Budget can ease retirement savings, help small businesses, but not all Canadians will benefit

Small businesses, seniors and Canadians with extra money to sock away will benefit most from the federal government’s pre-election budget.

There were few surprises in the document released on Tuesday, given much of the contents were already reported leading up to budget day, helping the government gain momentum for its policies as it readies to meet voters this fall.

“It’s obviously an election-year budget,” said Deb MacPherson, national leader of KPMG’s Enterprise Tax practice, and a partner in the company’s Calgary office.

Measures such as increasing the contribution level Canadians can make to their Tax-Free Savings Account (TFSA) — to $10,000 from $5,500 starting this year — and reducing the small business tax rate to 9 per cent from 11 per cent by 2019, are some of the goodies.

MacPherson said both are beneficial, but taxpayers should consider them in the context of their own personal or business situations.

She said a higher TFSA limit is only good news if you have another $4,500 to spare. She recommends people with limited budgets contribute to their Registered Retirement Savings Plans (RRSPs) first, especially during years when they’re in a higher tax bracket, because it offers a tax deduction.

“The good news is that the TFSA contribution room carries forward, so you’ve not lost anything if you can’t contribute right now,” MacPherson said.

The lower tax for small businesses will also be more beneficial to those companies able to defer taking money out of the corporation over a longer period of time, she said.

“It’s great for deferring longer term,” MacPherson said. “But if you’re a small business owner who needs every penny that you earn in your company, then this is nothing to get excited about because you are going to turn around and pay it out as either as a salary or a dividend.”

Seniors are getting some relief in the budget on an issue many have been griping about for years, which is the minimum amount of money they must withdraw from their Registered Retirement Income Funds (RRIFs). That amount is being reduced to a minimum of 5.28 per cent at age 71, when the mandatory withdraws begin, down from 7.38 per cent.

“Those that draw more than the new minimum are allowed to re-contribute the excess,” noted Adrian Mastracci, portfolio manager at Vancouver-based KCM Wealth Management Inc.

He said both the TFSA and RRIF measures “are very positive moves that enhance retirement” for many Canadians.

The tax-rate cut for small businesses will save companies between $1,500 and $25,000 over the next four years, according to the Canadian Federation of Business (CFIB).

“It’s a good budget for small business,” CFIB chief economist Ted Mallett told BNN on Tuesday, citing reductions in red tape in some areas, that will save companies time and money.

“Our members are looking for ways to expand their business without too much regulatory rigamarole,” he said. “We need to reward entrepreneurship and risk taking.”

While there were benefits for small business, more could’ve been done to support small business, according to Keith MacIntyre, national tax leader at Grant Thornton LLP.

His firm would like to have seen the government increase the small business limit from $500,000, as well as a lower tax rate for businesses, from software firms to manufacturers, who are commercializing products.

He said it’s an incentive that is used in place such as the UK and France to drive the economy and create higher-end employment within those countries.

Overall, experts say there was nothing new in the budget that would get families excited.

The government’s key message was its balanced budget, with a narrow surplus, which is expected to be a key campaign theme as is heads towards an election this fall.