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AiF insight | Oh Canada, tax! Tax!

  • April 17, 2024
  • April 17, 2024
Read All AiF Insight and Opinions
Read All AiF Insight and Opinions
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https://budget.canada.ca/2024/home-accueil-en.html?utm_campaign=fin-fin-budget-24-25&utm_medium=webfeat&utm_source=canada-ca#pdf

On April 16, 2024, Canada announced its 2024 fiscal budget. While there are many details, the key takeaway is: Raise Tax!

Many our clients are feeling quite nervous, especially since the tax hikes mainly target the wealthy. In terms of taxation, let's discussing it with everyone to understand its impact on us.

1. All investment in RRSP, FHSA, TFSA is not taxed.

2. Reducing tax if you contribute to RRSP or FHSA.

3. Withdraws from an FHSA are tax-free.

AiF opinion: Everyone should fully utilize RRSP, FHSA, and TFSA.

Chart 8.2 reflects the income composition of various socioeconomic strata.
1. For the bottom 50% of individuals, almost 99% of their income comes from active sources.
2. For 95-99% of individuals, active income comprises over 90% of their total income.
3. For less than 1% of wealthy individuals, active income accounts for less than 80%, while passive income exceeds 20%.
4. Among the wealthiest 0.01% of individuals, active income constitutes 45%, while passive income stands at 55%.

AiF's viewpoint: Wealthy individuals have a higher proportion of passive income.

Investment is the sole method for generating passive income.

Therefore: Without investing, one remains impoverished.

This passage describes the tax changes that everyone is concerned about:
1. For individual investment profits annually below $250,000, the capital gains tax remains unchanged. It's calculated at the original rate, with 50% considered as income and taxed according to the income tax brackets.
2. For individual investment profits exceeding $250,000 annually, the capital gains tax increases from the original 50% to 66.7%. This 66.7% is considered as income and taxed according to the income tax brackets.
3. Effective June 25, 2024.
AiF's opinion: This has an impact on our investments. The premise is that you must earn over $250,000 annually, and you withdraw all of it.
If you earn over $250,000 annually, don't worry. We have many other tools in our toolbox tailored for high-net-worth clients.
There are better tools and methods available to address these situations.

 

Table 8.1 shows：
By 2025, there will be a total of 40,000 wealthy individuals whose annual investment profits exceed $250,000, comprising 0.13% of the population. Their average annual income is $1.4 million. Currently, with a population of 40 million in Canada, only 40,000 individuals reach this level of wealth.

AiF's opinion: If you're within this group, congratulations! You are truly a wealthy individual.

Read All AiF Insight and Opinions

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