Monday, 4 May 2015

Update on the Budget Statement of 2015 for Trinidad and Tobago

The budget statement  for 2015 which was read in Parliament on September 8, 2014 was approved by the House of  Representatives, the Senate and  "assented to"  in January 2015. While there was the expectation that the Statement would become law, mainly due to the focus on savings and tax compliance which were proposed, we were all happy that the approvals did materialise. Some of the reasons are as follows:

  1. The Tax amnesty allowed for  persons who earned income and who are reaching towards pensionable age, to file returns and bring their tax matters up to date. 
  2. There were increases in personal allowances for persons who have attained the age of 60 from $60,000 to $72,000. This translates into a benefit of $12,000 per annum per individual. For a couple, the savings of $24,000 may be quite useful as they now have  a tax savings of  $6,000 available to spend... Here is the extract from  the Budget Statement and the link to the document..:"the personal allowances for individuals aged 60 and over will be increased from $60,000 to $72,000 for the calculation of individual taxes;"
  3. There were increases in allowances relating to contributions to pensions and other tax incentive plans from $30,000 to $50,000 per annum. This translates into $5,000 in tax savings ( 20000*25%). For persons who may have opted to receive pensions early in life such as age 55, 60 or 65, they can open  tax incentive plans which will allow them to defer taxes which arise on their taxable income including their pensions, and draw from these plans at 70. The deferral in tax and the returns will be of benefit to persons in this age group as some of the returns on  these plans are becoming more attractive than they were four to five years ago... Thus the possible income for some of these persons at the age of 70 has become quite favourable. Of course they still need to work, earn an income on a competitive basis as most of them may not  be in a large pensionable income bracket....... So in the  event that you do not believe me, here is an extract from the budget statement and the link to the document: " Registered Annuities I propose effective January 1, 2015, to increase from $30,000 to $50,000 the limit for contributions to registered annuities. This will impact 15,000 citizens at a cost of $75.0 million."
  4. Here is the link to the Act of Parliament. Given that my knowledge and application of Acts of Parliament is fairly limited, I usually search for a key phrase to quickly access the relevant section. This is mainly because this Act is one of the oldest pieces of legislation and to amend it, the  Bill  which is to being proposed, states the changes which are to be made to the relevant section of the existing Act.. For example the above changes will be made to "PART XVIII INCOME TAX",  with the key phrases being thirty and fifty... ( referring to thousands and the changes in the allowances.  See the link to the ACT of Parliament, which is also available online.
In conclusion, I am excited about these changes as when I combine the concepts embodied in my Certificate in Financial Planning Class, such as the Time Value of Money, I will be inclined to contribute to my plans early in the year to allow for an increase in return, and it is unlikely that these allowances will be reversed in the forseeable future. While I may experience difficulty in saving $50,000 and placing it in one area which I will not have access to for some time, I can be consoled in saving some more in another area which I can draw from to invest in my pension plans even earlier next year.