Nova Scotia Tax Changes

NOVA SCOTIA 2013-2014 BUDGET HIGHLIGHTS

Finance Minister Maureen MacDonald delivered her Budget Address entitled “Balanced Budget 2013-2014” on April 4, 2013. The provincial deficit for 2012-2013 is forecast to be $356,400,000. Budget 2013 projects a small surplus for 2013-2014 of $16,400,000 and $18,300,000 for 2014-2015.

While there are many highlights and initiatives in the budget, the two main tax changes are the reduction of the HST rate beginning in 2014 and a reduction in the small business tax rate effective January 2014. Changes of note:

  • Small business tax rate reduction

    The small business tax rate was recently reduced from 4% in 2012 to 3.5% in 2013. Budget 2013 proposes to reduce the rate effective January 1, 2014 to 3%, while leaving the general business rate at 16%. The small business rate applied on income up to $400,000 for 2012 and 2013. This income threshold will be reduced to $350,000 effective January 1, 2014. The federal small business rate of 11% applies to the first $500,000 of income earned and the majority of provinces have adopted this $500,000 threshold.

    If we assume a business earned $400,000 in both 2013 and 2014, there is a tax increase for that business. 2013 NS tax equals $400,000 times 3.5% or $14,000. 2014 NS tax equals $350,000 times 3.0% plus $50,000 times 16% or $18,500. While many small businesses will enjoy a benefit, some small businesses will have a tax increase.

  • HST rate reduction

    The HST rate will be reduced by 1% in 2014 and by a further 1% in 2015. Currently, the HST rate is 15%; therefore, these rate reductions will reduce the rate back to 13% by 2015.

  • Personal tax

    There were no changes announced in Budget 2013 for the personal income tax rates. Currently, Nova Scotians pay taxes at the highest marginal tax rates as follows:

    • Non-eligible dividends 36.21%
    • Eligible dividends 36.06%
    • Capital gains 25.00%
    • Interest and all other income 50.00%

    These rates apply to income over $150,000. This top tax bracket was introduced in 2010, as a temporary measure until the budget was brought back to balance. However, Budget 2013 proposes that this fifth tax bracket will remain.

    There are a number of tax credits discussed in Budget 2013:

    • Continuation of the Affordable Living and Poverty Reduction credits available for lower income families
    • Increasing the number of low income seniors who benefit from not paying NS taxes from $17,000 to 25,000
    • New $1,000 non-refundable Age Amount tax credit for NS seniors with taxable income below $24,000
    • Continuation of the Nova Scotia Graduate Retention Rebate Program

     

  • Film tax credits

    Budget 2013 announced that it is continuing to support the digital media and film industry. The Digital Media Tax Credit, which was set to expire at the end of 2012, will be extended to December 31, 2013.  The Digital Media Tax Credit is a refundable tax credit on expenditures directly related to the development of interactive digital media products.

    There will also be continued support provided for the Film Industry Tax Credit which was first announced in 2010.

  • Tobacco tax

    Budget 2013 will increase the tax rate by 2 cents per cigarette or gram of fine-cut tobacco. This increase will be effective April 5, 2013.

How will this affect you?

Please contact your WBLI advisor to discuss any of the items discussed above and the implications that these proposed tax changes may have on you or your business.