On April 21, 2015 Joe Oliver released the much anticipated federal budget. The Federal budget was delayed primarily because of changes in oil prices and their uncertain effects on the economy. This budget has several interesting points geared towards disabled Canadians. Here is a list of some of the highlights.
Home Accessibility Tax Credit and the Disability Tax Credit
This credit is a non-refundable credit meaning that, like the disability tax credit, you or a supporting family member would need to be paying at least $1500 of federal income tax (line 420) in order to take full advantage of the credit. In addition, you would have to spend $10,000 on eligible expenses to get $1500 back as a tax refund. This credit would serve to decrease the overall costs of accessibility installations and would pair well with other grants such as: Canadian Mortgage Housing Corporation’s accessible and adaptive housing, March of Dimes and city programs such as Toronto’s Renovates Homeowners Program.
Tax Credits for Disabled Veterans
This budget creates a new tax-free Family Caregiver Relief Benefit to seriously disabled veterans requiring daily assistance from an informal caregiver. The tax free annual benefit of $7,238 to eligible veterans is intended to provide relief to their informal caregiver. The Government will also make online courses available for caregivers of veterans with a physical or mental health condition. Other highlights include:
- Veterans may be eligible for $70,000 as a tax free lump sum.
- Preferential changes to permanent impairment allowance and Retirement Income Security Benefit.
- Part-time and full-time injured veterans get same level of Earnings Loss Benefit.
Changes to the Registered Disability Savings Plan
The RDSP, first announced in 2007 and recently called a “fiasco” in this CBC article, is somewhat easier to open now as the definition of the plan holder, in the budget, has expanded slightly. Despite this change, it is our severe doubt that this change will change poor overall adoption rates for disabled Canadians opening RDSPs. In the 2015 budget it stated that”over 100,000 RDSPs have been opened”. That represents a mere 2.8% of the overall Canadian population. A Statistics Canada study, entitled, Canadian In Context – People With Disabilities, suggested that as of 2012, 13.7% of Canadians had a disability. The approximate difference of 10% of the Canadian population who identify themselves as disabled without an RDSP is a very large adoption gap, notwithstanding the fact that the criteria used to evaluate suitability for the disability tax credit are much more specific and targeted then what was used in the study.
What is holding the RDSP back?
Age requirements: Criteria dictates that applicants must be under the age of 60. However the lifetime grant of $70,000 and lifetime bond of $20,000 stop being funded after the applicant turns 50 years old. Why not just put it into an RRSP?
Lengthy: Currently ESDC’s (government RDSP administrator) application package for the RDSP requires multiple instances of the same personal information and signatures. Then add the financial institution’s required disclosures, documentation requirements and the whole process is at a minimum, 4 multipage documents in small print to be completed in triplicate. The overall process is daunting to prospective RDSP applicants. Finally the model is not financially viable to financial advisors, who are compensated by mutual fund companies like TD and Mackenzie who pay trailer fees, that in most RDSP cases, wont even cover the cost of gas for the in-person meeting.
HandyTax’s Proposed Changes: streamlining the application process with a web based interface and electronic signatures is a good start. Require the applicant to upload 2 pieces of id to prove their identity along with tax information from their most recent notice of assessment. Instead of holding the RDSP in participating banks, have it centralized like the Canada Pension Plan. Finally automatically create a RDSP when the Canada Revenue Agency (CRA) approves a disability tax credit certificate.
HandyTax Inc (www.handytax.ca) reviews disabled Canadian’s (and their family member’s) past 10 years of income tax returns to see if they missed anything related to a disability. We’ve helped thousands of Canadians from coast to coast get the most out of their disability tax credit certificate. You would not believe the number of times our clients tell us, “my doctor (or my accountant) never told me i could get this much money back as a retroactive tax refund.” Find out more by calling 1-888-343-1155.
Jacqueline Soong – Financial Advisor – helps Canadians with disabilities open an RDSP account for themselves or their family members. She provides full support throughout the entire process, making it easy to understand and offering personalized advice. Unlike other advisors, Jacqueline spends as much time needed to help her clients obtain the maximum amount of contribution available from the government. She may be contacted at 416-494-6446 x.231 or via e-mail at firstname.lastname@example.org