Finance Minister Jim Flaherty presented the Tory government’s second budget in the House of Commons today. Here are the highlights from a personal finance perspective from reading the budget document found on the Department of Finance website (be warned that it is 478 pages long):
- If you purchase a fuel-efficient vehicle such as a Toyota Prius or Honda Civic Hybrid on or after March 20, 2007, you will qualify for a rebate of $2,000. Even high-mileage cars such as a Toyota Corolla will be eligible for a $1,000 rebate. (See pages 67-68).
- At the same time, gas-guzzling cars, minivans, SUVs, trucks and other passenger vehicles will attract a new “Green Levy” of $1,000 - $4,000 depending on the mileage. (See page 69).
- A Working Income Tax Benefit of $500 to $1,000 will be provided as a refundable tax credit to help low-income Canadians get over the “welfare wall”. (Pages 78-83).
- A new Registered Disability Savings Plan (RDSP) to help parents save for the future of a child with severe disabilities. The RDSP is modelled on the RESP program and is available to individuals who are eligible for the disability tax credit. (Pages 83-86).
- Donations of publicly listed securities to private foundations will not attract a capital-gains tax effective today. (Page 87).
- The net personal income tax threshold has been increased from $2,000 to $3,000 at or below which individual taxpayers do not have to pay instalments. This is part of a series of measures to reduce the paperwork burden of small business. (Pages 183-185).
- The budget is proposing some changes to RESPs by eliminating the $4,000 annual contribution limit, increasing the lifetime contribution limit to $50,000 from the current $42,000 and increasing the maximum annual CESG amount to $500 from $400 (and to $1,000 from $800 if unused grant room is available). The key though is that the amount of CESG that a child is eligible to receive stays at $7,200. (Pages 210-211).
- A new child tax credit of $2,000 for each child under age 18 is being introduced effective January 1, 2007. The child tax credit will reduce your income tax by $310 for each eligible child in your household. (Pages 226-227).
- Single income families will benefit from an increase in the spousal amount, which will now be equal to the basic personal amount in the current and future years. The increase will be worth $209 in additional tax relief in 2007. (Pages 227-229).
- The lifetime capital gains exemption available to small business owners, farmers and fishermen will increase from $500,000 to $750,000 effective today.
- RRSPs should now be converted to RRIFs by the end of the year in which an individual turns 69. The age limit is now increased to 71.
- Canadian residents travelling abroad can now bring back $400 (up from $200) worth of goods without having to pay duties or taxes after a 48-hour absence effective March 20, 2007.
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14 responses so far ↓
1 Big Cajun Man // Mar 20, 2007 at 8:46 am
You always find a few things that I miss, that is why I always like reading your analysis of things. Good posting! I need to learn more about the RDSP, because that sounds like a good thing for parents with kids with disabilities.
Good post!
–C8j
2 Investoid » Blog Archive » Federal Budget Wrap Up // Mar 20, 2007 at 8:58 am
[...] Now that the federal budget has been unveiled, the rumors have been dispelled and the actual policy is front and centre. The Canadian Capitalist has already written a good summary article, so I will suggest you read that article and I’ll try not to venture on its subject matter too much. [...]
3 Rob Drimmie // Mar 20, 2007 at 4:39 pm
A question about item 10 - I have been lead to believe that the intent is to raise the cap to $750,000, but effective today is an intermediary point that bumps it up to $640,000.
Is that correct or have I misinterpreted what I’ve been reading?
4 Canadian Capitalist // Mar 20, 2007 at 4:46 pm
Rob: Where did you see the $640K figure? Here’s what page 230 of the budget document says:
“In recognition of the importance of small business owners, farmers, fishermen and fisherwomen to the Canadian economy, Budget 2007 proposes to increase the LCGE to $750,000 from $500,000. This is the first time it has been increased since 1988. This new limit will apply to dispositions on or after March 19, 2007, of qualified farm and fishing property and qualified small business corporation shares.”
5 Alex // Mar 20, 2007 at 5:20 pm
I’m a little bit confused when they say that the $4000 annual RESP contribution limit has been eleminated. What does this mean? If I have $50 000 now and never contributed to an RESP before, does it mean that I can (in theory) in one shot make $50 000 and never have to worry again about RESP until my child turns 18?
thanks,
Alex
6 Canadian Capitalist // Mar 20, 2007 at 5:49 pm
Alex: The short answer is yes. But you can only get a CESG of either $500 or $1000 depending on your grant room. And I believe you would also lose future CESG grants because you are now maxed out.
7 Mike // Mar 20, 2007 at 8:07 pm
Just for the record, assuming any kind of return at all - you are better off front loading your contributions because the extra compounding time will make up for the lack of grants.
ie contributing $4k/year for 9 years (and only getting half the grant) will give you a bigger pot than putting in $2k/year even though you get the full grant.
Personally I’m not too worried about maxing the resp - it’s a future obligation and I have quite a few current obligations to worry about.
8 Glenn Rittinger // Mar 23, 2007 at 8:40 pm
Did the trial balloon re income splitting for seniors pop?
When I retired, gas was about - but usually under - $.60 per litre - now over $1.00, my health/life insurance was $139.00 per month - now over $400.00.
Out of pocket health and dental last year - over $9,000.00. Yikes! - and I know we are better off than many other seniors.I appreciate what the minister has done but…
How about a little more help, Mr Flaherty?
9 2007: A Retrospective // Dec 30, 2007 at 11:57 pm
[...] Federal Budget in March introduced major changes to RESPs and introduced a new child tax [...]
10 The Conservative Tax Trick // Jun 10, 2008 at 11:55 pm
[...] In Budget 2007, the Tories introduced “a broadly revenue-neutral” rebate program that offered up to $2,000 for the purchase of a new fuel-efficient automobile while at the same time imposing a “green levy” of up to $4,000 on gas-guzzling vehicles such as SUVs (but not trucks). In this year’s budget, they decided to scrap the green rebate, while keeping the green levy. It is hypocritical of the Conservatives to warn that we “better not fall for this trick”, when they themselves played a similar green trick on Canadians. [...]
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12 Federal-Budget » Learn to Engage in the Federal Budget Process // Jul 2, 2008 at 10:31 am
[...] Comment on Federal Budget Highlights by Federal-Budget » Now it's …Comment on Federal Budget Highlights by The Conservative Tax TrickIn Budget 2007, the Tories introduced “a broadly revenue-neutral” rebate program that offered up to $2000 for the purchase of a new fuel-efficient automobile while at the … [...]
13 Federal-Budget » DSC_063626924 - Ujjal DOSANJH & Alex STOJICEVIC // Jul 9, 2008 at 5:19 pm
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