A New Benefits Payment System for Canadian Families

For several decades, Canadian families have received financial assistance from the federal government to help offset the cost of raising children, through a range of benefits and allowance programs. Those programs have taken a variety of forms, from direct payments to parents to credits provided on the annual tax return. Some amounts provided under some such programs were taxable, while others were not. The one constant throughout those decades is that such programs are in a continual state of change and revision, resulting in a sometimes confusing patchwork of entitlements.

The latest iteration of child and family benefits was announced recently in the 2016 federal Budget, on March 22. There will be little time to adjust to the change, as the new Canada Child Benefit will take effect in July 2016, with existing programs eliminated as of the same month.

Those existing programs are the Canada Child Tax Benefit (CCTB) and the Universal Child Care Benefit (UCCB). The former is a non-taxable payment made monthly to Canadian families, based on family size and income. The latter, as the name suggests, is a payment made to all Canadian families having children under the age of 16, with the amount of the payment based on the age of the child or children. The full amount of the UCCB is included in income and taxed as income to the recipient parent.

Beginning July 1, both of those programs will be replaced by a single program, the Canada Child Benefit. That program will provide Canadian families who have children aged 17 or younger with a monthly benefit. The amount of benefit payable will be based on the number of children in the family, their ages, and the amount of net family income. All amounts received will be non-taxable.

Details of the new program, as outlined in the Budget Papers, are as follows.

The Canada Child Benefit will provide a maximum benefit of $6,400 per child under the age of 6 and $5,400 per child aged 6 through 17. On the portion of adjusted family net income between $30,000 and $65,000, the benefit will be phased out at a rate of 7% for a one-child family, 13.5% for a two-child family, 19% for a three-child family and 23% for larger families. Where adjusted family net income exceeds $65,000, remaining benefits will be phased out at rates of 3.2% for a one-child family, 5.7% for a two-child family, 8% for a three-child family and 9.5% for larger families, on the portion of income above $65,000.

To recognize the additional costs of caring for a child with a severe disability, Budget 2016 proposes to continue to provide an additional amount of up to $2,730 per child eligible for the disability tax credit. The phase-out of this additional amount will be made to generally align with the Canada Child Benefit. Specifically, it will be phased out at a rate of 3.2% for families with one eligible child and 5.7% for families with more than one eligible child, on adjusted family net income in excess of $65,000, effective July 1, 2016. This additional amount will be included in the Canada Child Benefit payments made to eligible families.

Entitlement to the Canada Child Benefit for the July 2016 to June 2017 benefit year will be based on adjusted family net income for the 2015 taxation year.

Families who want to determine the amount of Canada Child Benefit which they will begin receiving in July of this year can do so using an online calculator provided by the federal government and available at www.budget.gc.ca/2016/tool-outil/ccb-ace-en.html?utm_source=CRA&utm_medium=Carousel&utm_content=Calc&utm_campaign=CAbdgt16  As well, additional details of the overall program can be found on the Finance Canada website atwww.budget.gc.ca/2016/docs/tm-mf/si-rs-en.html.