HIGHLIGHTS OF THE 2007 FEDERAL BUDGET

Registered Education Savings Plans (RESP’s)


► $4,000.00 annual limit per child to be eliminated
► The lifetime contribution to rise from $42,000.00 to $50,000.00
► The Canada Education Savings Grant (CESG) to increase from $400.00 per child to $500.00 per child. The grant will be 20% of $2,500.00, not $2,000.00
► If there is unused grant room, the maximum CESG will increase from $800.00 to $1,000.00
► The lifetime limit of the grant itself is still $7,200.00
► The CESG increase will start after 2006
► The qualifications to meet eligibility requirements (EAP) have relaxed so that the demand for part-time courses of 10 hours per week, will change to 12 hours per month.

Registered Retirement Savings Plans (RRSP’s)


► The age for converting to a Registered Retirement Income Fund (RRIF) has gone back to the original age of 71 from age 69.
► Individuals age 70 and 71 in 2007 will be eligible to make RSP contributions provided they have room.
► Individuals who attain the age of 69 prior to 2007 will not be required to take the annual minimum amount until the year in which they attain the age of 72.
► The list of qualified investments that can be held by RRSP’s and other registered plans will be amended to include most investment-grade debt and publicly listed securities.

Registered Disability Savings Plans (RDSP)


► There will be a new Canada Disability Savings Grant (DPSP) and Disability Savings Bonds (CDSB) program.
► Any person resident in Canada and eligible for the Disability Tax Redit (DTC), or their parent or other legal representative, may set-up an RDSP
► Contributions won’t be tax deductible.
► Income on contributions, CDSG and CDSB, will accrue tax free and will be reported as income by the beneficiary when paid out of the RDSP
► Lifetime maximum contribution limit will be $200,000.00 with no annual limit.
► There will be no restriction on who can make a contribution
► Contributions will be permitted until the end of the year in which the beneficiary attains the age of 59
► CDSG will match contributions at a rate of 100% to 300% depending on the family net income and amount contributed
► Lifetime CDSG will be $70,000.00 and CDSG will be paid after the end of the year in which the beneficiary attains the age of 49
► Low and modest income beneficiaries will be eligible for an annual CDSB of up to $1,000.00
► The lifetime CDSB maximum will be $20,000.00 and must be paid prior to the end of the year in which the beneficiary attains the age of 49
► Payments from an RDSP must commence before the end of the year a beneficiary attains the age of 60. Maximum annual withdrawals limits are to be determined and will be based on the life expectancy of the beneficiary and fair market value of the plan
► The plan may provide that the beneficiary or their legal representative, can encroach on the income and capital in the plan
► Only the beneficiary or their legal representative will be entitled to payments out of the plan and contributors will not be entitled to a refund of contribution
► There will be a requirement to repay the CDSG and CDSB to the Government on the termination of the plan or the death of the beneficiary
► On the death of the beneficiary, the contributions and income in the plan pass to the estate of the beneficiary
► It is proposed that payments from an RDSP will not negatively impact any other income-tested social benefits the beneficiary may be entitled to.

Income Splitting


► Overall taxes for eligible pensioners will be reduced by allowing pension income splitting
► Starting in 2007, you can split up to 50% of your company pension (RPP) benefits with your partner with no age restriction
► Once you are 65 or older, you can split up to 50% of the payments from a RRIF, Lifetime Income Fund (LIF) or an RRSP annuity with your lower-income partner
► When splitting company pension benefits or payments fro an RRRIF, LIF or RRSP annuity, both partners can claim the pension credit.
► There is a 50% limit on income splitting for pensions and non-spousal RRSP’s and you have to wait until age 65 to split the non-spousal RRSP.

Other Provisions


I. If you don’t use all of your age credit, you can transfer the remaining portion to a lower-income partner.
II. Tax credits for low-income spouses and dependents of single individuals will rise from $7,581.00 to $8,929.00
III. The age credit amount will by increased by $1,000.00 to $5,066 for anyone over 65.
IV. A $2,000.00 child tax credit is to provide up to $310.00 per child of tax relief depending on family income