The income tax system currently includes a basic personal amount and an amount for a dependent spouse or common-law partner, or wholly dependent relative, that allow individuals and families to earn a basic amount of income on a tax-free basis. These amounts are available to individuals at all income levels, but provide more tax relief to those with low- and modest-incomes relative to the amount of tax they pay.

To provide tax relief to all taxpayers, particularly those with low and modest incomes, Budget 2005 proposes to increase progressively the basic personal amount so that by 2009 the amount of income that all Canadians may earn without paying federal income tax will increase from the current $8,012 to $10,000. This change will provide about $7.1 billion in tax relief over the next five years, with over 70 per cent of the relief going to those earning less than $60,000 per year. When fully implemented, the measure will remove 860,000 low-income taxpayers from the tax rolls, including some 240,000 seniors.

The basic personal amount will be increased over a five-year period as follows: $100 in 2006, an additional $100 in 2007, $400 in 2008 and $600 in 2009. The amount for a dependent spouse or common-law partner, and the equivalent amount for a wholly dependent relative, will increase accordingly, from £6,803 to $8,500. These increases are over and above the inflation protection provided by full indexation.

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...back to 3 March 2005


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