Quebec’s Minister of Finance, Éric Girard, tabled his last budget on March 21. A lot of changes have been presented, but I thought I’d give you a summary of some points that are more likely to impact you. This is of course a non-exhaustive summary that focuses on specific points and does not cover the entire budget presented.
Tax cuts
The 2023-2024 budget presents a 1% decrease in Quebec’s tax rates for the first two levels.
- Income below $49,275: The tax rate increases from 15% to 14%
- Income above $49,275, but less than $98,540: The tax rate increases from 20% to 19%
As a reminder, all workers who pay taxes in Quebec will benefit from this since we have a tiered tax system. The amount of savings will vary depending on the income earned, but will be subject to a maximum since there will be no tax savings for income earned above $98,540.
Labour-sponsored funds
Significant changes have also been made to the tax credits for labour-sponsored funds (Fonds de solidarité FTQ and Fondaction CSN). In addition to implementing a new investment standard, the Quebec government is also changing certain tax measures.
- Minimum holding period: The period will gradually increase from a minimum of 2 years to a minimum of 5 years. The change will be made gradually between 2024 and 2026 at the rate of one additional minimum year of ownership per year. Therefore, shares acquired from 1June 2024 must be held for a minimum of 3 years, those acquiredfrom 1 June 2025 for a minimum of 4 years and those acquired from 1June 2026 for a minimum of 5 years. The minimum holding period will remain at 5 years thereafter, unless further changes are made in the future.
- Provincial tax credit: The 15% provincial tax credit currently in effect will no longer be available to people with incomes above Quebec’s maximum tax bracket, currently $119,910. This change will be effective for shares acquired after December 31, 2023 and for taxation years after 2023. It will therefore still be possible to claim it this year for people with an income of more than $119,910. The 15% federal tax credit will remain in effect for the time being as long as the Government of Canada does not make any changes.
Quebec Pension Plan (QPP)
The new budget will also provide Quebec taxpayers with more options related to the QPP and make changes to encourage workers aged 65 and over to stay in the workforce.
- Maximum age: Asof January 1 , 2024, the maximum age to apply for a QPP pension will be increased from 70 to 72. During this deferral, the pension will continue to be increased by a factor of 0.7% per month (8.4% per year) as the current deferral of the pension after age 65.
- QPP contributions: Asof January 1 , 2024, a worker aged 65 and over who is already receiving his or her retirement pension will be able to elect to stop contributing to the QPP. This choice will apply to both the employee and the employer. Workers who continue to contribute to the QPP after age 65 will still be entitled to the supplement to their retirement pension as is currently the case. As a result of the increase in the maximum age, the obligation to stop contributing to the QPP will also be extended to age 72.
- Impact of work after age 65 on the QPP: New measures have also been introduced to help people over 65 stay in work. According to the calculation of a QPP contributor’s retirement pension, the pension is based on the average of his or her work earnings. People over the age of 65 who continued to work part-time, for example, could have a negative impact on the amount of their pension because their average earnings were reduced. The Government of Quebec is introducing an average earnings protection mechanism so that, asof January 1 , 2024, earnings from work after age 65 will not be able to reduce the average earnings used to calculate the pension.
If you would like to consult the new 2023-2024 Quebec Budget in its entirety, you can do so by going to the following address: http://www.finances.gouv.qc.ca/Budget_et_mise_a_jour/budget/
Do not hesitate if you have any questions.