 |
 |
Helping Individuals and
Families
Helping Individuals and Families
Budget 2006 delivers real results for people in a focused and fiscally
responsible way. On July 1, 2006:
- The 7-per-cent goods and services tax (GST) will be cut to
6 per cent.
- The lowest personal income tax rate will be reduced to 15.5 per
cent from 16 per cent.
- The Universal Child Care Benefit will be launched, providing
families $100 per month for each child under 6 years old.
- A new Canada Employment Credit of $500, rising to $1,000 as of
January 1, 2007, will be introduced.
Broad-based personal income tax relief, combined with targeted tax
cuts, will remove 655,000 low-income Canadians from the tax rolls
altogether. Over the next two years, this budget will provide almost
$20 billion in tax relief for individuals—more than the last four
budgets combined. As a result, Canadians will have greater opportunity to
keep more of their hard-earned tax dollars so they can invest in the
things that matter most to them and their families.
This brochure contains
basic facts about these and other Budget 2006 measures of particular
interest to individuals and families. More details are available on the
Department of Finance Canada website at www.fin.gc.ca.
Reducing the GST—Key Facts for Consumers
For consumers, savings from this budget’s GST reduction will
amount to about $8.7 billion over two years.
Reducing
the GST to 6 Per Cent—Examples of Savings
- A family purchasing a new $200,000 home will save $1,280 in
GST.
- A family buying $20,000 in new furnishings for that new home
will save $200 in GST.
- A family spending $30,000 on a car will save $300 in GST.
|
GST Transitional Rules
Budget 2006 includes transitional rules for transactions occurring
close to or straddling the July 1, 2006, implementation date. For
example:
- Where a person receives a good or service in June or earlier
for which an invoice is not issued or paid until July 1 or later.
- Where a person pays for something in June or earlier that they
do not receive until July 1 or later.
For consumers, these situations raise the question as to whether they
pay GST at the 7-per-cent rate or at the new rate of 6 per cent. In
general, the existing GST rules that determine when tax is payable will
determine if the 6-per-cent rate will apply. Typically, GST is payable
when an invoice is issued. Consequently:
- A good or service for which you are invoiced on or after
July 1, 2006, will generally be taxable at the new 6-per-cent
rate, even if you receive the good or service before that date.
- A good or service for which you are invoiced before
July 1, 2006, will generally be taxable at the 7-per-cent rate,
even if the good or service is not delivered until July 1 or
later.
Buying a New Home—Transitional Rules
Budget 2006 sets out the rules that will apply to purchases of new
homes during the transition to the new 6-per-cent rate. Specifically:
- Where ownership or possession transfer to the buyer before
July 1, 2006, the 7-per-cent rate would apply.
- Where ownership and possession transfer to the buyer on or after
July 1, 2006:
- The 6-per-cent rate would apply if the agreement of purchase and
sale is signed after budget day, May 2, 2006.
- Buyers who signed the purchase agreement on or before May 2, 2006,
and whose GST is based on the 7-per-cent rate will be able to claim a
transitional adjustment from the Canada Revenue Agency.
As the example below illustrates, the transitional adjustment would be
equal to the GST savings due to the reduced rate.
| Example—GST
Transitional Adjustment
Monique and Sanjeev each buy
an identical new home in the same subdivision. The price for each
home is $200,000 plus GST. Both buyers are scheduled to take
possession of their homes in the fall of 2006.
- Monique signs her agreement of purchase and sale with the
builder on May 1, 2006. Sanjeev signs his agreement one week
later.
- Sanjeev pays a total of $207,680 to the builder (i.e. $200,000
plus $12,000 in GST minus a rebate of $4,320, which is
36 per cent of the GST paid).
- Monique pays a total of $208,960 to the builder (i.e. the
price of the home plus $14,000 in GST minus the GST housing
rebate of $5,040). Subsequently, she claims a transitional
benefit of $1,280.
- As a result, the net amount of GST she pays is $7,680—the
same as the amount paid by Sanjeev.
|
Lower Personal Income Taxes for All Taxpayers
Budget 2006 proposes to reduce personal income taxes for all taxpayers
by permanently reducing the lowest personal income tax rate to
15.5 per cent from 16 per cent as of July 1, 2006. This is
the rate that applies on about the first $36,400 of income. Additional
broad-based relief will include the following measures:
- Introducing the new Canada Employment Credit—a tax credit on
employment income up to $500 effective July 1, 2006, to help
working Canadians. The credit amount will double to $1,000 as of
January 1, 2007.
- Confirming that the lowest rate will be 15 per cent for the
period from January 1, 2005 to June 30, 2006.
- Increasing the basic personal amount—the amount that an individual
can earn without paying federal income tax—so that it grows each
year and remains above currently legislated levels for 2005, 2006 and
2007.
More Money in Canadians’ Pockets
|
| Broad-Based Tax
Relief for Families by Income Group |
|
Average
tax savings |
|
|
| Income group |
2006 |
2007 |
|
| Less than
$15,000 |
$51 |
$96 |
| $15,000 to
$30,000 |
$199 |
$298 |
| $30,000 to
$45,000 |
$367 |
$509 |
| $45,000 to
$60,000 |
$459 |
$643 |
| $60,000 to
$80,000 |
$562 |
$797 |
| $80,000 to
$100,000 |
$682 |
$990 |
| $100,000 to
$150,000 |
$795 |
$1,228 |
|
Universal Child Care Plan
The new Universal Child Care Plan provides benefits directly to
families as well as support for the creation of new child care spaces.
