Canada’s cost-of-living relief benefit programs: How to qualify

Jamie Golombek: Here’s a quick look at the actions Ottawa is implementing to help with rising costs

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The federal government this week announced details of three measures to “make life more affordable for Canadians who need it most” amid rising costs of living, largely due to higher food prices and rents.

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Specifically, it doubles the Goods and Services Tax Credit (GSTC) for six months, introduces the new Canada Dental Benefit for children under 12 who don’t have access to dental insurance, and provides a one-time boost to the Canada Housing Benefit for low-income renters. Let’s take a quick look at each of these measures.

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Doubling the GSTC

The GSTC aims to offset the cost of paying GST when purchasing goods and services for low- and modest-income Canadians. The credit is paid quarterly in January, April, July and October and is indexed to inflation for each performance year running July through June.

The amount of GSTC you receive depends on your income and family size. For the current benefit year beginning July 2022 and ending June 2023, single Canadians with no children will receive a total of $467. Married or cohabiting couples get $612, while single parents get $612. Recipients with children receive $161 for each child under the age of 19.

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However, only low earners receive the full GSTC. To receive the full amount, your family income must be less than $39,826 in 2021. Above this income limit, the GSTC is gradually reduced as income increases, and the full phase-out depends on family type. For example, a single person with no children would not receive GSTC once their income reached $49,200, while a couple with two children could have an income of up to $58,500 in 2021 before it phased out completely.

The GSTC is indexed to inflation, but it is lagged. For the current performance year, the value of the GSTC increased by 2.4 percent based on the average consumer price index in the period October 2020 to September 2021. As a result, the sharp increase in inflation in 2022 is not yet reflected in the GSTC payments.

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To support Canadians in the meantime, the government announced it would double the GSTC for six months. The additional GSTC amounts will be paid to all current recipients through the existing system as a one-time lump sum payment before the end of the year, meaning recipients do not have to claim the additional payment but must file a 2021 tax return to be eligible.

The GSTC will also help post-secondary students who typically have little or no income. For example, let’s say Sarah, who is currently studying at university, made $5,000 in 2021 from part-time and summer jobs. She is currently receiving $233.50 in GSTC for the July-December 2022 period and an additional $233.50 for the January-June 2023 period. The temporary doubling of GSTC amounts for six months earns Sarah an additional $233.50 . In total, she receives $700.50 in GSTC payments.

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An estimated 11 million individuals and families will benefit from this additional support, which will cost approximately $2.5 billion.

The Canada dentist benefit

The government also announced that it is proceeding with its commitment to launch a national dental care program for uninsured Canadians with annual family incomes of less than $90,000. The program will begin coverage of children under the age of 12 in 2022.

The Canada Dental Benefit (CDB) offers eligible parents (or legal guardians) direct, tax-free advance payments to cover dental costs for children under 12 years of age. The target implementation date is set for December 1, 2022, but the program covers expenses retrospectively to October 1, 2022.

The CDB will make payments of up to $650 per child per year for families with an adjusted net income of less than $90,000 per year and no dental insurance. Families earning less than $70,000 would receive the full $650 per child. If family income is between $70,000 and $80,000, the benefit is reduced to $390 per child, and if family income is between $80,000 and $90,000, the benefit is $260 per child.

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In order to access the CDB, parents of eligible children must file an application with the Canadian Revenue Agency and certify that their child does not have access to private dental care and that they have out-of-pocket dental care expenses for which they will use the CDB. You may also need to provide receipts to verify children’s dental expenses.

The government estimates that 500,000 Canadian children could benefit from the CDB at a cost of US$938 million. Details on how to apply have not yet been published.

Canada Housing Benefit

Administered by the provinces, the Canada Housing Benefit (CHB) helps low-income Canadians pay their rent. Each province has its own system for accessing the funds, but to qualify, family income must be less than $35,000 per year ($20,000 for single Canadians) and the renter must be 30 percent or more of his spend income on rent.

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This week the government announced a one-off increase in the CHB, which will consist of a $500 tax-free payment to directly support low-income renters. Payment will be initiated by the end of the year and will be provided by the CRA through an attestation-based application process.

To determine eligibility, the CRA conducts a pre-screening of the applicant’s income, age, and residency for tax purposes. Applicants must certify that they spend at least 30 percent of their income on housing and that they pay rent for their own primary residence in Canada, along with the address of the rental property, the amount of rent paid in 2022, and the landlord’s contact information. They must also agree to the CRA reviewing their information to confirm eligibility.

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Students who pay rent and pass the above income test also qualify. The government estimates that 1.8 million low-income renters will be eligible for assistance at a total cost of $1.2 billion.

Jamie Golombek, CPA, CA, CFP, CLU, TEP, is Managing Director, Tax & Estate Planning at CIBC Private Wealth in Toronto. [email protected]

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