News/Tips
GST changes (January 1, 2008)
Effective January 1, 2008 the GST rate is being reduced from 6% to 5%. Only transactions that take place after this date are affected by the new rate. If an invoice is prepared after January 1, 2008 for services rendered before, the new rate must be charged. If rent is paid on December 15th covering the period December 15th to January 15th, the old rate must be charged.
Businesses that use the “Quick” method will use a rate of 3.6% on sales after January 1, 2008. If your reporting period is November 2007 to January 2008, you will use the old 4.3% rate on the November & December sales and the new 3.6% rate on the January sales.
The GST included in purchases will now be calculated using 5/105 (old rate: 6/106). If PST was charged, the calculation will be 5/113 (old rate: 6/114).
Detailed CRA instructions and examples can be found here (http://www.cra-arc.gc.ca/E/pub/gi/notice226/README.html).
Payroll changes (January 1, 2008)
The first personal tax bracket rate is reduced by 0.5%
The basic
personal exemption is $9,600 federal ($8,681 Ontario)
CPP maximum earnings increased to $44,900 (was $43,700)
CPP maximum contribution increased to $2,050 (was $1,990)
EI maximum earnings increased to $41,100 (was $40,000)
EI maximum contribution decreased to $711 (was $720)
New Canadian Cheque Specifications
The implementation date for the new cheque format has been deferred to September 2, 2008. All business and personal cheques must be in the new format by that time.
Click for additional information (Canadian Payments Association) (http://www.cdnpay.ca/faqs/new_specifications.asp)
Lifetime Capital Gains Exemption (March 19, 2007)
Increased from $500,000 to $750,000
RRSPs & RRIFs (2007)
The conversion age is now 71 (from 69)
Capital Cost Allowance (CCA)
Rates changed for the following assets acquired after March 19, 2007
Non-residential Buildings – from 4% to 6%
Computer Equipment – from 45% to 55%
Manufacturing Equipment – from 30% to 50% straight line (to Dec 31/08)
Installments
If the tax payable is below $3,000 (was $1,000), installments will not be required
For individuals, this starts in 2008
For corporations, this starts for taxation years that begin after 2007
For GST, this starts in 2008
Registered Education Savings Plan – RESP (2007)
The maximum annual RESP contribution qualifying for the 20% grant is increased from $2,000 to $2,500. The maximum lifetime grant, however, remains at $7,200.
Registered Disability Saving Plan – RDSP (2008)
This plan is to help parents save for long-term financial security of children with severe disabilities. It can be set up for any person under age 60 that is eligible for the disability tax credit. The maximum contribution is $200,000 and the maximum Canada Disability Savings Grant (CDSG) grant is $70,000. Families with income below $37,000 may qualify to receive a Canada Disability Savings Bond (CDSB) of up to $1,000 per year, to age 49.
Children’s’ Fitness tax Credit (2007)
Parents will be able to claim a maximum credit of $500 per year per child under 16 who participates in an eligible fitness program. Click for additional information (http://www.cra-arc.gc.ca/whatsnew/fitness-e.html)
Pension income splitting (2007)
Up to 50% of certain types of pension income can be transferred to a spouse. It includes traditional monthly pension benefits, but excludes CPP & OAS. If you are 65 or over, you can also split RRSP annuities and RRIF payments. No advance action is required; a joint election signed by both spouses will be required when your personal tax returns are prepared.
CAUTION: Increasing your spouse’s income may affect the age, spousal and medical credits as well as OAS entitlement and OAS clawback.
Payroll changes (January 1, 2007)
The basic personal exemption is increased to $8,929
The spousal exemption is reduced to $7,581
CPP maximum earnings increased to $43,700
Employment Insurance maximum earnings increased to $40,000
GST changes (July 1, 2006)
Effective July 1, 2006 the GST rate is being reduced from 7% to 6%. Only transactions that take place after this date are affected by the new rate. However if an invoice is prepared after July 1, 2006 for services rendered before, the new rate must be charged. If rent is paid on June 15th covering the period June 15th to July 15th, the old rate must be charged.
Businesses that use the 5% (quick) method will use a rate of 4.3% on sales after July 1, 2006. If your reporting period is June to August 2006, you will use 5% on the June GST included sales and 4.3% on the July and August sales. The GST included in purchases will now be calculated using 6/106 (old rate: 7/107). If PST was also charged, the calculation will be 6/114 (old rate: 7/115).
Universal Child Care Benefit (July 1, 2006)
Families with children under the age of six may be entitled to receive $100 per month per child under the new universal child care benefit program.
If you do not receive the Child Tax Benefit, you must apply for this benefit.
Additional information can be found at http://www.cra-arc.gc.ca/benefits/uccb/menu-e.html