Federal tax changes: From low-income subsidies, passive cash taxation to carbon tax

As Federal tax changes come into effect,some will hit your paycheque, others your bills — and if you’re a small business owner, there’s a few you need to be abreast of
Starting in January, Canadians’ Canada Pension Plan contributions increase from 4.95 per cent to 5.1 per cent on earnings between $3,500 and $57,400. It’s the first of five years of graduated increases running until 2023, when the rate will reach 5.95 per cent.The increases are going to pay for what eventually will be an enhanced CPP.
Partially offsetting that increased CPP contribution on your paycheque will be a drop in Employment Insurance premiums, from $1.66 to $1.62 per $100 of insurable earnings.
2019 also will be the first tax year when low income workers can qualify for a more generous Canada Workers Benefit, a program intended to help the working poor stay employed.The maximum benefit will increase by between $300 and $400, based on whether the applicant is single or part of a family. That brings the maximum benefits to $1,355 for a single person or $2,335 for a single parent or couple, depending on personal incomes.However, as 2019 is the eligibility year, low income workers will have to wait until 2020 to get the boosted benefit.Experts say more than half of Canadians who live in poverty are working
Small business tax changes
The rules on how much passive income an incorporated small business can hold is one of the biggest changes to business owners.Passive income is money earned in interest on funds that sit idle within an incorporated business, without being reinvested or used to cover operating expenses. As of January 1, business owners can generate up to $50,000 in passive income before they start to lose access to the advantageous small business tax rate.
Small businesses pay a relatively low tax rate — currently 10 per cent — on the first $500,000 of business earnings. But starting in January, if those businesses hold in excess of the new limit on passive income, some of that first half-million in earnings will be subjected to the much higher corporate rate, depending on how far over the new limit they are.
The federal government’s goal is to encourage business owners to reinvest their passive earnings into their businesses, or into hiring more people, rather than sitting on the cash.
Dan Kelly, president of the Canadian Federation of Independent Business said, ” I think a lot of firms are sitting ducks for the Canada Revenue Agency.”
However, the small business tax rate is going down from 10 to 9 per cent in 2019. The federal government estimates the average small business — one that has eligible business income of $107,000 — will keep an extra $1,600 per year after the cut.And for some really small businesses — especially those with no passive income to worry about — that tax cut will be very welcome.
Higher prices at the pump
In jurisdictions that don’t have carbon pricing mechanisms of their own, Ottawa will levy a tax on fossil fuels of $20 per tonne of greenhouse gas emissions starting in the new year, rising by $10 each year to $50 a tonne by 2022.
Emissions over set limits from large, industrial emitters in provinces without carbon pricing systems will fall under the federal governments carbon pricing rules starting in January. For consumers, the cost of fossil fuels and the services they support will start going up in April.
The government estimates that, once the carbon tax is in place in the provinces where it will be imposed, the cost of a litre of gasoline will go up 4.42 cents, natural gas will go up 3.91 cents per cubic metre and propane will go up 3.10 cents a litre.
People in those provinces will get direct rebates to offset the increased costs. The amount will vary based on the province and the number of people in the household. In Ontario, for example, the rebate for the average household (defined as 2.6 people) would be about $300 a year, or about $248 in New Brunswick, or $336 in Manitoba, or $598 in Saskatchewan.
In Yukon and Nunavut, consumers will see the cost of fossil fuels rise due to carbon pricing — but because the territories themselves are adopting the federal system, the revenue will go to the territorial governments, not to individual households.
Other tax and price changes coming:
Postage stamp prices are set to increase.
• $1.05 for a single domestic letter mail stamp
• $1.27 for a U.S. letter mail stamp
• $2.56 for an international stamp
• Many personal income tax credit and benefit amounts are being indexed to inflation:
• The basic personal amount rises to $12,069
• The annual contribution limit to tax-free savings accounts will inc

rease to $6,000 from $5,500.