave and tidal energy equipment
	active solar equipment
	small photovoltaic and fixed-location fuel cell systems
	biogas production equipment
	pulp and paper waste fuels
	biomass drying and other fuel upgrading equipment
	waste-fuelled thermal energy systems

Revised: January 17, 2012

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