How the New Federal Budget Will Affect Your Finances

How the New Federal Budget Will Affect Your Finances

How the New Federal Budget Will Affect Your Finances

This year’s Federal budget is titled “Growing the Middle Class” and just like the recent Ontario budget, it focuses on stimulating low and medium-income Canadian households. This year, we see changes in personal income tax rates, increased child care benefits, retirement changes and other changes that will impact every household and individual in some way.

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Tax Rates

Middle-income households will see a drop in their 2016 taxes. The federal income tax rate has been decreased by 1.5% for all income earned between $45,282 and $90,563; equating to a maximum tax reduction of $679.22. However, this is at the expense of high-income earners whom will now need to pay 4% more on all income earned over $200,000.

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Child Benefits

Beginning July 2016, the new Child Care Benefit will be introduced to target low to medium-income households. The maximum tax-free benefit will be $6,400 a year for each child under 6 years old and $5,400 a year per youth aged 6-17 years old. Families that earn $30,000 and under will receive the maximum benefit and the benefit will decrease as household income increases. Higher income households will have a reduced benefit from before (details to be presented at a future date.)

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In addition, support for children with disabilities will increase by an annual maximum of $2,750 per child.

The new Canada Child Benefit will be phase out older benefits that were previously in place for families. The following programs will be eliminated;

  • The previous Canada Child Benefit
  • Universal Child Care Benefit
  • Family income splitting will be eliminated (pension splitting will still be available)
  • The Children’s Fitness and Arts Credit

Students

We see many changes that will be introduced during the upcoming 2016/17 school year. There will be increased payments to low and middle-income households that have full and part-time students, as listed below;

  • Increasing the annual grant from $2,000 to $3,000 for low-income households
  • Increasing the annual grant from $800 to $1,200 for medium-income households
  • Increasing the annual grant from $1,200 to $1,800 for part-time students

Many changes are also happening to the federal portion of student loans. We see the introduction of a measure that delays student loan repayment until the student earns over $25,000. It will also be easier to apply to payment assistance for those that are encountering financial difficulties. There will also be expanded eligibility and increased ease in applying for federal student loans.

Beginning in 2017, the government will be eliminating the education and textbook credit. However, individuals that have past credits will be able to carry them forward indefinitely.

Employment Insurance.

We see some changes to EI that will simplify the application process and will increase benefits for targeted areas that are currently encountering economic distress. Specifically, we see;

  • The waiting period is reduced from two weeks to one
  • A $19 million investment into Service Canada to increase service quality
  • Increase EI benefits for targeted regions by 5 to 20 weeks
  • Easier approval conditions for new entrants and re-entrants

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Retirement

This budget reverses previous changes to the minimum age that one can receive Old Age Security (OAS) and Guaranteed Income Supplement (GIS) from 67 to 65 years old and from 62 to 60 years old for the Allowance. Discussions are also commencing on ways that the Canadian Pension Plan (CPP) can be changed to benefit Canadians.

GIS supplement for low-income seniors will receive up-to an additional $947 annually. The maximum will be paid for those that earn under $4,600 and those that earn under $8,400 will received a reduced amount.

Infrastructure

We see MASSIVE investments in infrastructure, the Federal Government is investing $11.9 billion over five years into a wide array of infrastructure projects. Including;

  • $3.4 billion into public transit projects
  • $5 billion into water, wastewater and green initiatives.
  • $3.4 billion into social projects like, affordable housing, childcare facilities, cultural and recreational projects
  • $3.4 billion into federal property like, national parks, harbours, laboratories defence and government buildings

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Clean Economy

$2.9 billion will be spent over five years to research climate change and reduce green house gas emissions. This will include the facilitation of a greener transportation network, support energy efficiencies, research investments and more.

An additional $1 billion dollars is being spent over four years to help promote green technology and research. This will include investing in electric vehicle infrastructure, research of alternative fuels and more.

First Nations

$8.4 billion will be spent over five years to improve the socio-economic conditions of first nations people and their communities. This includes massive investments in schooling, skill training, and more. Social infrastructure will also see a boost with a focus on bettering affordable housing, childcare, healthcare, cultural, shelter and more.

Finally we see lots of other investments in;

  • Veterans Affairs: The new budget will reopen many previously closed veterans’ centres and will increase available veterans’ benefits.
  • Health Care and Food: This will include increased digital healthcare systems, increased provincial cooperation, increased health care awareness for adults , improved food safety systems and improved food labeling for added sugars and dyes.
  • Justice: There will be moves to make it more difficult to acquire illegal firearms and betterment of their digital systems.
  • Arts: There will be large spending boost for the CBC and other television/radiostations.

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