Canada’s cost-of-living relief benefit programs: How to qualify

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The federal government this week announced details of three measures to “make life more affordable for Canadians who need it most” in light of the rising cost of living, primarily due to higher food prices and rent.

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Specifically, it’s doubling the Goods and Services Tax Credit (GSTC) for six months, introducing the new Canada Dental Benefit for children under 12 who do not have access to dental insurance, and giving a one-time top-up to the Canada Housing Benefit for low-income renters. Let’s take a brief look at each of these measures.

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Doubling the GSTC

The GSTC is meant to offset the cost of paying GST on purchases of goods and services for low- and modest-income Canadians. The credit is paid quarterly in January, April, July and October, and is indexed to inflation each benefit year, which runs from July through June.

The amount of GSTC you receive depends on your income and family size. For the current benefit year, which began July 2022 and runs through June 2023, single Canadians without kids receive a total of $467. Married or common-law couples receive $612 while single parents receive $612. Recipients with kids get $161 for each child under age 19.

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That said, only those with lower incomes get the full GSTC. To receive the full amount, your family income must be less than $39,826 in 2021. Above this income level, the GSTC is gradually reduced as income rises and the full phase-out depends on family type. For example, a single person without children would not get any GSTC once their income reaches $49,200, while a couple with two kids could have 2021 income up to $58,500 before being fully phased out.

The GSTC is indexed to inflation, but it’s done on a lagging basis. For the current benefit year, the value of the GSTC grew by 2.4 per cent based on the average consumer price index during October 2020 to September 2021. As a result, the sharp rise in inflation in 2022 is not yet reflected in the GSTC payments currently being distributed.

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To help support Canadians in the interim, the government announced it’s doubling the GSTC for six months. The extra GSTC amounts will be paid to all current recipients through the existing system as a one-time, lump-sum payment before year-end, meaning recipients do not need to apply for the additional payment, but must have filed a 2021 tax return to be eligible.

The GSTC will also help postsecondary students who typically have little or no income. For example, let’s say Sarah, who’s currently in university, earned $5,000 in 2021 through part-time and summer employment. She’s currently receiving $233.50 in GSTC for the July through December 2022 period, and will receive another $233.50 for the January through June 2023 period. With the temporary doubling of the GSTC amounts for six months, Sarah will receive an additional $233.50. In total, she will receive $700.50 in GSTC payments.

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It’s estimated 11 million individuals and families will benefit from this additional support, costing approximately $2.5 billion.

The Canada Dental Benefit

The government also announced it is proceeding with its commitment to launch a national dental program for uninsured Canadians with an annual family income of less than $90,000. The program will start by covering children under 12 years of age in 2022.

The Canada Dental Benefit (CDB) will provide eligible parents (or guardians) with direct, upfront tax-free payments to cover dental expenses for kids under 12. The target implementation date is set for Dec. 1, 2022, but the program will cover expenses retroactive to Oct. 1, 2022.

The CDB will provide payments of up to $650 per child, per year for families with adjusted net income of less than $90,000 per year and without dental coverage. Families with income under $70,000 would get the full $650 per child. If family income is between $70,000 and $80,000, the benefit is reduced to $390 per child, and for family income between $80,000 and $90,000, the benefit will be $260 per child.

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To access the CDB, parents of eligible children will need to apply through the Canada Revenue Agency and attest their child does not have access to private dental care coverage and they have out-of-pocket dental care expenses for which they will use the CDB. They may also need to show receipts to verify the kids’ dental expenses.

The government estimates 500,000 Canadian children could benefit from the CDB, at a cost of $938 million. Details on how and when to apply have not yet been released.

Canada Housing Benefit

The Canada Housing Benefit (CHB) is administered through the provinces and helps lower-income Canadians pay their rent. Each province has its own system for accessing the funding, but to qualify, family income must be less than $35,000 annually ($20,000 for single Canadians), and the renter must spend 30 per cent or more of their income on rent.

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This week, the government announced a one-time top-up to the CHB that will consist of a tax-free payment of $500 to provide direct support to low-income renters. The payment will be launched by year-end and delivered by the CRA through an attestation-based application process.

To determine eligibility, the CRA will do an upfront verification of the applicant’s income, age and residency for tax purposes. Applicants will need to attest they are spending at least 30 per cent of their income on shelter and that they’re paying rent for their own primary residence in Canada, as well as specify the rental property’s address, the amount of rent paid in 2022 and the landlord’s contact information. They’ll also need to provide consent for the CRA to verify their information to confirm eligibility.

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Students who pay rent and meet the income test above will also qualify. The government estimates 1.8 million low-income renters will qualify for support, at a total cost of $1.2 billion.

Jamie Golombek, CPA, CA, CFP, CLU, TEP, is the managing director, Tax & Estate Planning with CIBC Private Wealth in Toronto. Jamie.Golombek@cibc.com

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