Tax highlights from the 2016 Alberta budget

Transcription

1 Tax, Retirement and Estate Planning For wherever life takes you Tax highlights from the 2016 Alberta budget Finance Minister Joe Ceci tabled the 2016 Alberta provincial budget on April 14, The operational budget for the fiscal year forecasts a deficit of $10.4 billion. The budget also anticipates deficits of $10.1 billion in , and $8.4 billion in , with no expectation of returning to a balanced budget before Given the cumulative projected deficit of $58 billion by 2019, the government will need to repeal legislation it passed late last year capping the province s debt limit to 15% of its GDP. The big announcement in the budget was Alberta s new Climate Leadership Plan (CLP) which is detailed below. The CLP was introduced to address Alberta s dependence upon the energy industry and markets, reduce greenhouse gas emissions and create jobs in a more diversified economy. The four main components are: phasing out coal emissions and developing more renewable energy; implementing a new carbon price on greenhouse gas emissions; legislating an oil sands emission limit; and employing a new methane emission reduction plan for the oil and gas sector. Revenues generated from the aforementioned will be invested directly into measures to reduce emissions and improve energy efficiency, provide rebates to help lower and middle income individuals and families with carbon costs, as well as transitional support for small businesses, indigenous communities, and people working in communities centered on the coal industry. This budget continues to support the Capital Plan introduced last year. The Capital Plan supports $34.8 billion of investment in infrastructure projects over the next five years. The budget also outlined apprenticeship and workforce training initiatives to combat unemployment rates. On the tax side, there were no changes to personal and corporate income tax rates for 2016, however a reduction in the small business tax rate from 3% to 2% was proposed for The following pages are a summary of the changes announced in the budget. Please note that these changes are still proposals until passed into law by the provincial government. Personal Tax Matters Personal income tax rates and tax brackets There were no personal tax rate increases announced in this budget. As announced in last year s budget, Alberta introduced a progressive, multi-rate income tax system. As this is the first full year, income tax brackets will not be indexed until The table below shows Alberta tax rates and brackets for Page 1 of 5

2 Taxable income range 2016 tax rates $18,452 - $125,000 10% $125,001 - $150,000 12% $150,001 - $200,000 13% $200,001 - $300,000 14% $300,001 and over 15% The new federal marginal rate of 33% for taxable income in excess of $200,000 became effective January 1, The table below shows the 2016 combined federal and Alberta highest marginal tax rates for various types of income. Taxable income range 2016 tax rates Regular income 48.00% Capital gains 24.00% Eligible dividends 31.71% Non-eligible dividends 40.24% Indexation of personal tax credits The basic personal amount is equivalent to the amount of income you can earn without paying any tax. The basic, spousal, and eligible dependant amounts were increased by 1.3% for 2016, from $18,214 to $18,451. The general indexing provision will also increase other non-refundable tax credits by the same percentage. Alberta investor tax credit The budget introduced the Alberta investor tax credit. The credit, worth $90 million over two years, will be available to individual investors who invest in eligible small-to-medium-sized enterprises in Alberta. Further details regarding this credit will be made available later this year. Dividend tax credit Since 2009 Alberta s tax system has been fully integrated, so shareholders do not incur double taxation on dividend income. Non-eligible dividends the dividend tax credit rate will be adjusted downwards as a result of the decrease in the small business rate to 2%, effective The government s intention is to ensure that income earned in a small business and flowed out to shareholders will continue to be taxed at 10%. Eligible dividends the government has indicated it will be maintaining the dividend tax credit rate at 10%. Alberta family employment tax credit and Alberta child benefit The budget proposes to further enhance the AFETC effective July 1, The credit currently begins to phase-in at 8% of working income in excess of $2,760. The budget proposes to increase the phase-in from 8% to 11% of working income in excess of $2,760. In addition, the phase-out threshold will increase from $36,778 to $41,250. Page 2 of 5

