Canada: 2016 Federal Budget: Impact On Families

The new Liberal government's first budget included a number of measures impacting families. The new Canada Child Benefit, replacing the existing Universal Child Care Benefit (UCCB) and Canada Child Tax Benefit (CCTB) programs, is the one that has been highlighted by the government. However, there were other measures as well, including the elimination of the Family Tax Cut income-splitting tax credit, and the phasing out of both the children's fitness and children's arts credits.

UCCB and CCTB programs

The UCCB currently provides families with monthly payments of $160 for each child under the age of six, and $60 for each child ages six to 17. The benefit is taxable, generally to the lower income earning spouse or common-law partner, and is not income-tested. The CCTB pays non-taxable benefits to low- and middle-income families, providing a base benefit of up to $1,490 each for the first and second child, and up to $1,594 for each subsequent child. Supplemental benefits are provided for low-income families and for families caring for a child under the age of 18 who is eligible for the disability tax credit. CCTB payments are income-tested and, therefore, benefits begin to be reduced when family net income exceeds $44,701 and are phased out completely when family net income reaches $118,251 for families with one or two children and $157,601 for families with three or more children.1

New Canada Child Benefit program

The new Canada Child Benefit program will replace both the UCCB and CCTB programs, effective July 1, 2016. It will be non-taxable, income-tested, with payments made to eligible families on a monthly basis. It will provide a maximum benefit of $6,400 per child under the age of six and $5,400 per child ages six to 17. Benefits will begin to be phased out once family net income exceeds $30,000, but the family net income level at which benefits will be phased out completely will depend on the number of children, their ages and the amount of income earned by each spouse. For example, for a one income-earning family with one child under the age of six and one child over the age of five (but under age 18), benefits will be phased out when net income exceeds approximately $189,000.

There will be an additional benefit of up to $2,730 for each child that is eligible for the disability tax credit. This supplemental benefit will begin to be phased out once family net income exceeds $65,000. Entitlement to the Canada Child Benefit for the first benefit year, July 2016 to June 2017, will be based on family net income for the 2015 taxation year.

Unlike payments under the UCCB, amounts received under the Canada Child Benefit will not be taxable or included in income for the purpose of other federal income-tested benefits. To be eligible for the Canada Child Benefit, an individual must be a Canadian resident for tax purposes, reside with the child and be the parent who primarily fulfils the responsibility for the care and upbringing of the child (or be a shared-custody parent).

Although low- and most middle-income families will be better off under the new Canada Child Benefit program, higher-income families will often receive less, or even no benefits at all, as the new program is income-tested. The break-even point in respect of family net income, when comparing the amount of benefits received under the existing programs with the new program, will depend on the number and age of the children, the amount that each spouse earns and the province of residence. Let's look at a few examples:2

Impact on families – example #1

Bob and Sharon have two children, ages four and seven. Bob's taxable income is $125,000 and Sharon's is $70,000. Under the existing programs, they are not entitled to any CCTB benefits, but they receive a total of $2,640 in UCCB taxable benefits for the year ($160 x 12 in respect of the four year-old, plus $60 x 12 for the seven year-old). Under the new Canada Child Benefit program, however, they will not receive any benefits at all as their family net income is above the threshold for the complete phase out of benefits.

Impact on families – example #2

Steve and Ellen have three children, ages three, six and nine. Steve's taxable income is $65,000 and Ellen works part-time, earning $25,000 per year. Under the existing programs, they receive a total of $5,472 (on an after-tax basis) from the CCTB and UCCB programs, but they will receive $8,550 per year under the Canada Child Benefit, a $3,078 increase.

Impact on families – example #3

Bill and Donna have two children, ages one and three. Donna's taxable income is $82,000, while Bill's is $78,000. In this case, they receive $2,631per year (on an after-tax basis) under the existing programs, but will receive only $29 more (or $2,660 per year) under the new Canada Child Benefit. Their family income is $160,000 which is right around the break-even mark for spouses earning a similar amount of income with two children under the age of six.

Although it doesn't compare the benefits under the new system, as opposed to the old one, the government has prepared a calculator that can be used to determine the monthly benefit you can expect to receive starting in July 2016.

Elimination of Family Tax Cut

The Family Tax Cut is a non-refundable tax credit (maximum $2,000 per year) which was introduced beginning with the 2014 taxation year. It is an income-splitting credit for couples with at least one child under the age of 18. It involves a notional transfer of up to $50,000 of taxable income by the higher income-earning spouse or common-law partner to the lower income-earning spouse or common-law partner. To the extent that both spouses are subject to income tax at the same marginal rates, there is no benefit/credit. The 2016 federal budget has proposed to eliminate this credit for 2016 and subsequent taxation years.

Phase out children's fitness and children's arts credits

For the 2015 taxation year, the children's fitness tax credit provided a refundable 15 percent credit on up to $1,000 of eligible fitness expenses for children under 16 years of age at the beginning of the taxation year, while the children's arts credit provided a non-refundable 15 percent credit on up to $500 in eligible fees for programs of artistic, cultural, recreational and developmental activity for children under 16 years of age.3 For the 2016 taxation year, the maximum eligible amount for the children's fitness and arts credits will be reduced from $1,000 to $500 and from $500 to $250, respectively.4

Both the children's fitness tax credit and the children's arts credit will be eliminated for the 2017 and subsequent taxation years.

Footnotes

1 All figures are in respect of the July 2015 to June 2016 benefit period.

2 In all cases, assume the taxpayers are residents of Ontario.

3 There is a supplemental credit amount of $500 for children under the age of 18 who are eligible for the disability tax credit and have at least $100 of eligible expenses.

4 The $500 supplemental credit amount will remain in place for the 2016 taxation year.  

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Crowe Soberman LLP
Crowe MacKay LLP
Miller Thomson LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Crowe Soberman LLP
Crowe MacKay LLP
Miller Thomson LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions