With the newly elected Liberal government Canada’s personal taxation system will be experiencing significant changes.   Provided below is a brief summary of the key changes that all individuals should be aware of and a discussion of how these changes may affect you.

Personal Tax Changes in 2016

Personal Tax Rates:

  • The highest Ontario tax rate on regular income exceeding $220,000 has increased from 49.53% to 53.53%.
  • The tax rates for the “middle class” will decrease (for income exceeding $45,281 but below $90,563) by -1.5% at each marginal tax rate therein.
  • Tax rates on other types of income (e.g. dividends, capital gains) will be subject to similar changes in these brackets.

Tax-Free Savings Accounts (TFSAs):

  • The yearly contribution room for TFSAs has been reduced from $10,000 to $5,500 in 2016.
  • Indexing of the TFSA contribution limit has been reintroduced going forward, so you can expect the contribution limit to still increase in the future.


  • As of January 1, 2016 the ability for families to reduce taxes through income-splitting has been removed. This has no impact on pension splitting.

Child Care Benefit:

  • Formerly, eligible tax payers could utilize the Universal Child Care Benefit, the Canada Child Tax Benefit, and the National Child Benefit Supplement. These benefits will now be unified by the new Canada Child Benefit, for payments starting July 1, 2016. The Liberal Party has stated that this new benefit will be income-tied and tax-free.

Children’s Fitness and Arts Credits:

  • Proposed to be phased out entirely by 2017.
  • Reduced in 2016 from $1,000 to $500 and from $500 to $250, for the fitness and for the arts credit, respectively.

Education and Textbook Tax Credits:

  • Proposed for elimination January 1, 2017.
  • Carry forward amount will not be lost, and will continue to carry forward.
  • Tuition tax credit is a separate credit and will remain unchanged.

Teacher/Early Childhood Educator Supply Tax Credit:

  • Newly proposed 15% refundable tax credit beginning in the 2016 tax year.
  • Applies on up to $1,000 of eligible school supplies.


How will these changes affect me?

The advice below is a general guideline. The actual impact on an individual is dependent on your personal situation and could vary from our advice outlined below. We invite you to contact your representative at RLB to discuss how these changes may impact your personal tax situation.

Personal Tax Rates: Personal tax rates are marginal (tiered). For example, the first $41,536 of regular Ontario taxable income earned by an individual is taxed at only 20.05%. The next $27,863 of regular income (from $45,282 to $73,143) is taxed at a combined rate of 29.65% (down from 31.15% in 2015). By the time an individual reaches income of over $220,000, they will be paying marginal tax at a rate of 53.53% (up from 49.53%). As a result of these tax rate changes, if you have income over $200,000 you should expect more source deductions paid (less money in your pocket per paycheque). For individuals with salary exceeding $45,281 but below $90,563, you should expect lower source deductions (more money in your pocket per paycheque), up to a maximum annual savings of $679, rather than a refund at tax time.

TFSAs: In 2015, the contribution limit was $10,000. Starting January 1, 2016 this amount has been reduced to $5,500. This means that any deposits in 2016 over $5,500 and exceeding your cumulative limit could potentially be subject to monthly taxation.[1]

Income-Splitting: For 2016 and proceeding years the government has removed the family income-splitting tax credit. If you had previously benefitted from reduced taxes by means of income-splitting, then you may see your tax liability in 2016 increase, meaning you may owe more come April 30th.

Child Care Benefit: The Canada Child Benefit will start at $6,400 (tax free) per year, per child under the age of 6. For children between the ages of 6 and 17, the annual benefit is $5,400.  The amount of the benefit received is tied to your income—the higher the level of your household income, the less benefit your household will receive.  The benefit phases out completely once household income exceeds $200,000.  The potential impact on individuals, when compared against the old system, is that this change is beneficial to families with household income of less than $150,000.  Any families with income over this amount will see less benefit than under the old system.

Children’s Fitness and Arts Credits: Previously, supporters of a dependent child under the age of 16 could claim up to $1,000 of fitness expenses and $500 worth of artistic development activities. The new budget cuts each of those amounts in half. If an individual had previously claimed these amounts they may expect to see a smaller refund or a bigger balance owing.

Education and Textbook Credits: Effective January 1, 2017 the education and textbook credits will be completely eliminated. Fortunately, any amounts that individuals may not have used in previous years will still carry forward until used up. Please note that this amount is separate from the tuition credit amount, which will still be available to any taxpayer who pays tuition amounts and receives a T2202A tax slip on the amounts.

Teacher/Early Childhood Educator Supply Tax Credit: The 2016 budget proposes to introduce a new 15% refundable tax credit of up to $1,000 on supplies that a teacher or educator purchases for classroom purposes (i.e. paper, supplementary books, pencils, pens, etc…). The individual claiming these amounts must hold valid proof such as a teacher’s certificate or diploma in early childhood education.


Services Offered by RLB

Let our team of highly experienced professionals help set you on your path to financial success. At RLB we offer a variety of services to help you at every step of the way.  Some of our key service areas include:                          

Accounting and Assurance Bookkeeping Business Valuations
Condominiums   Construction Consulting Services
Estates and Trusts Human Resources Municipalities
Not-for-Profit   Owner-managed Business

[1] This yearly contribution room does not take into account an individual’s cumulative lifetime contribution room.

For more information on TFSAs, please contact an RLB Advisor!