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March 29, 2016

An Uncharitable Budget

Estimated reading time: 45 seconds

Canada's New Federal Budget and How It Affects You

The new Federal Budget tabled last week continued to make good on the government’s promise to collect more taxes.

In case you missed it, ‘wealthy’ was re-defined not long ago to include Canadians earning more than $200,000 annually.

Their incomes, already hit by a 4% tax rate increase in 2016, will reduce even further as a result of the changes in the Budget.

Many Canadians are now losing more than half of their incomes to taxes, up to 53.53%.

New Budget Removes Life Insurance Policy Transfers

The Budget slammed the door shut on Life Insurance Policy Transfers, exactly as I predicted in “Overlooked Strategy”, my very first TaxLetter® article published in 2011.

A version of income splitting, previously known as The “Family Tax Cut Credit” was eliminated. Introduced by the previous government in 2014, it allowed an individual to notionally transfer up to $50,000 of their income to his or her lower income spouse of common law partner, if they had a child under age 18.

Some income splitting strategies remain untouched and available to help high income couples with disparate incomes. Strategies include pension income splitting, spousal or common law partners RRSPs for post-retirement income splitting, and lending funds to lower income family members at a rate prescribed by the Canada Revenue Agency.

New Budget Affects Charitable Donations

Charities and taxpayers were dealt a nasty blow. The government announced it will not proceed with the implementation of a charity-friendly plan (introduced by the previous government) to eliminate the capital gains tax on the sale of appreciated real estate and private company shares if the proceeds were donated to charity with 30 days. Humbug!

The good news is that the donation of publicly traded shares was unaffected. Read more about Charitable Planned Giving.

For wealthy Canadians, the upcoming tax rules changes will have an even bigger impact than this new Budget. Before you make any financial decisions this year, make sure that you know exactly how the new tax rules and the new Budget affect you.

Take shelter now with tax-exempt insurance before the new rules come into effect. Only 180 days remain to act on this tax-saving opportunity. Policies issued before 2017 will be grandfathered.

Consider these strategies to pay less tax.

The shrinking list of tax-free investments has been whittled down to this final four: Lottery winnings, TFSAs, your principal residence and life insurance. (Lottery tickets seldom make the ‘investment’ list).

Proper estate planning and tax minimization is not a do-it-yourself project. People need professional help. Read this.

Contact us now and we can show you how to keep more for your family and less for the tax department.

Our team of advisors across Canada is available to answer questions and help preserve what you have worked for.

Please be in touch if we can help you.

Call me toll-free at 1-866-566-2001 or send an email to

I look forward to helping you and your family

Stay healthy

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