Why now is exactly the right time for Stephen Harper to move back to Calgary
Prime Minister Stephen Harper, who will be resigning this week but will remain as the member of Parliament for his own riding of Calgary Heritage, is moving back to Calgary. While this may seem like a logical decision, given that he must vacate the official PM residence of 24 Sussex Drive, his choice to leave Ontario for Alberta prior to year-end is a tax savvy move that could save him tens of thousands of tax in 2015.
That’s because provincial residency and where you pay provincial tax is based on where you live on the last day of the year, regardless of where you lived during the year. Of course it’s not as simple as checking into an Alberta hotel before midnight Dec. 31 to be considered a provincial resident of Alberta for the year. The determination of provincial residency looks to the province where you have the “most significant residential ties.”
Significant residential ties include the location of your home, your spouse or partner and family. Mr. Harper should have no problem satisfying this test as his wife and daughter, who is already enrolled in a Calgary school, will also be living in Calgary. His son will continue studying at Queens University in Ontario.
Of course, sometime it’s not practical for a family to move midway through the school year, in which case the determination of provincial residency also looks at secondary ties, which can include: maintaining a recreational membership in the province, using that province’s hospital or medical insurance coverage, continuing to drive a vehicle registered in the province and holding a driver’s licence from that province.
The Canada Revenue Agency has stated that it is indeed possible for someone to be resident in more than one province. The CRA will look at all the facts to determine in which province you have the most significant residential ties. If that province can’t be determined, then your province of residence would be the province in which you have the most secondary residential ties.
So how much tax will Mr. Harper potentially save in 2015?
Given the PM’s salary of $335,000, adjusted slightly downwards to $307,000 for 2015 since he will only receive an MP’s salary for the last two months of the year, and assuming no other income or tax credits, his combined federal/Ontario tax bill would have been $125,000, putting his average tax rate at about 41 per cent and his marginal tax rate on any additional income at 49.53 per cent.
By moving to Alberta before the end of the year, Mr. Harper’s federal/Alberta combined tax bill on his Parliamentary income drops by about $18,000 to $107,000, resulting in an average tax bill of 35 per cent and a marginal rate on other income of 40.5 per cent.
So, if you’re a high-income Canadian contemplating a move to Alberta over the next number of months, you may want to follow in Mr. Harper’s footsteps and accelerate that move before Dec. 31.
This is especially true for 2015, since Alberta’s tax rates are going up on Jan. 1, 2016 for Albertans with taxable income over $125,000. Albertans who earn over $300,000 will be the hardest hit and could soon face a top marginal rate of 48 per cent, when you combine Alberta’s scheduled tax hikes with prime minister-elect Trudeau’s new top tax bracket for high income earners.