ARCHIVED CD 2007-011

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June 22, 2007

SUBJECT: Tax Changes -- Effective July 1, 2007

1. PURPOSE

1.1 The purpose of this directive is to provide clients with information relative to the tax legislation changes that are effective July 1, 2007.

1.2 A notice of information to employees concerning the above subject has been included with this Compensation Directive and will also be posted in the "Who are you? - Public Service Employee" page of the Compensation Sector Web site.

2. BACKGROUND

2.1 The federal and four provincial budgets contained changes to the respective tax legislation which will be effective July 1, 2007.

2.2 The explanations in this directive will help compensation advisors provide information to individuals concerning the factors that may cause changes to their pay cheques.

3. POLICY

3.1. Federal personal tax credits

The spouse or common-law partner amount and the amount for an eligible dependant will be increased from $7,581 to $8,929 effective July 1, 2007. The Personal Tax Credits Return (TD1) form will be revised effective July 1, 2007 to include these changes.

A new Child tax credit of $2,000 has been introduced and will be effective July 1, 2007. The TD1 form will be revised effective July 1, 2007 to include this tax credit on line 2.

Due to the new Child tax credit being added to the TD1 form, the line numbers for the remaining tax credits starting with the Age amount will be renumbered. Therefore, the non-indexed tax credits will be on lines 4, 5, 11 and 12 of the TD1 form and the indexed tax credits will be onlines 1, 2, 3, 6, 7, 8, 9 and 10 of the TD1 form.

3.2. Provincial Tax Brackets, Rates and Tax Credits Effective July 1, 2007

New Brunswick

The following table provides the changes to the New Brunswick tax rates effective July 1, 2007.

New Brunswick Tax Brackets and Rates
Tax brackets and rates effective January 1, 2007 Tax brackets and rates effective July 1, 2007
Tax brackets Tax rates Tax brackets Tax rates
More than - Not more than   More than - Not more than  
$0 to $34,186 9.68% $0 to $34,186 10.56%
$34,186 to $68,374 14.82% $34,186 to $68,374 16.14%
$68,374 to $111,161 16.52% $68,374 to $111,161 17.08%
Over $111,161 17.84% Over $111,161 18.06%

The current tax rate of 9.68% that is used to calculate the provincial non-refundable tax credits amounts will increase to 10.56% effective July 1, 2007.

British Columbia

The following table provides the changes to the British Columbia tax rates effective July 1, 2007.

British Columbia Tax Brackets and Rates
Tax brackets and rates effective January 1, 2007 Tax brackets and rates effective July 1, 2007
Tax brackets Tax rates Tax brackets Tax rates
More than - Not more than   More than - Not more than  
$0 to $34,397 6.05% $0 to $34,397 5.35%
$34,397 to $68,794 9.15% $34,397 to $68,794 8.15%
$68,794 to $78,984 11.7% $68,794 to $78,984 10.5%
$78,984 to $95,909 13.7% $78,984 to $95,909 12.3%
Over $95,909 14.7% Over $95,909 14.7%

The current tax rate of 6.05% that is used to calculate the provincial non-refundable tax credits amounts will decrease to 5.35% effective July 1, 2007.

The provincial tax reduction for British Columbia has changed and is calculated as follows: Where the net income is less than or equal to $16,646, the premium is equal to the lesser of (i) basic provincial tax, and (ii) $375; Where the net income is greater than $16,646 and less than or equal to $28,364.75 (formerly $27,062.67), the premium is equal to the lesser of (i) basic provincial tax, and (ii) $375 - [(Annual net income - $16,646) × 3.2% (formerly 3.6%)]; Where the net income is greater than $28,364.75, the premium is equal to $0.


Prince Edward Island

The following table provides the changes to the Prince Edward Island tax brackets effective July 1, 2007.

