(Bloomberg) – Canadian Finance Minister Joe Oliver will allow Canadians to shelter more of their savings from taxes for longer while boosting benefits to children in a pre-election budget aimed at seniors and working families.
The budget measures for households will be worth about C$5 billion (US $4.1 billion) in each of the next two fiscal years, saving families as much as C$6,600 this year. The main measures are an increase in contribution limits for tax-free savings accounts to C$10,000 from C$5,500, and giving seniors more time to withdraw money from tax-sheltered retirement accounts.
Oliver said the tax breaks are focused on working Canadians, a response to opposition criticism the Conservatives have focused too much on money for companies and rich families since taking power in 2006. Oliver said the government’s move to cut the overall tax burden to the lowest in half a century has benefited everyone, including the 11 million Canadians who have a tax-free savings account.
“These measures will make life more affordable for all Canadian families with children,” Oliver said in his budget speech.
Allowing seniors to make slower conversions from a tax- deferred Registered Retirement Savings Plan, or RRSP, will cost C$670 million through fiscal 2019-20, according to budget documents.
Members of the CARP seniors’ group “will welcome the proposals that will help them save and manage their savings for their retirement needs,” Susan Eng, vice president of advocacy, said in a statement. “These changes are valuable vote getters in an election year.”
The Conservatives have the support of 39 percent of voters aged 55 and over, compared with 32 percent for the Liberals and 24 percent for the New Democratic Party, according to a poll this month by Ipsos.
The expansion of the TFSA addresses concerns that people are earning low rates of interest on their savings and paying tax on it, said Myron Knodel, director of tax and estate planning at Winnipeg-based Investors Group. More than half the people who have made the maximum contributions to TFSAs were over 55, Oliver said.