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[Home] [Income Trust Taxation Changes]

November 01, 2006 Income Trust Taxation Changes

On November 01, 2006, finance minister Jim Flaherty announced that the government would impose a new tax on income trust distribution paid out to unitholders.  The tax will be introduced in two phases.

Distributions from existing trusts will not face changes until 2011, but distributions from new trusts would be taxed beginning in 2007.

Other TAX Changes

  • Retirees (age 65+) will be allowed to split pension income starting in 2007.  Eligible pension income includes payments from a RPP (registered pension plan), annuity payments out of an RRSP or deferred profit sharing plan, as well as RRIF withdrawals.  (However, if you are under age 65, eligible pension income only includes payments from a RPP – NOT amounts paid by an RRSP or RRIF)
     
  • The age credit for seniors will be raised $1,000 to $5,066 retroactive to January 01, 2006. (For 2006, the age credit begins to be phased out when net income reaches $30,270.  The phase out rate is 15%.  The age credit will be fully phased out once net income reaches $64,043.)
     
  • Corporate taxes will be cut by one-half percentage point as of January 01, 2011 from 19% to 18.5%.
     

* All above information sourced from November 01, 04, & 08, 2006 National Post