Year 2007 Federal Budget Changes from the Government & Changes on Investment Rules
GST to be reduced from 6% to 5% effective January 01, 2008
Basic personal exemption on income is to be increased to $9,600 for years 2007 and 2008, and a further $10,100 in year 2009
Pension Income Splitting to be allowed - effective year 2007 and beyond
As of January 01, 2007 individuals who are age 65 and older can allocate for tax purposes up to a maximum of 50% of the annual income received from a lifetime annuity, registered pension plan, RRSP annuity, RRIF or deferred profit sharing plan annuity.
The individual continues to receive the entire amount of income but can allocate up to 50% to their spouse, common law partner or same sex partner
Individuals under age 65 who receive lifetime annuity payments from a registered pension plan can also allocate up to 50% of the annual income to a spouse. RRIF income however CANNOT be split with a spouse. (SO for people who will be retiring early with mainly RRSP money as a source of their pension, it is still very wise to be using spousal RRSPs as part of an income splitting strategy)
Canada Pension Plan Benefits do not require that the individual be age 65 to allow for income splitting
PS….Always use an accountant as they keep up to date with all these rule changes for your benefit.
Effective January 01, 2008, owners of a LIRA account and moving to a LIF account can unlock 25% of their monies or transfer it into an unlocked RRSP or RRIF account. Owners of existing Ontario LIFs will not be entitled to make this 25% withdrawal/transfer unless they transfer existing monies into a new LIF and exercise the withdrawal/transfer privilege within 60 days of the transfer. (There is also no need to convert your LIF into an annuity after age 80 & non-resident owners of an Ontario LIF may withdraw all their monies after 2 years of departure from Canada).
Age limit to convert RRSP plans to a RRIF has been increased to age 71 from age 69
The lifetime limit that can be contributed to RESPs has been increased to $50,000 from $42,000
the maximum annual grant that can be received from the government has been increased to $500 from $400 beginning in year 2007
the $4,000 annual maximum contribution limit has been eliminated
the maximum lifetime CESG receivable per child remains at $7,200
The lifetime capital gains exemption for small business shares has been increased to $750,000 from $500,000
Capital gains tax has been eliminated for donations made to registered charities effective March 19, 2007
