2009 Federal Budget Impact Paper

This paper was prepared by the Compensation Sector, Accounting, Banking and Compensation Branch, Public Works and Government Services Canada (PWGSC). It should be noted that this document is not all encompassing. Employees may find this document informative from a personal perspective.

The following items, which are relative to the compensation product, were introduced in the Federal budget speech that was presented by the Honourable James M. Flaherty, Minister of Finance for the Government of Canada on January 27, 2009.

To review the 2009 Federal Budget documents, please visit this site:

http://www.budget.gc.ca/2009/home-accueil-eng.asp

ITEMS AFFECTING PWGSC COMPENSATION SYSTEMS

The basic personal amount, the spousal and common-law partner amount, and the eligible dependent amount tax credit will be increased from $10,100 to $10,320 in 2009.

The age amount tax credit will be increased by $1,000 from $5,408 to $6,408 effective January 1, 2009.

The threshold for the first personal income tax bracket (15% income tax rate) will be increased from $38,832 to $40,726 in 2009.

The threshold for the second personal income tax bracket (22% income tax rate) will be increased from $77,664 to $81,452 in 2009.

The increased tax credit amounts and tax bracket thresholds will be indexed to account for inflation in the 2010 and subsequent tax years.

Impact: Some of the changes announced may impact compensation systems prior to the traditional July 1 effective date. Therefore, PWGSC compensation systems will be programmed to change the basic personal amount, spousal and common-law partner amount and the tax bracket thresholds as soon as the Canada Revenue Agency (CRA) provides employers with the revised tax withholding tables and implementation dates which we anticipate receiving in the Spring of 2009.

Information concerning the change to the eligible dependant amount and age amount will be communicated to employees paid through the Regional Pay System (RPS) and the Royal Canadian Mounted Police (RCMP) Pay System. This information will be communicated in an Information Notice to Employees and posted on the Compensation Sector Web site. As the PWGSC Annuitant System records each tax credit shown on the TD1 form separately, this system will be programmed to automatically change these tax credits as soon as the CRA provides employers with the revised tax withholding tables and implementation dates which we anticipate receiving in the Spring of 2009.

ITEMS OF INTEREST

Home Renovation Tax Credit

The Budget introduced a new temporary Home Renovation Tax Credit (HRTC). The HRTC is a 15% non-refundable tax credit for eligible expenditures over $1,000 but not more than $10,000, for a maximum credit of $1,350 ($9,000 x 15%).

Impact: This tax credit will be incorporated into the 2009 income tax return.

First-Time Home Buyers' Tax Credit

The Budget introduced a new First-Time Home Buyers' Tax Credit. It is a 15% non-refundable tax credit based on an amount of $5,000, for a maximum credit of $750 ($5,000 x 15%).

Impact: This tax credit will be incorporated into the 2009 income tax return.

Employment Insurance (EI) Rates

The Government announced that it will freeze EI premium rates for 2010 at $1.73, the same rate as 2008 and 2009.

Impact: Compensation systems will not require a change to the EI premium rate for 2010.