Canada Child Benefit Growth Matters

Geoff Currier and Evelyn Jacks

The Canada Child Benefit (CCB) keeps many Canadian families afloat in these inflationary times. But so few families leverage the opportunity to increase this important cash flow supplement with proper year round tax planning. Here’s what you need to know, especially if you are a financial advisor discussing FHSA and RRSP contributions to enhance the deductions that can increase the amount of CCB available.

The Backdrop. The history of the program can be traced back to the post World War II Baby Bonus. (between $5 and $8 per month per child). Many grandparents today will remember the stipend received monthly to help with the cost of child rearing. The first Family Allowance payments were tax free and made to all women in 1945 for children under 16 who were in school. By 1964 this was extended to those between 16 and 18.[1]  

The Family Allowance was eliminated in 1992 in favor of an income-tested Canada Child Tax Benefit and a new National Child Benefit Supplement. The Universal Child Care Benefit was introduced in 2006 but by 2016 the CCB replaced the Canada Child Tax Benefit and the Universal Child Care Benefit. 

Tax Implications: Because this is a tax-free benefit, you do not need to report it on your client’s T1 tax return. There is no line on the return to account for the CCB. However, the program is income tested so you will need to work with your clients to help them know how much of the CCB they can expect. They must file a T1 return to qualify for the benefit as the CRA uses that return to calculate the benefit.

It’s also critical to ask if your client’s marital status or caregiver responsibilities have changed. It can’t be assumed that family circumstances remain static from year to year. 

Eligibility: To receive the benefit, individuals must live with a child under the age of 18 and be primarily responsible for the child’s care. They must also be residents of Canada for income tax purposes, and either they or their spouse or common-law partner must be a Canadian citizen or permanent resident

Maximum amounts apply if your Adjusted Family Net Income (AFNI) is under $38,237. Payments phase out gradually for higher incomes. ($ 200,000 to over $250,000 in adjusted family income)

For children under 6 years old the benefit can be up to $8,157 annually or $679.75 per month. For those between 6 and 17, the amount can be up to $6,883 annually or $573.58 per month. The phrase “up to” must be noted and your clients need to be aware that they may not be eligible for the highest possible payments.

In addition, there is the Child Disability Benefit (CDB) which can provide up to $3,480 each year per child or $290 per month.

The Cost of the CCB: The CCB doesn’t come cheap. On September 17, the Parliamentary Budget Officer (PBO) released a report on the growing cost of the program. Between 2022-23 and 2024-25, the cost of the CCB rose by 16%, or, in real dollars, from $25 billion to $29.2 billion. 

The average annual benefit per family rose from $6,700 to $7,700 while the number of families receiving the benefit rose slightly from 3.7 million to 3.8 million.

The PBO reports that 68% of the growth in the program can be accounted for by annual indexation and 25% of the increase was for families whose income couldn’t keep pace with inflation.

Population growth, largely due to immigration, accounted for the balance of the increase in cost. 

The Bottom Line: As always, communicating with your clients will help keep them abreast of the benefits to which they are entitled and will also help you retain them as clients in the years ahead.

Finally, invite your clients to listen to Real Tax News with Evelyn Jacks and Friends to understand their tax system better. Go to learn.knowledgebureau.com/courses/real-tax-news-podcast

[1] https://www.policyalternatives.ca/news-research/the-introduction-and-evolution-of-child-benefits-in-canada/