[Home] [2007 Federal Budget Changes from the Government & Changes on Investment Rules]

Year 2007 Federal Budget Changes from the Government & Changes on Investment Rules

  • GST to be reduced from 6% to 5% effective January 01, 2008
  • Basic personal exemption on income is to be increased to $9,600 for years 2007 and 2008, and a further $10,100 in year 2009
  • Pension Income Splitting to be allowed - effective year 2007 and beyond
    • As of January 01, 2007 individuals who are age 65 and older can allocate for tax purposes up to a maximum of 50% of the annual income received from a lifetime annuity, registered pension plan, RRSP annuity, RRIF or deferred profit sharing plan annuity.
    • The individual continues to receive the entire amount of income but can allocate up to 50%  to their spouse, common law partner or same sex partner
    • Individuals under age 65 who receive lifetime annuity payments from a registered pension plan can also allocate up to 50% of the annual income to a spouse.  RRIF income however CANNOT be split with a spouse.  (SO for people who will be retiring early with mainly RRSP money as a source of their pension, it is still very wise to be using spousal RRSPs as part of an income splitting strategy)
    • Canada Pension Plan Benefits do not require that the individual be age 65 to allow for income splitting
    • PS….Always use an accountant as they keep up to date with all these rule changes for your benefit.
  • Effective January 01, 2008, owners of a LIRA account and moving to a LIF account can unlock 25% of their monies or transfer it into an unlocked RRSP or RRIF account.  Owners of existing Ontario LIFs will not be entitled to make this 25% withdrawal/transfer unless they transfer existing monies into a new LIF and exercise the withdrawal/transfer privilege within 60 days of the transfer. (There is also no need to convert your LIF into an annuity after age 80 & non-resident owners of an Ontario LIF may withdraw all their monies after 2 years of departure from Canada).
  • Age limit to convert RRSP plans to a RRIF has been increased to age 71 from age 69
  • The lifetime limit that can be contributed to RESPs has been increased to $50,000 from $42,000
    • the maximum annual grant that can be received from the government has been increased to $500 from $400 beginning in year 2007
    • the $4,000 annual maximum contribution limit has been eliminated
    • the maximum lifetime CESG receivable per child remains at $7,200
  • The lifetime capital gains exemption for small business shares has been increased to $750,000 from $500,000
  • Capital gains tax has been eliminated for donations made to registered charities effective March 19, 2007