March 23, 2011
Saskatchewan tabled a surplus budget of $115 million for fiscal 2011-2012. The budget will also pay down the provincial debt by another $325 million.
The budget contained a number of tax measures that lowers taxes for individuals and businesses, as summarized below.
Personal Tax Credit Amounts Increased - The following personal tax credit amounts have been increased, effective January 1, 2011:
Small Business Corporate Income Tax Rate Reduced - The small business corporate income tax rate will be reduced from 4.5% to 2%, effective July 1, 2011.
Dividend Tax Credit Rate Reduced- The dividend tax credit rate on dividends received from small business corporations will be reduced from 6% to 5% for 2011 and to 4% for 2012.
Education Property Tax – The budget follows through on the government’s previous commitment to reduce the education property tax, by providing the following mill rate reductions in the 2011 taxation year:
Graduate Retention Program (GRP) (2008 Saskatchewan Budget) – Effective January 1, 2008, a new refundable provincial income tax credit initiative was introduced to replace the previous Graduate Tax Exemption introduced in the 2007 budget. The GRP tax credit rebates up to $20,000 of tuition fees paid by eligible graduates of Saskatchewan post-secondary institutions. Eligible graduates include individuals who complete an approved program at a Saskatchewan post-secondary institution. Eligible programs must be at least six months in duration and must result in a certificate, diploma or undergraduate degree, or provide certification to journey persons.
In a provincial news release dated October 30, 2008, the Saskatchewan government announced that GRP eligibility is being expanded to include post-secondary graduates of approved programs both within and outside Canada. The newly expanded program is intended to support Saskatchewan employers in meeting their recruitment and retention needs.
The tuition rebate is based on actual tuition amounts paid by an individual by using the T2202A tuition receipts issued by the institutions. The maximum rebate for each completed program of study is:
To be eligible for full tuition rebates, graduates must remain in Saskatchewan for the seven years after graduation. Eligible graduates who continue their post-secondary education in another eligible program are eligible for additional tuition rebates, however the total amount of tuition rebates any graduate can receive over a lifetime is $20,000. A graduate’s tuition rebate entitlement is paid as a refundable tax credit over a seven-year period, with 10% of the entitlement paid out in each of the first four years after graduation and 20% paid out in each of the next three years. Graduates are required to attach Ministry certificates and all applicable tuition receipts to their Saskatchewan income tax return. CRA will use the tuition receipts and eligibility certificate to establish the graduate’s total rebate entitlement. Based on the entitlement amount, the CRA will calculate the individual’s rebate payment for each taxation year, applying the seven-year rebate claim schedule. Tax refunds will be made each year the graduate files a Saskatchewan income tax return for each of those years.
Those 2006 and 2007 graduates who were eligible under the previous Graduate Tax Exemption program continue to benefit under that program for the 2007 tax year. These graduates who meet the GRP eligibility criteria also receive benefits under the new program based on a portion of tuition costs and the specific program of study completed. The maximum amounts of tuition that can be claimed by eligible 2006 and 2007 graduates are:
Tuition rebate benefits for 2008 and 2009 graduates are also based on their course of study and a portion of their tuition costs. The maximum amounts of tuition that can be claimed by eligible 2008 and 2009 graduates are:
The program will be fully implemented, and will provide full benefits in 2010.
Proposals to Improve Saskatchewan Pension Plan (SPP) (December 7, 2010) - The SPP is a voluntary defined contribution pension plan established by the Government of Saskatchewan in 1986. Currently, the SPP allows annual contributions of up to $600. SPP contributions are tax-deductible where a contributor has available RRSP room, and reduce the contributor’s deduction limit accordingly. SPP membership is not limited to Saskatchewan residents.
Commencing with the 2010 tax year, the maximum annual SPP contribution is $2,500, up from the current $600. The SPP imposes a $2,500 cap on contributions, but that cap is not imposed by the tax rules. Draft amendments to the Income Tax Act were released on December 7, 2010 to accommodate increased tax-deductible contributions to the SPP (as outlined in Saskatchewan’s 2010 budget). The proposals under the Act remove the $600 limit on deductible contributions. The SPP is essentially treated as an RRSP. Existing SPP rules permit annual non-deductible contributions of up to $600 independent of an individual’s RRSP room. The proposed changes will require SPP contributions to be based on an individual’s RRSP limit, which is derived from earned income.
Also, changes are proposed to align its tax treatment with that of other tax-assisted retirement savings vehicles. These changes will ensure that SPP members benefit from additional features of the RRSP and RPP rules that were not previously available to them. Specifically:
1) Transfers from RPPs and RRSPs to the SPP will be permitted within existing limits on such transfers under the RPP/RRSP rules, subject to additional limits ($10,000 per year) imposed by the SPP;
2) SPP annuity payments will be eligible for the pension income credit and pension income splitting;
3) Rollovers of SPP funds on death to the RRSP or RDSP of a financially dependent infirm child or grandchild will be permitted;
4) SPP contributions will be taken into account in determining RRSP over-contribution rules; and
5) SPP savings will be subject to the same spousal income attribution rules as RRSPs.
Re: (4.) above, SPP contributions will be counted towards an individual’s $2,000 RRSP over-contribution allowance. Any over-contributions in excess of that allowance will be subject to the 1% per month penalty tax that applies to excess RRSP over-contributions. Transitionally, the RRSP over-contribution rules will not apply to SPP contributions made in respect of taxation years before 2010 or to the first $600 of SPP contributions made in respect of the 2010 taxation year.
Re: (5.) above, the application of these rules would only apply in limited circumstances and in respect of contributions made by a spouse or partner after 2010. Generally, there would be an attribution of SPP amounts to a spouse or partner in the year in which an SPP member received SPP funds, if his or her spouse contributed funds to the SPP member’s account in that year or in one of the two previous years, and either:
1. The SPP member cancels membership in the SPP within six months of joining (before contributions become locked-in) and receives a refund of contributions, as permitted by the plan; or
2. Upon retirement under the SPP, the SPP member transfers his or her SPP savings to a RRIF and withdraws an amount in excess of the annual minimum withdrawal amount (similar to the RRSP rules).
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