Waters & Meredith

Serving Niagara..

Client Information Newsletter: 2nd Quarter 2001

CONTENTS

  • 2001 Approximate Income Tax Rates
  • Tax On Income
  • Automobiles
  • Registered Retirement Savings Plan (RRSP)
  • Capital Gains (Losses)
  • Ontario Budget - May 9, 2001
  • Federal Economic Statement - May 17, 2001
    		•

    2001 APPROXIMATE INCOME TAX RATES



    Income
    Ordinary
    Income    		 Gross
    Capital
    Gain
    Cash
    Dividend
    % % %
    $20,000 22.20 11.10 4.67
    $25,000 22.20 11.10 4.67
    $35,000 31.24 15.62 15.97
    $45,000 31.24 15.62 15.97
    $55,000 33.09 16.55 16.99
    $65,000 43.41 21.71 27.58
    $75,000 43.41 21.71 27.58
    $100,000
    and over    		 46.41 23.21 31.33
    These do not take into account personal tax credits.

    Taxable income brackets are indexed annually by the CPI.

    Back to Contents

    TAX ON INCOME

    Ontario now charges tax on income rather than charging tax based on a percentage on the Federal income tax.

    This gives the Provincial government greater control over their own tax policy.

    Employers should ensure they are deducting both Federal and Provincial income tax from employees as there are separate deductions shown in the guide.

    Back to Contents

    AUTOMOBILES

    2000 2001
    Maximum Deductions

    Purchase price for capital cost allowance (plus PST and GST)
    $ 27,000 $ 30,000
    Lease - monthly (plus PST and GST)
    $ 700 $ 800
    Interest Deduction
    $ 250 $ 300
    The above rates apply for vehicles acquired in 2000 and 2001. If a vehicle was purchased or leased in 2000, the 2000 rates apply to 2001.

    Tax exempt allowance
    - first 5,000 km.
    $0.37 $0.41
    - excess km.
    $0.31 $0.35
    These are the amounts an employer may reimburse an employee on a tax-free basis.

    Automobile Taxable Benefits
    Operating Benefit in addition to standby benefit:


    General    		 Per km.

    $0.15    		 Per km.

    $0.16
    Standby Charge:
    Company-Owned Auto:
    The standby charge for a company-owned auto is 2% per month of the original cost of the auto plus GST

    Leased Auto:
    The standby charge is 2/3 of the lease, plus GST, for each month the auto is available for the employee's personal use

    If the personal use by the employee is less than 12,000 km. per year and the auto is used for business at least 90% of the time, a reduced standby charge is permitted.

    If the auto is used more than 50% of the time for business, the operating benefit may be one-half of the standby charge provided the employee notifies the employer in writing before the end of the year. GST is deemed to be included in the operating benefits.

    REGISTERED RETIREMENT SAVINGS PLAN

    The maximum contribution is $13,500 or 18% of the prior year's earned income, which includes salary, wages, self-employed earnings, alimony and net rental income.

    Contributions may be made to a RRSP until the end of the year the taxpayer turns 69.

    The taxpayer may continue to make contributions to a spousal RRSP until the end of the year the spouse turns 69.

    The foreign content limit has been increased to 30%.

    If you transfer stock that has appreciated in value to your RRSP, the gain is reportable as a capital gain in the year of the transfer.

    If you transfer stock to your RRSP that has declined in value, the loss is not deductible.

    If you sell stock at a loss then repurchase it in your RRSP, the loss is deductible against capital gains.

    CAPITAL GAINS (LOSSES)

    The inclusion rate (taxable portion) of capital gains is 50% of the gain or loss.

    Where a person has claimed a prior capital gains exemption or has claimed a prior allowable business investment loss (ABIL), this can offset the current reporting.

    Capital gains are generally taxable. Capital gains on one's principal residence, including up to one (1) acre, are generally not taxable.

    ONTARIO BUDGET - MAY 9, 2001

    Corporate Income Tax
    The general corporate rate, now 14%, will be reduced to:

      12.5% on January 1, 2002
      11.0% on January 1, 2003
      9.5% on January 1, 2004
      8.0% on January 1, 2005
    The corporate tax rate for manufacturing and processing, now 12%, will be reduced by 1% on January 1 each year to reach 8% on January 1, 2005.

    The retail sales tax rebate program for alternative-fuel vehicles is being extended to electric-hybrid vehicles delivered after May 9, 2001. A rebate of up to $1,000 is available.

    Personal Income Tax
    Provincial income tax rates will be reduced as follows:

    Up to $30,814:
      6.05% on January 1, 2002
      5.65% on January 1, 2003
    $30,814 - $61,619:
      9.15% on January 1, 2002
      8.85% on January 1, 2003

    FEDERAL ECONOMIC STATEMENT

    The Budget surplus for the year ended March 31, 2001 was $15 billion. It will be used to reduce the deficit.

    Although inflation was 3.6% at an annual rate last month, this was due to rising energy prices and is not economy wide. The government's goal is to keep inflation within a band of 1%-3% for the next 5 years.

    The $100 billion in promised tax cuts will proceed.

    A Federal-Provincial health care accord will inject an additional $21 billion into health care.

    We welcome comments you may have on this newsletter as well as suggestions for future topics.

    The information herein is provided for your general information and action should not be taken on the basis of this newsletter, but only on the advice of your own individual advisor, applying this advice to your individual situation. Please call if you have any questions.

    Waters & Meredith
    Chartered Accountants
    Telephone: 905-356-4324
    Fax: 905-356-0964
    E-mail: wm@watersmeredith.com

    © 2001 Waters & Meredith. All rights reserved.
    Website designed by: Stockton Web Designers, Niagara Falls, Ont.
    ---