Tax Insights: 2015 Alberta Budget – Many Albertans to pay more

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In brief

On March 26, 2015, Alberta’s President of Treasury Board and Minister of Finance, Robin Campbell, presented the province’s budget.

Starting January 1, 2016, Alberta’s 10% income tax rate will increase over three years for individuals with incomes exceeding $100,000, with a further increase when income exceeds $250,000. As expected, a new Health Care Contribution Levy will apply, but only for individuals with incomes over $50,000.

For individuals, the budget also reduces the top Charitable Donations Tax Credit rate, but proposes measures that will help some working families.

The budget does not change corporate income tax rates or the oil and gas royalty structure, and does not introduce a provincial sales tax. However, the budget does increase the Insurance Premiums Tax rates, tobacco and liquor taxes, and numerous fees and charges.

In detail

Personal tax measures

Personal income tax rates

Alberta currently has a flat tax rate of 10%. The budget introduces two new tax brackets starting January 1, 2016.

Taxable income over $100,000

For taxable incomes over $100,000, the 10% rate will increase to:

  • 10.5% in 2016
  • 11% in 2017
  • 11.5% after 2017

Taxable income over $250,000

For taxable incomes over $250,000, the 10% rate will increase to:

  • 11% in 2016
  • 11.5% in 2017
  • 12% in 2018

After 2018, the rate will be 11.5%.

Both the $100,000 and $250,000 brackets will be indexed after 2016.

The bottom line

The table below shows how much additional tax you will pay, at select income levels, assuming all your income is interest or ordinary income (such as salary).

Taxable income Additional tax1
2016 2018
$1,000,000 $8,250 $17,250
$800,000 $6,250 $13,250
$600,000 $4,250 $9,250
$400,000 $2,250 $5,250
$200,000 $500 $1,500
  1. The additional tax is equal to the tax resulting from this budget proposal over the tax you would pay at the 10% flat rate.

 

The table below shows top combined federal/Alberta tax rates.

Top combined federal/Alberta tax rates
    Taxable income Ordinary income Capital gains Canadian dividends
Eligible Non-eligible
Top bracket1 2019 > $138,586 40.50% 20.25% 21.36% 31.13%
2018 > $250,000 41.00% 20.50% 22.05% 31.72%
2017 40.50% 20.25% 21.36% 31.13%
2016 40.00% 20.00% 20.67% 30.54%
2015 > $138,586 39.00% 19.50% 19.29% 29.36%
  1. Ignores indexing after 2015.
     

 

Health Care Contribution Levy

Starting July 1, 2015, Alberta’s Health Care Contribution Levy will be payable by individuals with taxable incomes over $50,000.

The calculation of the new levy is outlined in the table below. When fully implemented in 2016, the maximum levy will be $1,000.

The levy will be collected through employer withholdings or included in instalments and will be administered through the personal income tax system.

Taxable income

Annual Health Care Contribution Levy (per individual)

 

Maximum

 

2016

20151

Up to $50,000

Nil

$50,000 to $70,000

 

5% of income > $50,000

$200

$100

$70,000 to $90,000

$200 +

5% of income > $70,000

$400

$200

$90,000 to $110,000

$400 +

15% of income > $90,000

$600

$300

$110,000 to $130,000

$600 +

15% of income > $110,000

$800

$400

> $130,000

$800 +

25% of income > $130,000

$1,000

$500

  1. The 2015 maximums are half of those for 2016.

 

Charitable Donations Tax Credit

Effective January 1, 2016, the Charitable Donations Tax Credit rate on total donations over $200 will be reduced from 21% to 12.75% (its 2006 level).

Alberta Family Employment Tax Credit (AFETC)

Starting July 1, 2016, the AFETC will be enhanced in two ways:

  • the rate at which benefits are phased in will increase from 8% to 11% on working income over $2,760
  • the phase-out threshold will be increased from $36,778 to $41,250

Alberta Working Family Supplement (AWFS)

The budget introduces the AWFS. Starting July 1, 2016, this new program will assist working families earning between $2,760 and $41,220.

Families with one child will be eligible for a maximum annual benefit of $1,100. An additional annual benefit of $550 will be provided for each of the next three children, for a maximum annual benefit of $2,750.

The AWFS will be indexed annually starting 2017 and will be administered by the Canada Revenue Agency. Families currently eligible for the AFETC will be enrolled automatically.

Business tax measures

Corporate income tax rates

Alberta’s budget does not change corporate income tax rates.

Insurance Premiums Tax

On April 1, 2016, the Insurance Premiums Tax rates will increase by one percentage point to:

  • 3% on premiums for life, accident and sickness insurance
  • 4% for other insurance

Other tax measures

Tobacco taxes

Tobacco taxes will increase from $40 to $45 per carton, effective 12:01 a.m., March 27, 2015, with an equivalent increase applied to other tobacco products.

Liquor taxes

On March 27, 2015, the alcohol tax will increase by 22¢ per litre, except for small brewers and certain cottage wineries. For mid-sized brewers the increase will be 11¢ per litre.

Fuel taxes

The fuel tax will increase by 4¢, to 13¢ per litre, effective 12:01 a.m., March 27, 2015. The Tax-Exempt Fuel Use program and Farm Fuel Benefit are capped at 9¢ per litre.

Fees and charges

Numerous fees and charges will increase under the user pay principle. This includes fees for land titles transactions and motor vehicle registrations, among others.