Happy Canada Day!
This year, there are several additional (financial) reasons other than national pride to be jubilant on Canada day. For some, the changes are welcomed, for others it might just be another way for the government to stick it to you. July 1st, 2006 is the day where several alterations to the tax rules are changing for Canadians! Here’s a run-down of some of the more popular that we’ve been looking forward to, eh?
GST Reduction
The federal government is reducing the Goods and Services tax by 1% to 6%. However, they are also increasing Canadian personal income tax rate for those earning up to $36,400 by 0.5% to 15%. Which some have already chimed in as a wash transaction, and perhaps even an illusion for low-income tax payers.
What does the math tell us? For someone earning $36,000 a year, that is going to increase their tax costs, on a monthly basis, by $15.16. The basic personal exemption is being reduced, and will increase that tax payer’s monthly cost an additional $5.17.
However, the new Canada Employment Credit removes the tax on the first $500 on employment income. This credit helps reduce taxes on a monthly basis by $6.35. In the end, the worker that earns $36,000 in a year is still looking at $13 more tax per month, $156 per year, beginning today!
Public Transit Tax Credit
This tax alteration is good news to commuters in urban cities. They will enjoy a 15.5% federal tax credit on the purchase of long-term public transit passes. Sorry, individual ticket sales don’t count! I personally like this initiative as it also helps to encourage people to use mass transit, which in turns is doing its part to reduce environmental pollution. If you are buying monthly passes, be sure to keep both the passes and receipts of purchases for tax season!
Child Care Benefit
The much talked-about Universal Child Care Benefit program that was the corner-stone of the Conservative eleciton platform also goes into effect on Canada Day. The government is giving parents back $100 / month per child in the family under the age of six. It’ll be interesting to hear from parents who are receiving these checks. And there’ll probably be some interesting stories of abusing this system.
But What Will Canadians Notice Most?
Most importantly, if you have been holding off on buying that car or making that major purchase. You can start buying them from today onwards and take advantage of that 1% GST reduction. Be sure to check with the retailer that they are complying with the change first!
P.S. I will be on vacation with my family starting this weekend for a week. I may write a few posts when the mood strikes me. But I want to wish you and yours a safe and Happy Canada Day and for my American Readers, a safe and Happy Fourth of July celebration!
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