2016 British Columbia Budget

Feb 24, 2016

 Banner Ad Budget Commentary.png

 

TAX HIGHLIGHTS FROM THE 2016 BRITISH COLUMBIA BUDGET

Finance Minister Michael de Jong tabled the 2016 British Columbia provincial budget on February 16, 2016. The minister projects a balanced budget for the fourth consecutive fiscal year, with surpluses in each of the next three years of the fiscal plan. Overall spending increases from $47.5 billion to $49.4 billion over the next three years. Total revenue is projected to increase from $48.1 billion to $50.1 billion over the same period.

This government forecasts a surplus of $377 million for the soon-to-end 2015-2016 fiscal year. The budget projects surpluses of $264 million for the 2016-2017 fiscal year, $287 million for the 2017-2018 fiscal year and $373 million for the 2018-2019 fiscal year.

On the tax side, there were no increases to personal or corporate tax rates, but the budget did propose to create a new Commission on Tax Competitiveness, which has a mandate to review the competitiveness of British Columbia’s tax regime and to make recommendations in the fall of 2016. It should be noted that the Commission’s mandate specifically excludes consideration of a return to the Harmonized Sales Tax (HST). The budget also establishes the BC Prosperity Fund with $100 million of 2015-2016 surplus. This is intended to be a long-term legacy fund for the province.

The following pages are a summary of the changes announced in the budget. Please note that these changes are still proposals until passed into law by the provincial government.

 

PERSONAL TAX MATTERS

Personal income tax rates and tax brackets

There were no personal tax rate increases announced in this budget. Tax brackets and personal credit amounts have been indexed by 0.9% for 2016.  The table below shows British Columbia tax rates and brackets for 2016. 

Taxable income range

2016 tax rates

$10,028 - $38,210

5.06%

$38,211 - $76,421

7.70%

$76,422 - $87,741

10.50%

$87,742 - $106,543

12.29%

$106,544 and over

14.70%

 

The new federal marginal tax rate of 33% for taxable income in excess of $200,000 became effective January 1, 2016. The table below shows the 2016 combined federal and provincial highest marginal tax rates for various types of income.

 

Type of income

2016 tax rates

Regular income

47.70%

Capital gains

23.85%

                                  Eligible dividends

31.30%

                               Non-eligible dividends

40.61%

 

Tax reduction credit

The budget proposes to enhance this credit effective for the 2016 tax year. The credit phase-out threshold is increased from $19,000 to $19,400 and the credit phase-out rate is increased from 3.5% to 3.56% of net income.

Taxation of trusts and estates

The budget proposes to bring in changes to the taxation of trusts and estates that parallel the new federal rules that became effective on January 1, 2016. Effective for taxation years ending after December 31, 2015, graduated personal income tax rates will only apply to trusts that are “graduated rate estates” or “qualified disability trusts.” The top marginal rate of 14.7% will apply to all other trusts and estates in BC, resulting in a combined federal and provincial tax rate of 47.7%.

Seniors home renovation tax credit

The budget proposes to expand this refundable credit to include persons with disabilities who are eligible to claim the federal disability tax credit for the 2016 taxation year. The expanded credit will be available in respect of eligible expenditures made on or after February 17, 2016.

British Columbia mining flow-through share tax credit

The budget proposes to extend the BC mining flow-through share tax credit by one year, to December 31, 2016.

 

CORPORATE TAX MATTERS

 

Corporate income tax rates

The budget leaves 2016 corporate income tax rates unchanged from 2015. There were also no changes proposed to the small business limit. The table below shows British Columbia tax rates and the small business limit for 2016.

 

Category

2016 tax rates

General rate

11.0%

Manufacturing & processing rate

11.0%

Small business rate

2.5%

Small business limit

$500,000

 

Farmers’ food donation tax credit

The budget proposes this new non-refundable tax credit, effective February 17, 2016. This tax credit is available to corporations and individuals that carry on the business of farming and donate a qualifying agricultural product to a registered charity that provides food to those in need or helps to operate a school meal program.

The credit is based on 25% of the fair market value of the agricultural product donated and must be claimed in the same year that the charitable donation deduction or tax credit is claimed. This credit will be available for the 2016, 2017 and 2018 taxation years, after which it will be reviewed.

