Recently, families have benefited greatly from these generous benefits.
“Median income from government transfers rose from $5,800 in 2014 to $7,400
in 2016,” states the
Canadian Income Survey released on March 13, 2018, “with about half of that coming from the Canada
Child Benefit.” Median receipts (defined as the level of income at which
half the population had higher income and half had lower) were as follows:
The CCB will continue to improve as a result of the newly-indexed amounts
implemented in July 2017. But here’s the problem: This important benefit
was missed by thousands of Canadian families, and the federal government is
now about to spend millions to fix that, at least for some of our most
Specifically, the Feb. 27, 2018, budget noted “Indigenous Peoples, living
in remote and northern communities, face distinct barriers when it comes to
accessing federal benefits such as the Canada Child Benefit.” The
government will spend $17.3 million over three years, beginning in 2018-19,
to expand outreach to Indigenous communities, and to conduct pilot outreach
activities for urban Indigenous communities to ensure they collect all
their social benefits.
But the problem extends beyond the Indigenous community. Here’s why: The
newly enhanced benefits depend on net “family” income, as declared on the
tax return. It’s an income test that can be difficult for families in flux.
Single parents involved in various types of conjugal relationships can find
themselves looking straight into the eyes of the vigilant tax auditor, who
has the power to cancel or delay the generous CCB.
So what’s at stake? For the benefit year starting July 2018, the maximum
available Canada Child Benefit amounts are the following:
If you have three children under the age of six, for example, you could
qualify for a tax-free monthly benefit of just under $1,624 dollars, or
$19,488 annually. That’s significant, but there is a catch. When you have
family net income above certain levels, a “clawback” is applied, as shown
Note that if a child in the family is disabled, the Child Disability
Benefit of $2,771 (in 2018) is also paid, in addition to the Canada Child
Benefit amount. Again, the amount is reduced if family net income exceeds
$65,975. The reduction rate is 3.2% for families with one child and 5.7%
for families with two or more eligible children.
You can see, this is not easy math for most people. In fact, it’s punitive:
the clawback creates a high marginal tax rate for families with rising
incomes. It’s one of the reasons why those who have common law
relationships prefer to report single status. But if this is false, it puts
the benefits – and more – at risk.
A better strategy: File an accurate tax return and use some of the funds to
make an RRSP contribution, which can help to reduce that net income below
$30,450 or $65,975, and increase the benefits. A qualified tax and
financial advisor can help.
There is an important opportunity for the tax and financial services
community to work together with such families to make sure they are tapping
into all their social benefits and leveraging those dollars into
tax-efficient investments that will help grow even more security for the
future. In fact, it’s a wonderful way to give back with some “professional
One could argue that removing the need to file a tax return to access
government social transfers available may not be the most effective income
redistribution method. Especially for those who live remotely or on an
isolated basis due to age or disability. Many of these same people are not
computer-literate or do not have access to computers or the Internet. This
should not be a reason not to receive government benefits at all.
© 2018 The Knowledge Bureau, Inc. All rights reserved. Reprinted with
is the founder and President of Knowledge Bureau, which
brings continuing financial education in the multiple areas of
specialization to advisors and their clients. She is the author of 52
books on tax and wealth planning. This article
originally appeared in the
Knowledge Bureau Report. Follow Evelyn Jacks on Twitter
@EvelynJacks. Visit her blog at www.evelynjacks.com.
Evelyn Jacks’ latest book,
NEW ESSENTIAL TAX FACTS: How to Make the Right Tax Moves and Be
Audit-Proof, Too is available now.
Notes and Disclaimer
The foregoing is for general information purposes only and is the opinion
of the writer. No guarantee of investment performance is made or implied.
It is not intended to provide specific personalized advice including,
without limitation, investment, financial, legal, accounting or tax advice.