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2015 Federal Budget Overview

by | Apr 24, 2015 | Market Commentary

2015 Federal Budget Overview

2015_budgetThe federal government today tabled its Economic Action Plan 2015 – a balanced budget for the first time since fiscal 2008. The government promised to balance the budget, and Budget 2015 announces that the deficit has been reduced from $55.6 billion at the height of the global and economic financial crisis to a projected surplus of $1.4 billion for 2015-16.

From Thirty Thousand Feet

Given that Budget 2015 is a pre-election budget, it’s not surprising that it was generally a good-news budget for Canadians. Finance Minister Joe Oliver presented a budget that focuses on four key priorities:

  1. Balancing the budget: The projected surplus in 2015-16 is $1.4 billion, and is expected to rise to $1.7 billion in 2016-17, $2.6 billion in each of 2017-18 and 2018-19, and $4.8 billion in 2019-20.
  2. Supporting jobs and growth: The government is taking steps to promote job-creation, making new investments in infrastructure, and training a highly skilled workforce that responds to the needs of employers.
  3. Helping families and communities prosper: Budget 2015 provides tax relief to families, seniors, and individuals. More on those tax measures in a moment.
  4. Ensuring the security of Canadians: Measures are being taken to further support the Canadian Armed Forces and protect Canadians from the threat of terrorism at home and abroad.

 

While the tax measures in Budget 2015 are largely welcome and good for taxpayers, some of the measures will not come into effect until 2016 or later years – not surprising, perhaps, given the
pending election this fall. There were also no changes or clarifications announced to the estate and trust rules that many had hoped for.

Below we’ve pulled together some additional resources to assist with explaining all of the aspects of the 2015 Federal Budget.

Resources

 

Brent answers some FAQs about TFSA’s and Investing for Retirement

 

[accordions_DD expanded=”0″][accordion_DD title=”If I receive money back from my tax return, is it better to put it in TFSA or RRSP?”]While I am a big proponent of using your TFSA to the fullest extent possible, the answer to this question is very personal and unique as it depends on your current income level and tax bracket, expected future income levels, retirement income considerations, etc. In general, you forego the immediate tax benefit an RRSP provides today for the advantage of a tax-free source of income the TFSA gives in the future. We need to sit down with each client to develop a personalized strategy based on their situation and available savings amounts.[/accordion_DD]

[accordion_DD title=”What’s better: making a lump sum rrsp contribution or setting up regularly contributions?”]Over the long term, I prefer regular and recurring investment deposits because you average out your purchase price and take advantage of the dips in the market. Lump sums can go either way – they can look good if the timing turns out to be good or they can look bad if it was a top in the market. Over the long run, it will average out and so the key is to first focus on actually saving the money and if it helps to make this a regular withdrawal from your bank account, it’s important to set this up and get it going. [/accordion_DD]

[accordion_DD title=”Any important benefits to TFSAs vs. the greater growth potential of index/mutual fund investments?”]A TFSA is simply an account structure with particular and unique tax treatment. Think of it like a bucket that you deposit money into. Your RRSP or non-registered investment account is also just a bucket that you deposit money into. Each is taxed in its own unique way. What you buy as an investment inside each bucket is a totally different discussion and is independent of the bucket itself. In other words, we can buy the same investments in a TFSA, an RRSP and in anon-registered investment account. How that investment is taxed is the key difference. So, you don’t “buy and TFSA” and it’s wrong to think that a TFSA is just a fixed interest rate savings account. When you work with a broker like us, we can buy anything in your TFSA including but not limited to savings account, bonds, funds, stocks, ETF’s, etc. The sky is the limit and it’s based on your objectives and risk tolerance. In an ideal situation and one where an investor has a medium or higher risk tolerance, I like to suggest putting the growth oriented investments in the TFSA to shelter those gains from tax rather than the currently low paying interest investments (like savings accounts or bonds). This makes greater use of the TFSA and takes ultimate advantage of the potential tax savings. [/accordion_DD]

[accordion_DD title=”Will the budget change how Canadians should be saving for retirement?”]The budget may change a few things for retirement savers, but likely not entice those who aren’t currently saving to start. It has benefits for those who already have savings or are saving now. I’m hoping the discussion and awareness of these topics grow so that those who aren’t considering this aspect of their financial plans will start doing so. I’m looking forward to seeing the Provincial budget soon as there are meaningful changes proposed there (i.e. new mandatory pension plans) that could have a significant impact on peoples savings. Stay tuned for news on that. [/accordion_DD]

[accordion_DD title=”What is the best place for Cdns to learn about TFSAs?”]Come talk to us! We’d love to share our knowledge with you. Other great spots include: