Originally published in the Toronto Star on March 22nd, 2011. To go to the Toronto Star website please click here
The federal budget may include assistance for low-income seniors and retirees who rely on government benefits and tax changes for those whose investment nest eggs have been hard-hit by stock market turmoil.
The minister has already hinted there could be help for low-income single seniors, said Susan Eng, vice president, advocacy, for the Canadian Association of Retired Persons.
“There is a need to deal with the issue of poverty in retirement and old-age. If they can’t do it across the board, they at least have to target the most needy,” Eng said.
About 1.6 million Canadians currently receive the Guaranteed Income Supplement, or GIS, which provides additional money, on top of the Old Age Security pension, to low-income seniors.
The advocacy group has also been pushing for changes to the eligibility requirements for GIS and pension reform.
Another way to help seniors would be to provide financial support to family care givers, by providing job protection or financial support, similar to Canada’s maternity and parental leave programs, Eng said.
CARP and other experts in the tax and financial planning industry would like to see more flexibility on withdrawal rules for Registered Retirement Income Funds.
Retirees who have a RRIF must withdraw, and pay income taxes on, a minimum amount from their registered account each year.
“Why force these minimums? Why not just let people have more control?” said Ian Russell, president and chief executive officer of the Investment Industry Association of Canada. “It’s not fair to seniors, particularly in periods when the stock market has collapsed and they’re forced to take their money out.”
Some have suggested changes to rules for Tax-Free Savings Accounts that would allow seniors to contribute a lifetime lump sum, rather than adhere to annual limits.
This type of change would likely be well-received among seniors. That’s because withdrawals from a RRIF are taxable income and may result in the loss of some government benefits, but that would not be the case with withdrawals from a TFSA.
“This could be a pre-election budget and seniors and retirees are an important contingent of the electorate,” said Jamie Golombek, managing director of tax and estate planning at the Canadian Imperial Bank of Commerce in Toronto.
Few experts expect any major changes to come into effect this year.
“I would be surprised if there were any significant changes in the personal tax system, the brackets, or the marginal rates,” Lorn Kutner, tax partner in Deloitte Canada’s private company services group.
“I think this budget will be more of a stay-the-course budget. There may be a few tweaks, but nothing that will make or break the livelihood of most Canadian families.”
The federal government should embark on a course of reducing Canadian personal income tax rates, similar to the cuts it made on the corporate tax side, Kutner said. “It’s important in a global environment that Canada is seen as being attractive for those individuals that we want to come, the innovative, entrepreneurial, well-skilled, highly educated people who live around the world.”