Regional and distant location tax credits for animation

As announced on June 26, 2015, the regional and distant location tax credits for animation productions are clarified to ensure that credits are based on the amount of eligible labour expenditures incurred in the regional or distant location. The change applies to both the production services tax credit and the Film Incentive BC tax credit for animation productions, where principal photography began after June 26, 2015.

Mining exploration tax credit

The budget proposes to extend the mining exploration tax credit by three years, to December 31, 2019. This credit is available to both corporations and individuals that undertake mining exploration in the province. The credit is calculated as 20% of eligible BC mining exploration expenditures or 30% if exploration is in the mountain pine beetle affected area.

 

OTHER PROPOSALS

 

Property transfer tax

The budget proposes to provide an exemption from the property transfer tax, effective February 17, 2016, for newly constructed homes used as a principal residence. The full exemption will apply to homes with a fair market value of up to $750,000, with a partial exemption available for homes valued between $750,000 and $800,000.

Also effective on that date, the property transfer tax rate will be increased from 2% to 3% of a property’s fair market value in excess of $2,000,000. The current rates of 1% on the first $200,000 and 2% on the next $1,800,000 will continue to apply.

Finally, it is proposed that the governing legislation be amended to require disclosure of a purchaser’s citizenship in the spring of 2016. If, at the time of registration of a taxable transaction, the purchaser is neither a Canadian citizen nor permanent resident, there will be a requirement to disclose the purchaser’s citizenship. Corporate purchasers will be required to disclose the citizenship of any director who is not a Canadian citizen or permanent resident. Purchases by bare trusts will require disclosure of names, addresses, and citizenship information of settlors and beneficiaries.

Training and education savings grant

In 2013 the BC government introduced a new one-time grant of $1,200 per child to all families with a child under the age of seven (born in 2007 or later), who met basic residency requirements. Once a child turns six and enters elementary school, the funds will be transferred to a registered education savings plan (RESP) in the child’s name, on receipt of a grant application. No matching or additional contributions are required in order to receive the grant. This budget extends the program to include children born on or after January 1, 2006.

Medical services plan premiums

The budget proposes to increase medical services plan (MSP) premiums by approximately 4%, effective January 1, 2017. Maximum monthly premium rates will increase by $3 per month to $78 monthly for each adult.

There are three other changes that will also be effective on January 1, 2017.

• The calculation of MSP premiums will no longer include children;

• The MSP premium rate for couples will be set at twice the premium rate paid by single adults; and

• MSP premium assistance is enhanced by increasing the income threshold up to which a household receives full premium assistance by $2,000 and by $12,000 for households receiving partial assistance.

Homeowner grant

For 2016, the phase-out threshold of the homeowner grant increases from $1,100,000 to $1,200,000. The phase-out rate continues to be $5 per $1,000 of value for properties valued at more than $1,200,000.

Provincial sales tax

The budget proposes new exemptions from provincial sales tax for qualifying farmers, effective February 17, 2016. The exemption will apply to telescopic handlers, skid steers and polycarbonate greenhouse panels used solely for farm purposes. To qualify for the exemption, polycarbonate greenhouse panels must be purchased in a minimum quantity of 500 square metres.

Tourist accommodation relief

For 2017, the reduction in assessed value for eligible short-term accommodation property located outside municipalities is increased. The maximum reduction in assessed value increases from $150,000 to $500,000. The benefit begins to phase out once the assessed value is $4,000,000, an increase from the previous threshold of $2,000,000.

WE CAN HELP

Your Assante advisor can help you assess the impact of these proposals on your personal finances or business affairs, and show you ways to take advantage of their benefits or ease their impact. The resources available to you and your advisor include Assante Private Client’s Wealth Planning Group, a multi-disciplinary team of accountants, lawyers and financial planners.

Although this material has been compiled from sources believed to be reliable, we cannot guarantee its accuracy or completeness. All opinions expressed and data provided herein are subject to change without notice. The author of this publication is employed by an affiliate of CI Investments.  The information is provided solely for informational and educational purposes and is not intended to provide, and should not be construed as providing individual financial, investment, tax, legal or accounting advice. Professional advisors should be consulted prior to acting on the basis of the information contained in this publication. The Assante symbol and Assante Wealth Management are trademarks of CI Investments Inc., used under license.
©2016 Assante Private Client, a division of CI Private Counsel LP. All rights reserved.   1602-0298_E (02/16)



Tags:
Category: