Feds launch consultation on tax proposals

Clients with children are among those who are certain to feel the impact of the 2016 federal budget as the government embarks on a significant overhaul of the financial benefits available to middle-class families.

The most significant change for families in Tuesday’s budget comes in the form of the Canada Child Benefit — a new non-taxable monthly payment for eligible families with children under the age of 18. The new benefit replaces existing programs that provide financial assistance to families with children under the age of 18, including the Canada Child Tax Benefit and the Universal Child Care Benefit (UCCB).

The Liberal government also announced plans to eliminate certain other benefit programs, including the Children’s Fitness Tax Credit and Children’s Arts Tax Credit, in an effort to simplify the tax code for families.

The impact of the new program will vary for clients, depending on their income level. Lower- and middle-income families will enjoy higher benefits under the new program, whereas households with income of more than $150,000 will see their benefits decline compared with the existing programs available to families.

Nine out of 10 families will receive more under the new benefit than they do under existing programs, according to Finance Minister Bill Morneau. Those who benefit will see an average increase in child benefits of almost $2,300 in the 2016-17 benefit year.

“The Canada Child Benefit is the most significant social policy innovation in a generation,” Morneau said in his budget speech on Tuesday. “It will lift hundreds of thousands of kids up from poverty.”

The new benefit will provide a maximum annual benefit of $6,400 per child under the age of six and up to $5,400 per child for those aged six through 17. Families with less than $30,000 in net income will receive the maximum benefit.

The income-tested nature of the program means it will provide support to those families requiring the most assistance, says Jamie Golombek, managing director of tax and estate planning with Toronto-based Canadian Imperial Bank of Commerce’s wealth strategies division. That contrasts with the existing UCCB, he notes, which provides a benefit to all Canadians, regardless of their income level.

“Most Canadian families will benefit under the new program,” Golombek says. “The new system, which is purely income-tested, gives the benefit to the families that need it the most.”

Payments under the Canada Child Benefit will begin in July.

The Liberal government will phase out the Children’s Fitness Tax Credit and Children’s Arts Tax Credit, which provide families with up to $150 and $75 per child on up to $1,000 and $500 in eligible expenses, respectively. Specifically, the budget proposes to reduce the maximum eligible expenses for these tax credits by half for 2016, and to eliminate both credits as of 2017.

The budget also proposes to eliminate income splitting for couples with children under the age of 18 for the 2016 and subsequent taxation years.

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