Universal Child Care Benefit
As anticipated, the Budget introduced the Universal Child Care Benefit (UCCB) of $100 per month for each child under the age of six years. The UCCB will commence in July 2006. Although the UCCB will be taxable to the lower income spouse, it will not be included in income for purposes of income-tested benefits under the income tax system or for the claw-back of Old Age Security or Employment Benefits. It will also not reduce the amount of expenses claimable under the child care deduction.
The supplemental benefit under the Canadian Child Tax Benefit for children under the age of seven will generally be eliminated on July 1, 2006. However, for children who attain the age of six years before July 1, 2007, the supplemental Canadian Child Tax Benefit will continue for those months prior to July 1, 2007 for which no UCCB is received.
Canada's Universal Child Care Plan Website
Tax Rate
The tax rate in the lowest tax bracket is used to calculate most of the tax credits available to individuals and to calculate alternative minimum tax.
The November 2005 Economic Statement decreased the lowest rate from 16% to 15% effective January 1, 2005. The Budget proposes to increase the rate to 15.5% effective July 1, 2006. The effective rate will therefore be 15.25% for 2006 and 15.5% for future years.
Changes to Tax Credits
The Budget continues to tinker with the basic personal amount and the
spouse/common-law partner (SCLP) amount. These amounts for 2006 and 2007 are as
follows:
|
|
2006 |
2007 |
|
Basic personal amount |
$8,839 |
$8,739 |
|
SCLP amount |
$7,505 |
$7,420 |
The Budget proposes a number of new tax credits commencing in 2006.
The Canada Employment Credit will be based on the lesser of $250 and the amount of the individual's employment income for the year. In 2007, the base for this credit will increase to $1,000.
The Textbook Tax Credit will be $65 for each month a student is eligible to claim the education credit for full-time students and $20 for each month a student is entitled to the education credit for part-time students. Unused amounts will be added to unused tuition and education credits that can be transferred to a supporting person or carried forward to future years.
The Children's Fitness Tax Credit may be claimed by either parent for up to $500 of eligible fees relating to the enrolment of a child under the age of sixteen in an eligible program of physical activity. The government will consult with experts on the definition of an "eligible program of physical activity". Parents will need to obtain a tax receipt and the organizations will have to keep books and records. The amount claimed under this tax credit will not be eligible for the child care deduction.
Effective July 1, 2006, individuals will be entitled to a non-refundable Tax Credit for Public Transit Passes for the individual, the individual's spouse or common-law partner and dependent children under the age of 19. The transit pass must be for a duration of at least one month. Public transit includes a bus, streetcar, subway, commuter bus, commuter train and a local ferry.
The pension income credit will be increased from $1,000 to $2,000 effective for 2006.
Flow Through Shares
The 15% Mineral Exploration Tax Credit for investments in flow-through shares has been reintroduced for agreements entered into between May 2, 2006 and March 31, 2007 for exploration that is conducted before December 31, 2008.