On Tuesday, April 21, 2015, Finance Minister Joe Oliver delivered his first Federal Budget for 2015. The good news is he delivered a balanced budget with a projected surplus of $1.4 billion this year, increasing to $4.8 billion in 2019-20. Part of this came from the sale of the government’s General Motors shares, purchased in 2009 as part of an effort to help the auto industry weather the storm in the wake of the 2008 recession, generated a net gain of $2.1 billion. The federal contingency fund drops to $1 billion in 2015-16, returning to $3 billion by 2019. Like any budget, there are are always some groups that benefit more than others. Who were the winner of this year’s Federal Budget?
Seniors in Canada
Many financial writers including Rob Carrick of the Globe and Mail depicted Seniors as the runaway winner of the Budget.
The biggest item that Seniors and retirees should be happy with is the changes to the RRIF minimums at age 71. Since, 1992, Canadians had to take out a minimum of 7.38% of their RRIF at the age of 71 and this percentage increased every year they got older. In the new budget, the government is proposing to lower that minimum to 5.38%.
Related article: Understanding RRIF Minimum Income rules
Although, the idea behind lowering the minimum income required is to help allow retirement assets to last longer, I’ve often suggested that retirees should really look at drawing out some of their RRSP/RRIF assets long before the age of 71. Regardless, lowering RRIF minimums will give retirees more flexibility than before.
Related article: Should RRIF minimums be changed?
Many seniors will also benefit from the introduction of the Home accessibility Tax Credit (HATC). Seniors and disabled persons will be able to claim up to $10,000 per year of renovations used to make homes safer and more accessible.
Savers and Investors
The TFSA, which was introduced in 2009, has become the poster child for savings and investing given that all the growth in a TFSA is tax free. As great as the TFSA is, it’s gotten better because effecitve for 2015, the annual limit has been increased to $10,000 from $5500. According to the Federal Budget, this change will have the largest impact to government revenues and costs. The TFSA limit will stay at $10,000 indefinitely and will not be adjusted for inflation.
Related article: TFSA contribution and withdrawal rules
Although seniors will greatly benefit from the increase in the Tax Free Savings Account (TFSA) contribution limit, all Canadians over the age of 18 win from this 2015 Budget item. Some critics suggest that the TFSA change only benefits the rich but statistics suggest that as of 2013, 80% of all TFSA account holders make less than $80,000.
Related article: Who benefits from the TFSA
Personally, I think this is great news and a change that all Canadians can benefit from at some point in time in their lives.
Small businesses are also big winners from the new budget. According to the Federal Budget, “Small businesses are critical to the health of the Canadian economy. They represent 99 per cent of all businesses in the country and employ half of all Canadians working in the private sector.
- 10.5 per cent effective January 1, 2016;
- 10 per cent effective January 1, 2017;
- 9.5 per cent effective January 1, 2018; and
- 9 per cent effective January 1, 2019
This rate applies to the first $500,000 of active business income.
Small business owners will also benefit from the Increase in the lifetime capital gains exemption (LCGE) realized on the disposition of small business corporations and farm or fishing properties from $813,600 to $1 million. This exemption also applies to farm and fishing businesses.
Although there is a lot more in the budget, my take is these three groups are the big winners in the 2015 Federal Budget. For all the details, here’s a link to the actual budget paper. http://www.budget.gc.ca/2015/docs/plan/budget2015-eng.pdf