Ottawa, December 22, 2004 2004-084 Related document: Backgrounder Minister of Finance Ralph Goodale announced today that Canadians will benefit again in 2005 from full indexation of the personal income tax system, which was restored in Budget 2000 as part of the Government's Five-Year Tax Reduction Plan. On January 1, 2005, all indexed personal income tax amounts, including tax bracket thresholds and amounts used to calculate non-refundable tax credits, will be adjusted by 1.7 per cent to ensure that inflation does not cause people to pay more income tax. Indexation also applies to benefits such as the Canada Child Tax Benefit (CCTB) and the goods and services tax credit (GSTC). On July 1, 2005, the 1.7-per-cent indexation factor will be applied to the CCTB and the GSTC, ensuring that the real value of benefits that people receive through these programs is fully preserved rather than eroded by inflation. In addition, as of July 1, 2005, low- and modest-income families with children will benefit from a $185 increase in the National Child Benefit supplement of the CCTB, which was announced in Budget 2003. A further increase of $185 is scheduled for July 2006. By the end of 2004-05, the Five-Year Tax Reduction Plan¿the largest tax cut in Canada's history¿will have reduced taxes by $100 billion. For individuals, this represents a tax cut of 21 per cent on average¿27 per cent for families with children. For example, a two-earner family of four with a $60,000 income is saving almost $2,000 per year in federal personal income tax compared to what they would have paid had the plan not been in place. Three-quarters of the value of the tax reduction plan is flowing to individuals, with most of the tax relief going to low- and modest-income Canadians. Tax measures introduced since 2000 have removed about 1 million low-income Canadians from the tax rolls. A backgrounder providing further information on full indexation of the personal income tax system is attached. - 30 - For further information: David Gamble Public Affairs and Operations Division (613) 996-8080 Pat Breton Press Secretary Office of the Minister of Finance (613) 996-7861 Backgrounder How the Indexation Factor Is Calculated The indexation factor for a given taxation year beginning January 1 is the percentage increase in the average Consumer Price Index (CPI) for Canada as determined by Statistics Canada for the 12-month period ending on September 30 of the previous year relative to the average CPI for the 12-month period ending on September 30 of the year earlier. Thus, the 1.7-per-cent factor effective January 2005 is the percentage increase in the average level of the CPI from October 2003 to September 2004, relative to the average level of the CPI from October 2002 to September 2003. Indexed Personal Income Tax Parameters 2005 2004 ($) Personal Amounts and Bracket Thresholds Basic personal amount 8,148 8,012 Spouse or common-law partner amount 6,919 6,803 Net income threshold 692 681 Taxable income at which 22-per-cent bracket begins 35,595 35,000 Taxable income at which 26-per-cent bracket begins 71,190 70,000 Taxable income at which 29-per-cent bracket begins 115,739 113,804 Credit Amounts to Reflect Needs Infirm dependant amount 3,848 3,784 Net income threshold 5,460 5,368 Caregiver amount 3,848 3,784 Net income threshold 13,141 12,921 Disability amount 6,596 6,486 Amount for children with disabilities 3,848 3,784 Allowable child care and attendant care expenses 2,254 2,216 Medical expense tax credit¿3 per cent of net income ceiling 1,844 1,813 Refundable medical expense tax credit supplement 571 562 Minimum earnings threshold 2,857 2,809 Family net income threshold 21,663 21,301 Age amount 3,979 3,912 Net income threshold 29,619 29,124 Old Age Security repayment threshold 60,806 59,790 Goods and Services Tax Credit (GSTC)1 Adult maximum 227 224 Child maximum 120 118 Single supplement 120 118 Phase-in threshold for the single supplement 7,377 7,253 Family net income at which credit begins to phase out 29,618 29,123 Canada Child Tax Benefit (CCTB)1 Base benefit 1,228 1,208 Additional benefit for third child 86 84 Additional benefit for children under 7 years 243 239 Family net income at which base benefit begins to phase out 35,595 35,000 National Child Benefit (NCB) Supplement1,2 First child 1,722 1,511 Second child 1,502 1,295 Third child 1,420 1,215 Family net income at which NCB supplement phase-out ends 35,595 35,000 Child Disability Benefit1,3 Maximum benefit 1,681 1,653 Family net income at which Child Disability Benefit begins to phase out 35,595 35,000 1 The GSTC, CCTB and Child Disability Benefit are paid on a benefit-year cycle beginning in July. 2 Includes a $185 increase for July 2005 that was announced in Budget 2003. 3 Introduced in Budget 2003.
