The 2019 budget is titled “Investing in the Middle Class. Here are the highlights from the 2019 Federal Budget.
We’ve put together the key measures for:
- Individuals and Families
- Business Owners and Executives
- Retirement and Retirees
- Farmers and Fishers
Financial Calendar for 2019 – All the deadlines you need to know to maximize your benefits!
The reduction will partly offset increases to CPP premiums next year
Clients who own small businesses and who are worried about upcoming Canada Pension Plan increases got some relief Thursday. The Canada Employment Insurance Commission announced a decrease in employment insurance premiums for 2019.
The 2019 rate will be $1.62 per $100 of insurable earnings, a decrease of four cents from the 2018 rate. For employers, who pay 1.4 times the employee rate, the $2.27 rate per $100 of insurable earnings amounts to an effective decrease of 5.6 cents, the commission said.
The commission sets the premium rate based on a seven-year break-even rate for the EI operating account. It said lower unemployment projections led to the reduction.
In a statement, Finance Minister Bill Morneau and Social Development Minister Jean-Yves Duclos said the rate is the lowest since 1980 and almost 14% lower than in 2015.
The Canadian Federation of Independent Business, which has been lobbying the federal government to delay CPP increases set to start in 2019, applauded the reduced EI premiums.
The new employer rate is five cents lower than last year, the organization said in a statement, and will offset some of the cost increases for employers from the CPP hike.
Other information on the EI premium rate:
- The rate for residents of Quebec covered under the Quebec Parental Insurance Plan will be $1.25 for employees and $1.75 for employers, a five-cent reduction.
- The maximum insurable earnings for 2019 will increase to $53,100 from $51,700 in 2018.
- For self-employed Canadians who have opted in to the EI program, the annual earnings required in 2018 will increase to $7,121 for claims filed in 2019.
- The maximum annual EI contribution for a worker will increase by $2.00 to $860.22 (up $2.80 for employers to $1,204.31 per employee). In Quebec, the maximum annual contribution for a worker will decrease by $8.35 to $663.75 (down $11.69 for employers to $929.25 per employee).
Read a summary of the commission’s actuarial report here.
Segregated Funds and Mutual Funds often have many of the same benefits such as:
- Both are managed by investment professionals.
- You can generally redeem your investments and get your current market value at any time.
- You can use them in your RRSP, RRIF, RESP, RDSP, TFSA or non-registered account.
So what’s the difference? Who offers these products?
- Segregated Funds: Life Insurance Companies
- Mutual Funds: Investment Management Firms
Why is this important?
- Since Segregated funds are offered by life insurance companies, they are individual insurance contracts. Which means….
- Maturity Guarantees
- Death Benefit Guarantees
- Ability to Bypass Probate
- Potential Creditor Protection
- Mutual Funds do not have these features.
What are these features?
Maturity and Death Benefit Guarantees mean the insurance company must guarantee at least 75% of the premium paid into the contract for at least 10 years upon maturity or your death.
Resets means you have the ability to reset the maturity and death benefit guarantee at a higher market value of the investment.
Bypass Probate: since you name a beneficiary to receive the proceeds on your death, the proceeds are paid directly to your beneficiary which means it bypasses your estate and can avoid probate fees.
Potential Creditor Protection is available when you name a beneficiary within the family class, there are certain restrictions associated with this.
What are the fees?
- Segregated Funds: Typically higher fees (MERS)
- Mutual Funds: Typically lower fees
I can help you decide what makes sense for your financial situation.
The government’s 2018 federal budget focuses on a number of tax tightening measures for business owners. It introduces a new regime for holding passive investments inside a Canadian Controlled Private Corporation (CCPC). (Previously proposed in July 2017.)
Here are the highlights:
Small Business Tax Rate Reduction Confirmed
Lower small business tax rate from 10% (from 10.5%), effective January 1, 2018 and to 9% effective January 1, 2019.
Limiting Access to the Small Business Tax Rate
A key objective of the budget is to decrease the small business limit for CCPCs with a set threshold of income generated from passive investments. This will apply to CCPCs with between $50,000 and $150,000 of investment income. It reduces the small business deduction by $5 for each $1 of investment income which falls over the threshold of $50,000. This new regulation will go hand in hand with the current business limit reduction for taxable capital.
Limiting access to refundable taxes
Another important feature of the budget is to reduce the tax advantages that CCPCs can gain to access refundable taxes on the distribution of dividends. Currently, a corporation can receive a refundable dividend tax on hand (known as a RDTOH) when they pay a particular dividend, whereas the new proposals aim to permit such a refund only where a private corporation pays non-eligible dividends, though exceptions apply regarding RDTOH deriving from eligible portfolio dividends.
The new RDTOH account referred to “eligible RDTOH” will be tracked under Part IV of the Income Tax Act while the current RDTOH account will be redefined as “non-eligible RDTOH” and will be tracked under Part I of the Income Tax Act. This means when a corporation pays non-eligible dividends, it’s required to obtain a refund from its non-eligible RDTOH account before it obtains a refund from its eligible RDTOH account.
Health and welfare trusts
The budget states that it will end the Health and Welfare Trust tax regime and transition it to Employee Life and Health Trusts. The current tax position of Health and Welfare Trusts are linked to the administrative rules as stated by the CRA, but the income Tax Act includes specific rules relating to the Employee Life and Heath Trusts which are similar. The budget will simplify this arrangement to have one set of rules across both arrangements.
Get in Touch
Steve Syrett, Financial Planner
Office: 613-544-9600 x 4475