2015 Budget Analysis


Jamie Golombek, CPA, CA, CFP, CLU, TEP
Managing Director, Tax & Estate Planning, CIBC Wealth Advisory Services
Reprinted with permission from Renaissance Investments

The April 21, 2015 federal budget (Budget) included a number of tax measures that will impact individuals and small business owners. As per the government assurance that this would be a balanced budget, it includes actions that the government pledged would be taken once a balanced budget was achieved.  Rather than summarize every tax measure included in the Budget document, this report, which was prepared from within the Budget lock-up today in Ottawa, will focus on a few of the tax measures that are of most interest to individuals and small business owners.


TFSA Contribution Limit

Doubling of the annual TFSA contribution limit is likely the most anticipated tax measure in the Budget, since the Conservative Party had announced in its 2011 Party Election Platform that it would double the TFSA annual limit to $10,000 once the federal budget was balanced. The 2015 limit is increasing to $10,000 (double the original $5,000 limit); however, the Budget advised that future annual contribution limits will no longer be indexed to inflation and the limit will thus remain at $10,000 for 2015 and future years. This is a welcome initiative for all Canadians and will benefit not only high income investors but also lower income Canadians who may find the TFSA a more attractive retirement planning vehicle than an RRSP. The Budget shows that Canadians making under $80,000 annually were more likely to make the maximum allowable TFSA contribution than higher-income Canadians. This initiative will go a long way to achieving the government’s goal, outlined in its 2008 Budget Plan, to permit “over 90 per cent of Canadians to hold all their financial assets in tax-efficient savings vehicles” within 20 years.

RRIF Minimum Amounts

An RRSP must be converted to a RRIF (or a registered annuity) before the end of the year the annuitant reaches age 71. A RRIF is a tax-sheltered plan that requires you to take out a minimum amount each year. This amount, which varies by age, is prescribed by the Income Tax Act and is equal to a percentage of the fair market value of your RRIF assets on January 1st each year. It’s this forced withdrawal – whether or not you need the money – that has raised the ire of many seniors who would prefer to leave their retirement nest egg in a tax-sheltered environment as long as possible without being forced to draw down the funds and pay tax before the funds are needed. The problem is exacerbated when forced RRIF withdrawals cause seniors to lose part (or all) of their Guaranteed Income Supplement (GIS) or Old Age Security (OAS) benefits, since both are clawed back based on your net income, which includes RRIF withdrawals.

Discussions about this issue have been ongoing for many years.

To read complete budget details, click here