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Finance Minister Jim Flaherty tables the budget in the House of Commons on Parliament Hill in Ottawa. (Tom Hanson/Canadian Press)
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INDEPTH: FEDERAL BUDGET 2006
Highlights
CBC News Online | May 2, 2006
Changes for individuals and families
- The goods and services tax (GST) will drop to six per cent from seven per cent on July 1. For people buying a new home before that, a "transitional adjustment" equivalent to the difference in rates will be offered through the income tax system.
- The lowest tax rate, applied to earned income up to about $36,400, will continue to be 15 per cent until June 30. After that, it will rise to 15.5 per cent for income earned in the last six months of 2006, and stay at 15.5 per cent after that. (The rate was 16 per cent until the previous Liberal government cut it to 15 per cent in November 2005.)
- The basic personal amount that is tax-exempt for the 2006 tax year will rise slightly as of July 1, and will continue to increase in later years so that by 2009, it will reach $10,000, the same amount earlier promised by the Liberals.
- Working people can claim a new $250 Canada employment credit in 2006, rising to $1,000 in 2007.
- The universal child-care benefit will provide $1,200 a year to parents for each child under the age of six, taxable at the rate applied to whichever spouse earns the lower income.
- A total of $250 million has been allocated for the creation of new child-care spaces across Canada, beginning in 2007.
- People who buy monthly or annual public transit passes will get a new tax credit, amounting to 15.5 per cent of the cost of the passes, effective July 1.
- Children under 16 who enroll in physical fitness activities (for example, hockey leagues or figure skating lessons) will bring their parents a tax credit of up to $500.
- Middle- and high-income families will be eligible for the child disability benefit for the first time, to an annual maximum of $2,044, effective July 1.
- People donating ecologically sensitive land or publicly listed securities to charities will no longer have to pay capital gains tax.
Changes for students
- Canadians attending university or college can claim an annual $500 tax credit on textbook costs, which translates into a benefit of about $80 a year for a typical full-time student.
- All scholarship, fellowship and bursary money will now be income-tax exempt, compared to the current exemption limit of $3,000 a year.
- More people will be eligible for Canada Student Loans because of a reduction in the amount parents are expected to contribute toward the cost of post-secondary education, effective August 2007.
- The federal government will give up to $1 billion to provinces and territories needing to make "urgent investments in post-secondary education infrastructure."
- Apprentices in the skilled trades will get a new $1,000 annual grant in their first and second years, plus a tax deduction of up to $500 for the cost of tools they need for the job, above an initial cost of $1,000.
Changes for seniors
- An estimated 85,000 pensioners will no longer have to pay income tax as the maximum eligible amount for the pension income credit rises from $1,000 to $2,000, starting in the 2006 tax year.
- At the same time, the refundable medical expenses supplement rises from $767 to $1,000.
- A pledge to provide "temporary solvency funding relief" for federally regulated defined benefit pension plans, to safeguard pension benefits.
Changes for low-income Canadians
- The government estimates that tax measures will remove about 655,000 low-income individuals from the tax rolls altogether, meaning they pay no income tax.
- Up to $800 million has been set aside that the provinces and territories can tap for urgently needed affordable housing projects.
Changes for aboriginal Canadians
- $450 million more is promised for the improvement of water quality and housing on reserves, as well as "education outcomes and socio-economic conditions for aboriginal women, children and families."
Changes for immigrants
- As promised, the Right of Permanent Residence Fee drops from $975 to $490, effective immediately.
- Settlement program funding will rise by $307 million.
Changes for farmers
- An additional $2 billion over two years has been allocated to the farm sector, including $1.5 billion this year broken down as follows: $500 million for farm support, and a one-time amount of $1 billion "to assist farmers in the transition to more effective programming for farm income stabilization and disaster relief."
Changes for businesses
- Corporate income tax rates will drop, the general rate falling from 21 per cent to 19 per cent by 2010 and the small business tax rate dropping from 12 per cent to 11.5 per cent in 2008 and 11 per cent in 2009.
- Small businesses can now earn $400,000 in income instead of just $300,000 before the higher general rate will apply.
- A new tax credit of up to $2,000 is planned for companies that hire apprentices.
- The corporate surtax for all corporations will disappear as of Jan. 1, 2008.
- The federal capital tax has been eliminated, effective Jan. 1, 2006.
Changes for federal government departments and agencies
- The president of the Treasury Board will review all government programs before identifying $1 billion in spending cuts for the 2006-07 fiscal year, followed by another $1 billion in the 2007-08 fiscal year. (The Conservatives had earlier promised to reign in spending in all departments except Defence and Indian Affairs.)
Changes for the arts
- The Canada Council for the Arts will get $50 million extra over two years – $20 million in new money for 2006-07 and $30 million more in 2007-08.
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