On March 22, 2016, federal Minister of Finance Bill Morneau tabled the new Liberal Government’s first budget in the House of Commons. While many of the headlines are focused on the deficit projections for 2016 and beyond, many Canadians are left wondering just how the new budget will affect their everyday lives.
Here is a look at 12 ways the new budget will impact Canadian families in the years to come:
Introduction of the Canada Child Benefit (CCB)
Starting in July 2016, the Universal Child Care Benefit and the Canada Child Tax Benefit will be replaced with the new Canada Child Benefit (CCB). The budget claims that the CCB will be simpler, tax free, better targeted and more generous for 9 out of 10 families.
The CCB will provide a maximum annual benefit of $6,400 per child under the age of 6, and up to $5,400 per child aged 6 through 17. Families with less than $30,000 in net income will receive the maximum benefit, while benefits are gradually reduced for households earning more. For households earning more than $190,000, benefits will be eliminated entirely.
Recognizing the additional costs of caring for a child with a severe disability, the budget calls for the Child Disability Benefit to continue going forward.
Elimination of the Children’s Fitness and Arts Tax Credits
As part of the Government’s efforts to simplify the tax code and better target support for families with children, the budget reduces the maximum eligible expenses for the Children’s Fitness and Arts Tax Credits in half for 2016, and calls for the elimination of both credits as of 2017. Currently, families can obtain a tax credit of up to $150 and $75 per child through Children’s Fitness and Arts Tax Credits.
Enhancement of Canada Student Grants
The new budget seeks to increase Canada Student Grant amounts by 50 per cent from:
- $2,000 to $3,000 per year for students from low-income families;
- $800 to $1,200 per year for students from middle-income families; and
- $1,200 to $1,800 per year for part-time students.
Increased grant amounts will be first available for the 2016-2017 academic year.
Repayment of Canada Student Grants
The budget will increase the loan repayment threshold under the Canada Student Loans Programs’ Repayment Assistance Plan to ensure that recent graduates will not have to repay their Canada Student Loans until they are earning at least $25,000 per year. The current repayment threshold is $20,210 per year in income.
Elimination of the Education Tax Credit and the Textbook Tax Credit
As expected, the budget eliminates the Education and Textbook Tax credits effective January 1, 2017. The Government reasoned that these tax credits are not targeted based on income and provided little direct support to students at the time they need it most.
Access to Employment Insurance
The budget proposes to amend the rules to eliminate the higher Employment Insurance (EI) eligibility requirements that restrict access for new entrants and re-entrants to the labour market. With these changes, new entrants and re-entrants would only need to accumulate 420 to 700 hours of insurable employment (depending on the unemployment rate in their region) to qualify for EI benefits.
Under the current system, new entrants and re-entrants to the labour market must accumulate at least 910 hours of insurable employment in the 52 weeks preceding their claim in order to qualify for EI benefits.
Reduced Waiting Period for EI Benefits
Currently, EI claimants must serve a two-week waiting period prior to receiving benefits. Aimed at reducing the period of time during which a claimant is without income, the budget proposes legislative changes to reduce the EI waiting period from two weeks to one week effective January 1, 2017.
Extending EI Benefits in Affected Regions
In response to Canada’s sluggish economy, the budget seeks to extend the duration of EI regular benefits by five weeks, up to a maximum total of 50 weeks of benefits, for claimants in the 12 EI economic regions that have experienced the sharpest and most severe increases in unemployment. Extended benefits will be available for one year starting in July 2016, with the measure being applied retroactively to all claims as of January 4, 2015.
The budget also proposes to make legislative changes to offer up to an additional 20 weeks of EI regular benefits to long-tenured workers in the same 12 EI economic regions, up to a maximum total of 70 weeks of benefits. These benefits would also be available for open year starting in July 2016.
Restoring Eligibility Ages for the Old Age Security Program
Provisions introduced by the Harper Government that would have increased the age of eligibility for Old Age Security (OAS) and Guaranteed Income Supplement benefits from 65 to 67 and Allowance benefits from 60 to 62 over the 2023 to 2029 period will be canceled under the new budget plan.
Increasing the Guaranteed Income Supplement for Single Seniors
Starting in July 2016, the Guaranteed Income Supplement top-up benefit will be increased to $947 annually for the most vulnerable seniors. Under this measure, single seniors with annual income (other than OAS and Guaranteed Income Supplement benefits) of $4,600 or less will receive the full increase of $947.
For single seniors with an income above the $4,600 threshold, the amount of benefit they will receive will be gradually reduced and will be completely phased out at an income level above $8,400. These benefits will be adjusted quarterly to reflect increases in the cost of living.
Elimination of Income Splitting
Income splitting for couples with children under the age of 18 for the 2016 and subsequent taxation years is set to be eliminated under the new budget. In doing so, the Government will reverse a popular move from the last budget, instituted by the Conservatives, for wealthy Canadians who had one spouse earning substantially more than the other. It should be noted that pension income splitting will not be affected by this change.
Commitments to New Tax Rates
The new budget reconfirms that the tax rate for individuals and families in the middle class has been cut from 22 per cent to 20.5 per cent. As of January 1, 2016, Canadians with taxable income between $45,282 and $90,563 saw their income tax rate fall.
To help finance this tax cut, the Government raised taxes on the wealthiest Canadians by introducing a new top income tax rate of 33 per cent for individuals with more than $200,000 in taxable income each year.
The items highlighted above are just a brief overview of the changes proposed by the budget. For a more complete look at the new budget, click here.
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