While announcing the Budget for 2016, Prime Minister Justin Trudeau made it clear that the current government believes in the growth and development of the middle and lower classes to build Canada. To achieve this, the government has decided to make various investments towards the growth of the Canadian middle class and bring about economic equality.
One such investment is the introduction of a tax cut for Canada’s middle class, reducing the second personal income tax rate from 22% to 20%, thus providing taxpayers earning between $45,282 to $90,563 an opportunity to save more, invest and assist the growth of the economy.
It is estimated that close to 9 million Canadians have benefited from this tax cut. Every single Canadian will save close to $330 per year in taxes while couples could save up to $540 in taxes every year.
An additional change to the Budget is the Canada Child Benefit (CCB), which will be replacing the Universal Child Care Benefit (UCCB) introduced by the previous government.
The following is a summary by AG Tax professionals on the CCB for Canadian taxpayers to become more informed about it, check the qualifications, and take the necessary steps to ensure you receive the benefits.
Why the Replacement of UCCB with CCB
The UCCB system is complicated, consisting of a tax-free, income-tested Canada Child Tax Benefit with two components (the base benefit and the National Child Benefit supplement) and a taxable Universal Child Care Benefit received by all families, regardless of income. It is a system that is both inadequate (as it does not provide families with the support they need) and not sufficiently targeted to those who need it most (as families with very high incomes receive benefits).
Overview of the Canada Child Benefit (CCB)
The Canada Child Benefit (CCB) is a tax-free benefit amount receivable on a monthly basis beginning July, 2016. It is much simpler than the Universal Child Care Benefit (UCCB) plan which required taxpayers to report the UCCB as income and payback a portion of the amount received as income tax when filing their annual income tax return.
The Canada Child Benefit will provide a maximum annual benefit of up to $6,400 per child under the age of 6 and up to $5,400 per child for those aged 6 through 17. Families with less than $30,000 in net income will receive the maximum benefit.
The CCB target is to benefit the low and middle income families. For example, a married couple earning an annual income of CAD$65,000 or less with two children below six years of age and two children between 6 and 17 years of age could receive a tax-free benefit of $1,500 on a monthly basis, as compared to the $850 monthly benefit receivable under the UCCB plan.
A couple earning CAD$90,000 and having two children: one aged below 6 years and another between 6 years to 17 years could receive $490 per month, $215 more than the amount receivable in the UCCB plan.
Families earning a total net income of less than $30,000 would be benefiting the most out of the CCB plan.
To recognize the additional costs of caring for a child with a severe disability, Budget 2016 proposes to continue to provide the Child Disability Benefit, an additional amount of up to $2,730 per child eligible for the Disability Tax Credit.
If a taxpayer is currently receiving the UCCB or the CCTB or both, they do not need to apply for the new CCB, as it will automatically be updated. You and your spouse must file a 2015 income tax and benefit return even if there is no income, so that the Canada Revenue Agency (CRA) can calculate the CCB payment amount. The payment for the period July, 2016 to June, 2017 is based on the 2015 income. Taxpayers may visit CRA CCB calculator to get an idea of your estimated receivable benefit amount.
If a taxpayer or their spouse or common-law partner with child(ren) is not receiving any of the previous benefit, they must apply. Applying for the CCB in July 2016 will be the same as the current CCTB process. Further information may be found on the CRA website.
The CRA may request supporting documentation to validate eligibility. Therefore, keep all necessary documents in place once an application has been made to avail these benefits.
That being said, the UCCB and CCTB benefit received until 20th June will be the last amounts you will receive from these plans. Starting 20th July, the CCB will be issued to all Canadian taxpayers who qualify.
To continue receiving the benefit and credit payments that you are entitled to, you have to file your income tax and benefit return on time every year, even if you do not have income in the year. If you have a spouse or common-law partner, they also have to file a return every year.
The Canadian government has estimated that families will receive approximately $23 billion in Canada Child Benefit (CCB) payments during the 2016–17 benefit year.
CRA’s latest mobile application ‘MyCRA’ allows taxpayers to view their personalized benefit and credit information anytime, anywhere, taxpayers can consider downloading this app to keep themselves updated about their tax data.
AG Tax LLP Can Help
If you have any tax-related queries or need assistance with tax planning or filing please contact AG Tax. Our tax professionals are highly-experienced with U.S. and Canadian tax laws and can provide you the right guidance to handle your tax situation.
Aylett Grant Tax LLP is a full service accounting firm with a dedicated team of experts, who are highly-qualified and experienced in handling situations related to U.S., Canada and other international tax laws.
We can assist with:
- Canadian Personal and Corporate tax returns
- Cross Border Taxation and Business Planning
- U.S. Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement planning
- Estate Planning, Inheritance tax advice
To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:
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