Disabilty-Related Tidbits from the Federal Budget 2006
May 4, 2006
Federal Budget 2006 Disability-Related Tidbits from the Budget
Intro/Overview (pg.15) Other Family Measures
A children’s fitness tax credit for up to $500 in eligible fees for physical fitness programs for each child under age 16.
Assistance for persons with disabilities will be enhanced by:
Increasing the maximum annual Child Disability Benefit (CD to $2,300 from $2,044, effective July 2006.
Extending eligibility for the CDB to middle- and higher income families caring for a child who is eligible for the disability tax credit, effective July 2006.
Boosting the maximum amount of the refundable medical expense supplement to $1,000 from $767, effective 2006.
Looking Forward: A More Competitive, Productive Canada (pg. 89) Canada starts from an enviable position. It is one of the wealthiest countries in the world — a position built on the creativity and drive of Canadians, a rich natural resource base, the vision of Canadian researchers, and the dynamism of Canadian business. Canada’s current economic prospects are strong, with unemployment at its lowest rate in over 30 years, record personal income, and business profitability at an all-time high.
Yet as many Canadians know, these impressive figures mask deeper, difficult adjustments. For example, more than half of current Canadian jobs did not exist in 1997, demonstrating the degree of change constantly occurring in the economy. New immigrants, Aboriginal people and persons with disabilities remain under-represented in our workforce. Canada’s manufacturing sector is under pressure, losing more than 8 per cent of its jobs over the past 31⁄2 years. In fact, as markets globalize, all sectors— primary, manufacturing and services—will face increasing competitive pressures from both emerging market countries and fast-moving industrialized economies.
Families and Communities Section starts on pg 95
Enhancing Assistance for Persons With Disabilities (pg 104-105)
In April 2003, the Technical Advisory Committee on Tax Measures for Persons with Disabilities was established to provide advice on how to address issues related to tax measures for persons with disabilities. The committee released its final report, Disability Tax Fairness, in December 2004. It made 25 policy and administrative recommendations focusing on three key areas:
Eligibility criteria for the disability tax credit (DTC), including extending eligibility for the credit and recommendations to improve its administration.
Recognition of expenses incurred to pursue employment or education, including the creation and expansion of a disability supports deduction and an increase in the maximum amount of the refundable medical expense supplement.
Measures for caregivers and children with disabilities, including an increase in the maximum Child Disability Benefit.
This government endorses the work of this committee. Budget 2006 therefore proposes to fully implement their policy recommendations and go beyond by:
Increasing the maximum annual Child Disability Benefit (CD to $2,300 from $2,044 effective July 2006. The CDB is a supplement of the CCTB payable in respect of children in low- and modest-income families who meet the eligibility criteria for the DTC.
Extending eligibility for the CDB to middle- and higher-income families caring for a DTC-eligible child, including virtually all families that are currently eligible for the CCTB base benefit, effective July 2006.
Increasing the maximum amount of the refundable medical expense supplement (RME to $1,000 from $767 for the 2006 taxation year. The RMES improves work incentives for Canadians with disabilities by helping to offset the loss of coverage for medical and disability-related expenses under social assistance when recipients move into the labour force.
Enhancements to the CDB will increase the benefits paid to all families currently receiving the CDB, and will extend eligibility for the CDB to over 95 per cent of families caring for children with severe disabilities. It is estimated that these enhancements will provide benefits of $35 million in 2006–07 and $45 million in 2007–08.
Increasing the maximum amount of the RMES will provide benefits of $15 million in 2006–07 and $10 million in 2007–08 for Canadians with disabilities.
An important consideration for parents and grandparents of a child with severe disabilities is how best to ensure the financial security of their child, when they are no longer able to provide support. The Minister of Finance will appoint a small group of experts to examine ways to help parents save for the long-term financial security of a child with severe disabilities, and provide their recommendations to the Minister within six months.
Annex 3 starts on pg 196
Children’s Fitness Tax Credit (pg 226)
The government will establish a small group of experts in health and physical fitness to advise it on the definition of an “eligible program of physical activity” for the purposes of the credit. These consultations will consider among other things whether the activity should include an element of instruction or supervision, and the adaptation of the definition of an eligible program for children with disabilities.
Child Disability Benefit (pg 227-228)
The Canada Child Tax Benefit (CCT is the main federal instrument for the provision of financial assistance to families with children. The CCTB has three components: the CCTB base benefit, the National Child Benefit (NC supplement, and the Child Disability Benefit (CD. The CDB is payable in respect of children, in low- and modest-income families, who meet the eligibility criteria for the disability tax credit (DTC).
Under the current rules, eligible families would receive for the 2006-07 benefit year an annual CDB entitlement of up to $2,044 per qualified child as part of their monthly CCTB issuance. The CDB begins to be phased out when family net income reaches the amount at which the NCB supplement is fully phased out ($36,378 in July 2006 for families with three or fewer children). Beyond that income level, the CDB is currently being reduced at the same rates as those applying to the NCB supplement (that is, between 12.2 per cent and 33.3 per cent of family income in excess of the point at which the NCB supplement is fully phased out, depending on the number of DTC-eligible children in the family—see table below).
Budget 2006 proposes two changes to the CDB to enhance assistance to families with children eligible for the DTC.
First, the Budget proposes to increase the maximum annual CDB to $2,300 from $2,044, starting in July 2006. The benefit will continue to be indexed for inflation thereafter.
Second, the Budget proposes to extend the CDB to more families caring for a child eligible for the DTC by reducing the rates at which the CDB is reduced as family income rises.
Effective July 2006, the CDB will be reduced at the same rates as the CCTB base benefit, that is 2 per cent of family income in excess of the amount at which the NCB supplement is fully phased out for families caring for one child eligible for the DTC, and 4 per cent of that excess for those caring for more than one child eligible for the DTC (see table below). Accordingly the CDB will be reduced to zero as net family income reaches $151,378 for a family caring for one or two children eligible for the DTC, and $208,878 for a family caring for three children eligible for the DTC. This change will significantly reduce effective marginal tax rates faced by families with incomes in the current CDB phase-out range and will extend eligibility for the CDB to nearly all families caring for children eligible for the DTC.
Examples (pg 229)
Bernard and Simone, with a net family income of $50,000, have two children who are eligible for the DTC. Under the existing CDB, the family would receive $955 dollars in CDB payments for the 2006–07 benefit year. After the proposed changes, the family will receive $4,055.
Sandra, a single mother with a net family income of $100,000 has one child eligible for the DTC. Under the existing CDB, she would not qualify for the CDB. With the proposed changes, she will receive $1,028 in CDB benefits for the 2006-07 benefit year.
Refundable Medical Expense Supplement (pg 229) The refundable medical expense supplement (RME improves work incentives for Canadians with disabilities by helping to offset the loss of coverage for medical and disability-related expenses when individuals move from social assistance to the paid labour force.
The RMES is equal to 25 per cent of the total of the allowable portion of expenses that can be claimed under the medical expense tax credit and the expenses claimed under the disability supports deduction, up to a maximum credit of $767 for 2006. To target assistance to those with low and modest-incomes, the supplement is reduced by 5 per cent of net family income above an income threshold ($21,663 for 2005).
Budget 2006 proposes to increase the maximum amount of the RMES to $1,000 from $767 for the 2006 taxation year. The maximum amount will continue to be indexed for inflation thereafter.
The Budget also proposes to set the income threshold at which the RMES starts to be reduced at its level for 2005—$21,663—to ensure that the supplement continues to be targeted to low- and modest-income Canadians. The threshold will be indexed for inflation thereafter. For 2006, it will be $22,140.
Measures Announced in the 2005 Budget (pg 244)
A limited number of tax measures that were originally proposed in the 2005 budget and the Notice of Ways and Means Motion tabled on November 17, 2005 were not legislated before Parliament prorogued as a result of the election call. Budget 2006 confirms the Government’s intention to proceed with measures which would introduce a tax deferral in respect of certain dividends paid after 2005 by agricultural cooperatives, and would for the 2005 and subsequent taxation years,
introduce a new tax credit for adoption expenses,
respond to recommendations of the Technical Advisory Committee on Tax Measures for Persons with Disabilities concerning the eligibility criteria for the disability tax credit and the expenses eligible for the disability supports deduction,
expand the list of expenses eligible for the medical expenses tax credit, and clarify the eligibility of home renovation and construction expenses, and
double the amount of disability-related and medical expenses that can be claimed by a caregiver.
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