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Ottawa, December 22, 2004
2004-084
Canadians to Benefit Again in 2005 From Indexation of Tax System
Related document:
Minister of Finance Ralph Goodale announced today that Canadians will benefit again in 2005 from full indexation of the personal income tax system, which was restored in Budget 2000 as part of the Government’s Five-Year Tax Reduction Plan.
On January 1, 2005, all indexed personal income tax amounts, including tax bracket thresholds and amounts used to calculate non-refundable tax credits, will be adjusted by 1.7 per cent to ensure that inflation does not cause people to pay more income tax.
Indexation also applies to benefits such as the Canada Child Tax Benefit (CCTB) and the goods and services tax credit (GSTC). On July 1, 2005, the 1.7-per-cent indexation factor will be applied to the CCTB and the GSTC, ensuring that the real value of benefits that people receive through these programs is fully preserved rather than eroded by inflation.
In addition, as of July 1, 2005, low- and modest-income families with children will benefit from a $185 increase in the National Child Benefit supplement of the CCTB, which was announced in Budget 2003. A further increase of $185 is scheduled for July 2006.
By the end of 2004–05, the Five-Year Tax Reduction Plan—the largest tax cut in Canada’s history—will have reduced taxes by $100 billion. For individuals, this represents a tax cut of 21 per cent on average—27 per cent for families with children. For example, a two-earner family of four with a $60,000 income is saving almost $2,000 per year in federal personal income tax compared to what they would have paid had the plan not been in place.
Three-quarters of the value of the tax reduction plan is flowing to individuals, with most of the tax relief going to low- and modest-income Canadians. Tax measures introduced since 2000 have removed about 1 million low-income Canadians from the tax rolls.
A backgrounder providing further information on full indexation of the personal income tax system is attached.
___________________
For further information:
| David Gamble Public Affairs and Operations Division (613) 996-8080 |
Pat Breton Press Secretary Office of the Minister of Finance (613) 996-7861 |
If you would like to receive automatic e-mail notification of all news releases, please visit the Department of Finance Canada Web site at http://www.fin.gc.ca/scripts/register_e.asp.
Backgrounder
How the Indexation Factor Is Calculated
The indexation factor for a given taxation year beginning January 1 is the percentage increase in the average Consumer Price Index (CPI) for Canada as determined by Statistics Canada for the 12-month period ending on September 30 of the previous year relative to the average CPI for the 12-month period ending on September 30 of the year earlier. Thus, the 1.7-per-cent factor effective January 2005 is the percentage increase in the average level of the CPI from October 2003 to September 2004, relative to the average level of the CPI from October 2002 to September 2003.
Indexed Personal Income Tax Parameters
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2005 |
2004 |
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|---|---|---|
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($) |
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Personal Amounts and Bracket Thresholds |
||
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Basic personal amount |
8,148 |
8,012 |
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Spouse or common-law partner amount |
6,919 |
6,803 |
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Net income threshold |
692 |
681 |
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Taxable income at which 22-per-cent bracket begins |
35,595 |
35,000 |
|
Taxable income at which 26-per-cent bracket begins |
71,190 |
70,000 |
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Taxable income at which 29-per-cent bracket begins |
115,739 |
113,804 |
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Credit Amounts to Reflect Needs |
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Infirm dependant amount |
3,848 |
3,784 |
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Net income threshold |
5,460 |
5,368 |
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Caregiver amount |
3,848 |
3,784 |
|
Net income threshold |
13,141 |
12,921 |
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Disability amount |
6,596 |
6,486 |
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Amount for children with disabilities |
3,848 |
3,784 |
|
Allowable child care and attendant care expenses |
2,254 |
2,216 |
|
Medical expense tax credit—3 per cent of net income ceiling |
1,844 |
1,813 |
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Refundable medical expense tax credit supplement |
571 |
562 |
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Minimum earnings threshold |
2,857 |
2,809 |
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Family net income threshold |
21,663 |
21,301 |
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Age amount |
3,979 |
3,912 |
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Net income threshold |
29,619 |
29,124 |
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Old Age Security repayment threshold |
60,806 |
59,790 |
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| Goods and Services Tax Credit (GSTC)1 | ||
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Adult maximum |
227 |
224 |
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Child maximum |
120 |
118 |
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Single supplement |
120 |
118 |
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Phase-in threshold for the single supplement |
7,377 |
7,253 |
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Family net income at which credit begins to phase out |
29,618 |
29,123 |
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Canada Child Tax Benefit (CCTB)1 |
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Base benefit |
1,228 |
1,208 |
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Additional benefit for third child |
86 |
84 |
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Additional benefit for children under 7 years |
243 |
239 |
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Family net income at which base benefit begins to phase out |
35,595 |
35,000 |
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National Child Benefit (NCB) Supplement1,2 |
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First child |
1,722 |
1,511 |
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Second child |
1,502 |
1,295 |
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Third child |
1,420 |
1,215 |
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Family net income at which NCB supplement phase-out ends |
35,595 |
35,000 |
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Child Disability Benefit1,3 |
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Maximum benefit |
1,681 |
1,653 |
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Family net income at which Child Disability Benefit begins to phase out |
35,595 |
35,000 |
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| 1 The GSTC, CCTB
and Child Disability Benefit are paid on a benefit-year cycle
beginning in July. 2 Includes a $185 increase for July 2005 that was announced in Budget 2003. 3 Introduced in Budget 2003. |
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| Last Updated: 2004-12-22 |
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