What the New Liberal Government Means for Your Finances

The stunning victory for Trudeau’s Liberals in Canada’s 42 federal election finally puts to rest the speculation as to which campaign promises will affect us in the foreseeable future. Here’s what to expect from the new Liberal majority and what that means for your finances:

Saving/Investing:

• The TFSA annual contribution limit will be reduced from the current non-indexed $10,000 to $5,500 indexed to inflation.
• Likely future expansion of the Canada Pension Plan.

Taxes:

• The income tax rate for those earning $44,700 – $89,401 will be reduced from 22% to 20.5%. The reduction will result in savings of $670/year per individual, funded by a new 33% tax bracket for incomes over $200K.
• Payroll taxes, in the form of Employment Insurance premiums, are expected to fall to $1.65 per $100 down from the current rate of $1.88.

Families:

• The Universal Child Care Benefit (UCCB) will be scrapped in favour of a new Canada Child Benefit that promises to give families of four up to $2,500, tax-free.
• A new flexible paternal benefits plan will be introduced, making it possible for parents to take leave up to 18 months at a lower benefit level. The plan will also allow benefits to be paid out every two weeks instead of each month.
• Income splitting will be repealed.

Students:

• Graduates can expect not to repay their student loans until they are earning $25,000 a year.
• The Canada Student Grant will be increased to $3,000 per year for full-time students and $1,800/year for part time students. Income thresholds for CSG eligibility will be increased
• Existing textbook tax credits will be cancelled.

Seniors:

• Old Age Security (OAS) and Guaranteed Income Supplement (GIS) eligibility will be rolled back to the age of 65, instead of 67 for those born in or after 1958.
• Income splitting for seniors will remain.

Home Ownership:

• The Home Buyers’ Plan will be expanded so that those who experience significant life changes (job changes, death of spouse, etc) can make withdrawals from their RRSP savings against the HBP to maintain home ownership.

The Last Word

Regardless of your political stripe, there are measures in the upcoming changes that will undoubtedly help many Canadians. While I’m disappointed with the decrease in the TFSA contribution limit, I’m interested to see if the new Canada Child Benefit will be more practical than the UCCB. Whether you like it or not, this is the hand that’s been dealt and we’ll have to watch it play out over the next four years.

Do these changes work in your favour?