October 25th, 2017
On October 24, 2017, the Honourable Bill Morneau, Minister of Finance, released Canada’s 2017 Fall Economic Statement (“FES 2017”). The Canadian economy saw a better than expected performance with an average annualized growth rate of 3.7 per cent over the last four quarters. It is expected that these results will reduce the annual fiscal year deficit to $19.9 billion, down from the $28.5 billion predicted in last spring’s budget.
FES 2017 reiterated the Government’s previously-announced cut to the Federal small business corporate income tax rate. Effective January 1, 2018, the rate will decrease from 10.5 per cent to 10 per cent and will decrease further to nine per cent on January 1, 2019. In order to preserve the integration of our corporate and personal income tax rates, the Government will be decreasing the dividend tax credit for non-eligible dividends. For an individual in the highest marginal tax bracket, this will result in an increase to the personal income tax rate on non-eligible dividends to 45.7 per cent and 46.8 per cent in 2018 and 2019, respectively.
In addition, FES 2017 reconfirmed the government’s intention to move forward with its previously-announced dividend sprinkling and passive income tax measures and its intention to not move forward with its proposed measures limiting access to the Lifetime Capital Gains Exemption and curtailing surplus stripping by converting income into capital gains. More details on the dividend sprinkling measures are expected before the end of this year, and the passive income tax measures will be detailed in the 2018 Federal budget.
Finally, the Government announced in FES 2017 that it intends to use a portion of its windfall to support additional measures targeted at strengthening the middle class, including:
- Indexing the Canada Child Benefit (“CCB”) to inflation two years ahead of schedule. This will provide low and middle-income families with an additional $5.6 billion over a five year period starting July 2018. For a family with two dependents, the CCB entitlement will increase by approximately $200 in 2018 and by approximately $500 in 2019.
- Expanding and enhancing the Working Income Tax Benefit, a credit for low-income earners, by providing an additional $500 million annually to the program commencing in 2019.
Connect with the Authors
This article was prepared by Crowe Soberman’s Tax Group. If you have any questions relating to this article, we encourage you to contact one of them.
Aaron Schechter, CPA, CA, TEP
Adam Scherer, BA, CPA, CA
Alexandra (Ali) Spinner, BA, MMPA, CPA, CA, TEP
Karen Slezak, BBA, CPA, CA, CFP, TEP
Karyn Lipman, BComm, CPA, CA
Silvia Jacinto, BComm, MTax
This article has been prepared for the general information of our clients. Specific professional advice should be obtained prior to the implementation of any suggestion contained in this article. Please note that this publication should not be considered a substitute for personalized tax advice related to your particular situation.