Families
Budget 2006 proposes to introduce the Universal Child Care Benefit as
of July 1, 2006. This new benefit will give all families $100 per
month for each child under age 6. This will put $2.1 billion per year
into the hands of parents.
Universal
Child Care Benefit—How Do I Apply?
Families who receive the Canada Child Tax Benefit (CCTB) will
receive the new benefit automatically.
- Families who do not receive the CCTB will be able to apply for
the new benefit by submitting a completed CCTB application form
to the Canada Revenue Agency.
|
The Universal Child Care Benefit will be taxed in the hands of the
spouse with the lower income and will not reduce federal income-tested
benefits. The Universal Child Care Benefit will provide direct federal
support to 1.5 million families and more than 2 million
children.
New Child Care Spaces
This budget sets aside $250 million per year beginning in 2007–08
to support the creation of new, real child care spaces.
Children’s Fitness Tax Credit
Budget 2006 proposes to introduce, effective January 1, 2007, a
tax credit to promote physical fitness among children. For each child
under 16, the credit will be provided on up to $500 in eligible fees for
programs of physical activity.
The Government will consult with a small group of experts in health and
physical fitness to determine which programs should be eligible for the
credit.
Helping Persons With Disabilities and Pensioners
Persons With Disabilities
Budget 2006 proposes to:
- Increase the maximum annual Child Disability Benefit to $2,300 from
$2,044, effective July 1, 2006.
- Extend eligibility for the Child Disability Benefit to middle- and
higher-income families caring for a disability tax credit–eligible
child, including virtually all families that are currently eligible
for the CCTB base benefit, effective July 1, 2006.
- Increase the maximum amount of the refundable medical expense
supplement (RMES) to $1,000 from $767 for the 2006 taxation year.
Over the next two years, Child Disability Benefit enhancements will
provide $80 million in tax relief, and increasing the RMES will
provide $25 million.
| Examples—Child
Disability Benefit
Megan earns $30,000 and has a child with a disability. Currently,
she qualifies for the maximum Child Disability Benefit of $2,044 per
year. As of July 1, 2006, Megan will receive $2,300 per year as
a result of Budget 2006—a $256 increase.
Fred and Gillian also have a child with a disability. Their
income of $80,000 currently disqualifies them from receiving the
Child Disability Benefit. As a result of Budget 2006, they will
become eligible for the benefit starting July 1, 2006. Their
annual benefit will be $1,428.
Paul and Louise’s income is $100,000 and, as a result, are also
ineligible for the Child Disability Benefit for their child. Like
Fred and Gillian, they will become eligible for the benefit. The
amount they would receive in this case is $1,028.
|
Pensioners
Budget 2006 proposes to double the current $1,000 maximum amount of
eligible pension income that can be claimed under the pension income
credit.
This measure is proposed to take effect starting with the 2006
taxation year. It will help nearly 2.7 million taxpayers and remove
85,000 pensioners from the tax rolls. This measure will provide about
$895 million in tax relief to pensioners over the next two years.
Helping Students, Apprentices and Tradespeople
Budget 2006 proposes the following measures:
Students
- A new $500 tax credit to help about 1.9 million post-secondary
students with their textbook costs. For a typical full-time student,
the tax credit will represent a yearly benefit of about $80.
- Making all scholarship, fellowship and bursary income received by
post-secondary students exempt from income tax by eliminating the
current $3,000 exemption limit.
- Expanding eligibility for student loans to more students from
middle-income families.
Apprentices
- A new tax credit of up to $2,000 per year for employers who hire and
train apprentices to help them cope with the difficulties they face in
finding skilled tradespeople. In addition, apprentices themselves will
be eligible for $1,000 grants as of January 1, 2007, under a new
Apprenticeship Incentive Program.
Tradespeople
- A new tools tax deduction of up to $500 for tradespeople for the
cost of tools in excess of $1,000 that they must acquire as a
condition of their employment. Moreover, the $200 limit on the cost of
tools eligible for the 100-per-cent capital cost allowance will be
increased to $500.
Helping Public Transit Users
Budget 2006 proposes a new tax credit for people who regularly use
public transit. This credit will be available to anyone who purchases
monthly transit passes or passes for a longer duration.
This incentive to use public transit will help ease traffic congestion
and improve the environment. It will provide regular transit users with
about $370 million in tax relief over the next two years.
Helping Newcomers to Canada
Budget 2006 delivers on the Government’s commitment to reduce by half
the $975 Right of Permanent Residence Fee. Effective immediately, this fee
is reduced to $490.
This budget also increases immigration settlement
funding by $307 million and takes steps towards the establishment of
a Canadian agency for assessment and recognition of foreign credentials.
How Can I Get More Information on Budget 2006?
Information is available on the Internet at www.fin.gc.ca
or by phoning:
You can also obtain copies of this brochure and other budget documents
from the:
Distribution Centre
Department of Finance Canada
Room P-135, West Tower
300 Laurier Avenue West
Ottawa, Ontario K1A 0G5
Phone: 613 995-2855
Fax: 613 996-0518
E-mail: services-distribution@fin.gc.ca
Ce document est également offert en français.
|
