- News Release 2005-078 -
Explanatory Notes
Relating to the Income Tax Act
Published by
The Honourable Ralph Goodale P.C., M.P.,
Minister of Finance
November 2005
Preface
These explanatory notes describe proposed amendments to the Income Tax
Act. These explanatory notes describe these amendments, clause by
clause, for the assistance of Members of Parliament, taxpayers and their
professional advisors.
The Honourable Ralph Goodale, P.C., M.P.,
Minister of Finance
These explanatory notes are provided to assist in an understanding of the
proposed amendments to which they relate. These notes are intended for
information purposes and should not be construed as an official
interpretation of the provisions they describe.
Table of contents
|
Clause in Legislation |
Section of Act |
Topic |
|
Income Tax Act |
1 |
117 |
Tax rates applicable to individuals |
2 |
118 |
Personal credits |
3 |
118 |
Bill C-67 co-ordinating amendment |
|
Explanatory Notes
Clause 1
Tax Rates Applicable to Individuals
ITA
117(2)
Subsection 117(2) of the Income Tax Act (the Act) provides the
marginal tax rates of federal tax.
Subsection 117(2) is amended to reduce the lowest rate of personal income
tax for the 2005 and subsequent taxation years from 16% to 15%. As a result,
the "appropriate percentage" used in computing the individual’s
non-refundable personal tax credits and alternative minimum tax will also
reflect the lowered rate.
Clause 2
Personal Credits
ITA
118 (3.1) to (3.3)
Section 118 of the Act provides for the calculation of various personal
tax credits. These include the basic personal credit, the credit in respect
of a spouse or common-law partner and the credit that a single individual
can claim for a wholly dependent relative. These credits are calculated by
reference to 15% of the amount used in section 118 to compute the particular
credit.
Subsection 118(3.1) provides, in addition to the annual increases
provided under the indexing provisions, for annual increases to the amount
used to compute an individual’s basic personal credit, for 2006 to 2009,
inclusive. Subsection 118(3.1) is amended to bring forward $300 of the
increases otherwise scheduled to take in effect for each of 2008 and 2009
and to instead apply those amounts to provide for a $500 increase for 2005
and an additional $100 increase, beyond that currently provided by
subsection 118(3.1), for 2006.
Subsection 118(3.2) provides, in addition to the annual increases
provided under the indexing provisions, for annual increases to the amount
used to compute the credit in respect of a spouse or common-law partner and
the credit that a single individual can claim for a wholly dependent
relative, for 2006 to 2009, inclusive. Subsection 118(3.2) is amended to
bring forward $255 of the increases otherwise scheduled to take in effect
for each of 2008 and 2009 and to instead apply those amounts to provide for
a $425 increase for 2005 and an additional $85 increase, beyond that
currently provided by subsection 118(3.2), for 2006.
Subsection 118(3.3) provides, in addition to the annual increases
provided under the indexing provisions, for annual increases to the amount
used to compute the net income threshold for the credit in respect of a
spouse or common-law partner and the credit that a single individual can
claim for a wholly dependent relative, for 2006 to 2009, inclusive.
Subsection 118(3.3) is amended to bring forward $25.50 of the increases
otherwise scheduled to take in effect for each of 2008 and 2009 and to
instead apply those amounts to provide for a $42.50 increase for 2005 and an
additional $8.50 increase, beyond that currently provided by subsection
118(3.3), for 2006.
ITA
118(9)
New subsection 118(9) of the Act provides for the rounding of amounts to
be used in computing the increases described in subsections 118(3.1) to
(3.3) of that Act.
These amendments apply to the 2005 and subsequent taxation years.
Clause 3
Bill C-67 Co-ordinating Amendment
ITA
118
This clause concerns provisions of the Income Tax Act that are
being amended by both this Act and the Unanticipated Surpluses Act.
This clause ensures that on the coming into force of subsections 6(1) and
(2) of the Unanticipated Surpluses Act, subsections 118(3.1), (3.2)
and (3.3) and 118(9) of the Income Tax Act are amended to reflect the
amendments described above and the amendments to subsections 118(9) and (10)
under subsection 6(2) of the Unanticipated Surpluses Act.
- News Release 2005-078 -
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