Federal Budget Highlights

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):

1. 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).
2. 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).
3. 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).
4. 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).
5. Donations of publicly listed securities to private foundations will not attract a capital-gains tax effective today. (Page 87).
6. 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).
7. 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).
8. 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).
9. 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).
10. The lifetime capital gains exemption available to small business owners, farmers and fishermen will increase from $500,000 to $750,000 effective today.
11. 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.
12. 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.