Prince Edward Island Tax Brackets and Rates
Tax brackets and rates effective January 1, 2007 Tax brackets and rates effective July 1, 2007
Tax brackets Tax rates Tax brackets Tax rates
More than - Not more than   More than - Not more than  
$0 to $30,754 9.8% $0 to $31,984 9.8%
$30,754 to $61,509 13.8% $31,984 to $63,969 13.8%
Over $61,509 16.7% Over $63,969 16.7%

The provincial surtax payable for Prince Edward Island has changed and is calculated as follows:

  • Where the basic provincial tax payable is less than or equal to $12,500 (formerly $5,200), the surtax payable is equal to $0.
  • Where the basic provincial tax payable is greater than $12,500 (formerly $5,200), the surtax payable is 10% of the basic provincial tax payable in excess of $12,500.
  • The following table provides the changes to the Prince Edward Island tax credit amounts effective July 1, 2007.
Prince Edward Island Personal Tax Credit Amounts
  Current amount Amount effective July 1, 2007
Basic personal amount $7,412 $7,708
Age amount Maximum of $3,619 Maximum of $3,691
Tuition and education amounts (full-time) $200 $400
Tuition and education amounts (part-time) $60 $120
Spouse or common-law partner amount Maximum of $6,294 Maximum of $6,420
Amount for an eligible dependant Maximum of $6,294 Maximum of $6,420

The Prince Edward Island Personal Tax Credits Return (TD1PE) form will be revised to include these changes.

Newfoundland and Labrador

The following table provides the changes to the Newfoundland and Labrador tax brackets and rates effective July 1, 2007.

Newfoundland and Labrador Tax Brackets and Rates
Tax brackets and rates effective January 1, 2007 Tax brackets and rates effective July 1, 2007
Tax Brackets Tax rates Tax Brackets Tax rates
More than - Not more than   More than - Not more than  
$0 to $29,590 10.57% $0 to $30,182 8.7%
$29,590 to $59,180 16.16% $30,182 to $60,364 13.8%
Over $59,180 18.02% Over $60,364 16.5%

The current tax rate of 10.57% that is used to calculate the provincial non-refundable tax credits amounts will decrease to 8.7% effective July 1, 2007.

Effective July 1, 2007, Newfoundland and Labrador's surtax of 9% will be eliminated.

The following table provides the changes to the Newfoundland and Labrador tax credit amounts effective July 1, 2007.

Newfoundland and Labrador Personal Tax Credit Amounts
  Current amount Amount effective July 1, 2007
Basic personal amount $7,410 $7,558
Age amount Maximum of $3,482 Maximum of $3,552
Disability amount $5,000 $5,100
Spouse or common-law partner amount Maximum of $6,055 Maximum of $6,177
Amount for an eligible dependant Maximum of $6,055 Maximum of $6,177
Caregiver amount $2,353 $2,401
Infirm dependant amount $2,353 $2,401

The Newfoundland and Labrador Personal Tax Credits Return (TD1NL) form will be revised to include these changes.


4. PROCEDURES/INSTRUCTIONS

4.1 All pay systems will be programmed to automatically reflect the new federal spouse or common-law partner amount.

All pay systems will be programmed to automatically reflect the new provincial tax rates and brackets for payments dated on or after July 1, 2007.

All pay systems will be programmed to automatically reflect the new Prince Edward Island and Newfoundland and Labrador basic personal amount and spouse or common-law partner amount.

Employees who wish to change any of their personal tax credit amounts at source that are not automatically programmed as mentioned herein must complete a federal and/or provincial TD1 form. These forms are available at District Taxation Offices or on the Internet at the following address:

Federal and provincial (other than Quebec) TD1 forms TD-e

To change personal tax credit amounts at source for the province of Quebec, employees are to complete a Source Deductions Return (TP1015.3-V) form. This form is available from the ministère du Revenu du Québec (MRQ) and on the Internet at the following address:

TP-1015.3-V.

5. INQUIRIES

5.1 Any inquiries on the information contained in this document should be addressed to your Public Works and Government Services Canada (PWGSC) Compensation Services Office.



Original Signed by
B. Fortin

Brigitte Fortin
Director General
Compensation Sector
Accounting, Banking and Compensation


Reference(s): CJA 9007-11-15 and 9007-11-1