Highlights from the 2016 Federal Budget:

On March 22, 2016, Finance Minister Bill Morneau tabled the current government’s first Federal Budget. The Budget outlines planned government spending, expected government revenue, and forecast economic conditions for the upcoming year. The budget is the financial plan on delivering the commitments made by the current government during the election campaign, Speech from the Throne and mandate letters to the Ministers.  The priorities of the Budget have been laid out into five key themes:

1. Strengthening the Middle Class: Investing in the middle class, skills training and infrastructure.
2. An Innovative and Clean Economy: Smart, targeted investments in science, research, innovation and the environment.
3. An Inclusive and Fair Canada: A better more inclusive Canada where all Canadians have a chance to succeed.
4. Canada and the World: International Leadership in support of peace, security and economic growth.
5. Open and Transparent Government.

The summary below highlights key investments and commitments made by the Federal government over the next year.

Personal Tax

1. A tax reduction for the middle class: A reduction in the federal tax rate for incomes between $45,283 and $90,563 to 20.5% from 22%

1. A tax increase for the Wealthy: An increase in the tax rate for those earning incomes over $200,000 to 33% from 29%

1. A change in TFSA contributions: The contribution limit for Tax-Free Savings Accounts will be reduced to $5,500 per year starting in 2016 (from $10,000 for 2015)

The federal budget introduced the following additional changes:

1. Income splitting for families is gone: The rule for income splitting allowed wealthy couples with children under the age of 18 to transfer up to $50,000 from a higher earning spouse to a spouse in the same household earning less. This would allow the higher earning spouse to get a tax credit of up to $2,000. The budget will eliminate this sort of income splitting. Pension income splitting will not be affected.

1. Children fitness and arts tax credits are gone: These credits are worth between $75-$100 (based on eligible expenses of $500 to $1,000). The budget proposes to reduce these by half in 2016 and to eliminate both credits by 2017.

1. Child Benefit is restructured: The budget introduced the Canada Child Benefit which will replace the Canada Child Tax Benefit and Universal Child Care Benefit starting in July 2016. The program will pay (at a maximum): $6,400 for each child under 6, $5,400 for each child between 6-17. However, these amounts decrease gradually if your income is more than $30,000 and families earning more than $150,000 will actually receive less in this program. The new benefit helps low-to-middle income class families the most and is tax-free.

1. EI benefits have changed: The waiting period to receive EI benefits will be reduced from two weeks to one week and the benefit period will be extended by an additional five weeks (notably, this is for parts of the country hit hard by the economic downturn i.e. Alberta)

1. Increased income support to seniors: Increase the Guaranteed Income Supplement benefit by up to $947 annually for single seniors and reduce the eligibility of Old Age Security back to 65.

1. Canada Student Grants: These grants are currently available to low-to-middle income families. The budget proposes to increase the grants for low income families from $2,000 to $3,000 and from $800 to $1,200 for middle income families.

1. Student Debt: The budget proposes that loan repayments under the Canada Student Loans Program Repayment Assistance Plan will only have to be repaid when students are making above $25,000/year. Students will also now be required to contribute a flat amount each year towards the cost of their education rather than having their student loan applications be based on assets and income.

Small Business

Although it was highly speculated that changes would be made to tax rates for small businesses, this was unchanged. Where is the money going to be spent?

1. Tax breaks: All the tax changes outlined above reduce the government’s revenues and/or add to the government’s expenses and therefore, to the deficit.

1. Infrastructure: In order to stimulate the economy and create new jobs, the government will spend approximately $11.9 billion over the next five years. This will be split as follows:

• $3.4 billion over three years to upgrade and improve public transit systems across Canada
• $5.0 billion over five years for investments in water, wastewater and green infrastructure projects across Canada. This includes investments to reduce greenhouse gases, assist communities in adapting to impacts of climate change and support clean technologies.
• $3.4 billion over five years for social infrastructure, including affordable housing, early learning and child care, cultural and recreational infrastructure, and community health care facilities on reserve. The investments in affordable housing include:
  • $200 million over two years in affordable housing for seniors.
  • $208 million over five years to construct new and affordable rental units.
  • $118 million over two years to prevent and reduce homelessness.

1. Youth Employment Strategy: $330 million will be invested to help young people gain the skills, abilities and work experience they need to find a good job in the labour market.

1. Clean technology, mining, agriculture: $1 billion over four years, starting in 2017–18, to support clean technology, including in the forestry, fisheries, mining, energy and agriculture sectors.

1. Indigenous people: $8.4 billion over five years to improve the socio-economic state of Indigenous people. This historic commitment includes:

• $2.6 billion over five years into primary and secondary education on reserve.
• $15 million over two years in job skills and training for First Nations.
• $40 million over two years toward the National Inquiry into Missing and Murdered Indigenous Women and Children

1. Health care system: $39 million over three years in various initiatives to expand access to nutritious food in the North and improving vaccine uptake and coverage. Funding will also go towards negotiating a new health accord with Provinces and Territories to enhance the affordability of prescription drugs and improve home care and mental health services.

1. Public Safety: As part of the Government’s commitment to public safety and countering radicalization to violence, $35 million over five years will be invested to establish an Office of Community Outreach and Counter--Radicalization Coordinator. The mandate of the office will be to lead Canada’s response to radicalization to violence and support community outreach and research. 

1. Canada’s Immigration System: The immigration levels to Canada will be increased by 7 per cent which means that 300,000 new Canadians will be welcomed to the country in 2016. Priority will be placed on family reunification and resettling refugees from war stricken countries.

• $25 million will be invested to increase processing times for family sponsorship applications.
• In addition to the previous commitment of $678 million over five years to resettle 25,000 Syrian refugees, an additional $245 million over five years will be invested to resettle 10,000 more Syrian refugees.

1. International Assistance:

• $2.65 billion by 2020 to address climate change in developing countries
• $1.6 billion+ over three years, starting in 2016/2017, towards security, stabilization, humanitarian and development assistance for Iraq, Syria, Jordan and Lebanon
• $678 million over six years, starting in 2015/2016, to respond to the Syrian refugee crisis and aid in the resettlement of 25,000 Syrian refugees
• $30 million for the Counter-Terrorism Capacity Building Program-Sahel Envelope

Want to learn more? Click here to check out the full budget documents.