3 Introduced last year, the Alberta Child Benefit (ACB) will assist lower income families beginning in July The program will provide an annual benefit of up to $1,100 for one child, and then up to $550 for each of the next three additional children to a maximum benefit of $2,750. Families with net income of up to $25,500 will receive the maximum benefit. Benefits will gradually phase out once family income exceeds $25,500 and will fully phase-out at family net income of $41,220. The credit will be refundable and will be in addition to the AFETC. The benefit will be paid on a quarterly basis in August, November, February and May. The AFETC and ACB programs will be indexed to inflation each year, beginning in Families currently eligible for AFETC will automatically be enrolled in the ACB. Corporate Tax Matters Corporate income tax rates The budget leaves 2016 corporate income tax rates unchanged, however a reduction in the small business tax rate from 3% to 2% was proposed for The table below shows Alberta tax rates and the small business limit for 2016 and proposed for Category 2016 tax rates 2017 tax rates General rate 12% 12% Manufacturing & processing rate 12% 12% Small business rate 3% 2% Small business limit $500,000 $500,000 Capital investment tax credit The budget introduced the capital investment tax credit. This credit, worth $75 million over two years, will be available to corporations that make investments in eligible capital assets. Further details regarding this credit will be made available later this year. Climate Leadership Plan The budget introduced the Climate Leadership Plan (CLP) to address Alberta s dependence upon the energy industry and markets, reduce greenhouse gas emissions and create jobs in a more diversified economy. The CLP will impose a carbon levy on emissions starting in Along with the levy, the government will provide financial incentives to households, businesses and large industrial emitters to achieve the CLP goals. The carbon levy will apply to purchases of all fossil fuels that produce greenhouse gas emissions when consumed for combustion purposes. The carbon levy will be introduced in 2017 and will reflect a price of $20 per tonne of carbon dioxide-equivalent emissions, rising to $30 per tonne in Page 3 of 5

4 The rates on major fuels are as follows: Type of fuel 2017 rate ($20 per tonne) 2018 rate ($30 per tonne) Diesel 5.35 cents/litre 8.03 cents/litre Gasoline 4.49 cents/litre 6.73 cents/litre Natural Gas $1.011/gigajoule $1.517/gigajoule Propane 3.08 cents/litre 4.62 cents/litre To support small businesses with the CLP, the government will lower the small business corporate income tax rate as outlined above in corporate tax matters. To assist lower and middle income individuals or households with the CLP, the government will implement carbon rebates starting in 2017, which will be increased in The parameters of the rebate system are listed in the table below. Benefit amounts First adult $200 $300 Spouse/equivalent to spouse $100 $150 Child (maximum 4) $30 $45 Phase-out thresholds (family net income) Single $47,500 $47,500 Couple $95,000 $95,000 Families $95,000 $95,000 Income at which rebate is fully phased out (family net income) Single $51,250 $55,000 Couple $100,000 $103,750 Couple with 2 children $101,500 $106,000 Couple with 4 children $103,000 $108,250 Phase-out rates Single 2.67% 2.67% Couple 4.00% 4.00% Families 4.00% 4.00% Other Proposals Education property tax rates Alberta s education property tax rates will decrease by approximately 0.8% for This means that rates for residential property and farmland will decrease from $2.50 to $2.48 per $1,000 of assessed value. Commercial property rates will decrease from $3.67 to $3.64 per $1,000 of assessed value. Page 4 of 5

5 CI Investments and the CI Investments design are registered trademarks of CI Investments Inc. This communication is published by CI as a general source of information and is not intended to provide personal legal, accounting, investment or tax advice, and should not be relied upon in that regard. Facts and data provided by CI and other sources are believed to be reliable when posted; however, CI cannot guarantee that they are accurate or complete or that they will be current at all times. CI and its affiliates will not be responsible in any manner for direct, indirect, special or consequential damages howsoever caused, arising out of the use of this communication. Published April Queen Street East, Twentieth Floor, Toronto, Ontario M5C 3G7 I Head Office / Toronto Calgary Montreal Vancouver Client Services English: French: _E (04/16)