The 2015 Alberta budget, tabled on October 27th by the NDP Government, replaced Alberta’s single 10% personal tax rate with a series of graduated tax brackets as was widely anticipated; however, the Health Care Contribution Levy outlined in the March 2015 budget was note implemented. Below is a brief summary of the tax changes contained in the budget. Please call our office if you have any questions. We would be happy to arrange a meeting to discuss how these measures may apply to your situation, assist you with the preparation and filing of your tax returns, and discuss tax planning opportunities.
Personal Tax Changes
Graduated tax brackets
Beginning in 2015 graduated tax brackets were introduced as listed below. Transitional provisions apply for 2015 such that only one quarter of the proposed increase in rates will apply in 2015.
Income up to $125,000 10%
$125,001 to $150,000 12%
$150,001 to $200,000 13%
$200,001 to $300,000 14%
over $300,000 15%
The resulting combined federal and Alberta tax rates will be as follows
Income up to $44,701 25%
$44,702 to $89,401 32%
$89,402 to $125,000 36%
$125,001 to $138,586 38%
$138,587 to $150,000 41%
$150,001 to $200,000 42%
$200,001 to $300,000 43%
over $300,000 44%
The Alberta income tax brackets will be indexed for inflation starting in 2017.
Dividend tax credit
Alberta will amend its dividend tax credit for “other than eligible” dividends (paid from corporate income taxed at the small business rate) to account for changes in the federal calculations.
A review of the dividend tax credit for “eligible” dividends (paid from corporate income taxed at the general rate) is being completed as a result of the change in the Alberta general corporate income tax rate from 10% to 12% effective July 1, 2015. Any changes will be incorporated into the 2016 Alberta budget and will be effective in 2016.
Charitable donation tax credit
The March 2015 budget included a proposed reduction of this credit from 21% to 12.75%. The October 2015 budget maintains this credit at 21%.
The Alberta Child Benefit (ACB) and The Alberta Family Employment Tax Credit (AFETC)
The Alberta Child Benefit is a new program introduced by the budget that will provide a benefit of $1,100 for one child, and $550 per child for the next three children, to a maximum benefit of $2,750 per family. This benefit is income-tested and fully phased out once family net income reaches $41,220.
The maximum available credit under The Alberta Family Employment Tax Credit remains unchanged at $1,987 but the phase-out rate is increased to 11% from 8% and the phase-out threshold is increased to $41,250 from $36,778.
Corporate Tax Changes
Corporate tax rates
There are no further changes to the corporate tax rates; however, Bill 2 – An Act to Restore Fairness to Public Revenues, enacted on June 29, 2015, increased the general corporate income tax rate from 10% to 12% effective July 1, 2015. This increase is pro-rated for corporate year-ends that straddle July 1, 2015. The combined federal and Alberta general corporate income tax rate is now 27%.
There have been no changes to the small business tax rate which remains at 3%. The combined federal and Alberta small business tax rate remains at 14%.
Job creation incentive program
A new program was announced to provide grants to employers of up to $5,000 per job ($500,000 per employer) for new employment created after January 1, 2016. Seasonal, part-time, and full-time positions will qualify and grants will be accessible on a first-come, first-serve basis with total grants being capped at $89 million per calendar year. The grant calculation will use employee insurable earnings.
Other Tax Changes
The budget also included increases to the insurance premiums tax, fuel tax, and tobacco tax.