On Monday December 7th, the Honourable Finance Minister Bill Morneau announced and tabled a notice of Ways and Means motion to amend the Tax Act and commented on the following tax changes to both individuals and corporations. The following is a summary highlight of the principal changes that have been retained.

Individual Tax Measures:

Rates for Personal tax rates after 2015
Starting January 2016, personal tax rates on income earned in excess of $200,000 will increase from 29% to 33%, effectively creating a new tax bracket to accommodate that change. The second lowest tax rate will drop from 22% to 20.5%.
So starting in January 2016, the Personal tax brackets will be modified to reflect the following:
• 15% on the first $45,282
• 20.5% on income between $45,283 and $90,563
• 26% on income between $90,564 and $140,388
• 29% on income between $140,388 and $200,000
• 33% on Income in excess of $200,000

Income Splitting for families
The measure that allowed certain families with children under 18 to reduce their taxes by $2,000, using an income splitting formula, will be completely repealed.

Tax Free Savings Account
The contribution limit on the TFSA will be modified and rolled back to $5,500 for contributions made in 2016 and later years. The indexing of the limit will be reinstated to the nearest $500. Individuals who have not contributed the maximum or have not contributed anything in 2015, will keep the $10,000 limit. As such those individuals may be able to contribute the remaining room for 2015 and prior years.

Universal Child care and Canada child tax Benefit and supplement
Starting July 1st 2016, the above programs will be cancelled and replaced with a new Canada Child Benefit. Payments will start July 1st.

The Finance Minister has said that the income splitting measure and Canada Child benefit measure are not part of the ways and means motion to amend the Tax Act, however, they were simply announced and will form part of 2016 federal Budget.

Corporate Measures:

Investment Income surtax
Investment income earned in a Canadian Private Corporation is currently surtaxed at 6 2/3%. As of 2016, that surtax will increase to 10 2/3%. The objective of this additional tax is to reduce personal income tax deferral possibilities that individuals earning investment income directly might otherwise obtain by earning such income through a Corporation.

The increase is in part consequential to the introduction of the new top personal tax bracket of 33%.
Also portfolio dividend income earned through a corporation will be taxed at the high rate of 38 1/3% up from 33 1/3%. Consequently, tax refund on taxable dividends paid from a Canadian Private corporation will also increase to 38 1/3% from 33 1/3%.

ProvinceSalaryCapital GainEligible DividendsOrdinary Dividends
British Columbia47.70%23.85% 31.30% 40.61%
Alberta 48.00%24.00% 31.71%40.24%
Saskatchewan 48.00%24.00%31.71%40.24%
Manitoba 50.40% 25.20%37.78%45.69%
Ontario 53.53% 26.76% 39.34%45.30%
Quebec 53.31%26.65%39.83% 44.23%
New Brunswick 58.75% 29.38%43.79% 51.75%
Nova Scotia 54.00%27.00%41.58%46.97%
Prince Edward Island 51.37%25.69%34.22%43.87%
Newfoundland 48.30%24.15%38.47%39.40%