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How the Minority Liberal Government May Affect Tax Policies

By Jamie Golombek and Debbie Pearl-Weinberg

The Liberal party has retained minority power in the recent federal election. If they follow through with initiatives in their election platform and are supported by some members of the other parties, many Canadians may see a number of personal tax changes.

Basic Personal Amount 
The basic personal amount (the “BPA”) is the amount of income that an individual can earn that is not subject to tax. Every Canadian taxpayer is eligible for this credit, which is currently $12,069 and rises annually with inflation. The Liberals pledged to increase this amount over four years by 15 per cent, so that it will reach $15,000 by 2023. This increase was not presented as universal since it will not apply for those individuals who were described as being “Canada’s wealthiest one per cent.” The increased BPA will start to be reduced for those in the second-highest federal tax bracket. In 2020, this will apply to those earning over $150,605. It will be eliminated entirely for those earning over $214,557 in 2020, which corresponds with those in the highest federal tax bracket. These individuals will continue to receive the current BPA, adjusted for inflation, as the chart below indicates.

Tax Year

Projected Status Quo BPA

Proposed New BPA

2020

$12,309

$13,229

2021

$12,567

$13,808

2022

$12,852

$14,398

2023

$13,092

$15,000

Source: Liberal Platform documents

Seniors

There are two changes that may affect seniors. First, the Liberals proposed increasing the Old Age Security (OAS) rate by 10 per cent for those over the age of 75 starting in July of 2020. This could increase OAS by as much as $729 per year. The amount will be indexed to inflation. The full increase should apply to those earning less than approximately $77,500 per year, in 2019 dollars.

Secondly, the amount of Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) survivor’s benefits is proposed to increase. These are the CPP and QPP benefits a spouse or common-law partner receives after their partner passes away. Currently, a survivor is entitled to receive approximately 60 per cent of what their deceased spouse or common-law partner received in benefits. The Liberal platform set out a 25 per cent increase in these survivor’s benefits. This could mean as much as an additional $2,080 per year in benefits.

Parents

There are a few Liberal election promises that will be of interest to parents. First, the Liberal platform included a plan to make both EI maternity and paternity benefits tax free, beginning in 2020. This means that recipients would see the net amount per payment rise as there would be no federal tax deducted at source. According to the Liberal platform, this would mean approximately $1,800 more annually to a parent receiving EI benefits, if they earn roughly $45,000 a year.

Adoptive parents could also see a change in EI benefits. The Liberals proposed introducing a 15-week leave for those who adopt, which would be equivalent to the current maternity leave available to an individual who gives birth. It was estimated that this could provide an additional $7,000 to the average family claiming the new adoption leave.

The Liberals also proposed increasing the Canada Child Benefit by 15 per cent for children under one year of age starting in July of 2020. This could result in an increased benefit of up to $1,000. Beginning in July 2020, the base benefit is to be $7,750.

For those with children living with a disability, the Liberals pledged an immediate doubling of the Child Disability Benefit. This is a tax-free monthly benefit that families caring for a child under the age of 18 who is eligible for the disability tax credit are entitled to receive. The Liberal platform stated that this could result in more than $2,800 in extra assistance by increasing the annual benefit to $5,664.

Although it is never assured that a newly elected government will follow through with all their pre-election promises, that uncertainty looms even larger this time around, given the Liberal minority government.

Jamie Golombek, CPA, CA, CFP, CLU, TEP, is managing director, tax and estate planning, with CIBC Financial Planning and Advice in Toronto. Debbie Pearl-Weinberg, LLB, is executive director, tax and estate planning, with CIBC Financial Planning and Advice in Toronto.

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