New UCCB and Taxes

So the Harper Government introduced the much vaunted New and Improved UCCB  (universal child care benefit) this month so parents (with eligible children)  have been receiving payments, and from what I can tell of the parents I know it has been viewed as a positive thing. Mrs. C8j received the new payment and the back payments as well (conveniently paid just at the start of an election campaign (sorry that just slipped out)) for Young C8j, which was nice to see in the bank account.

Before you go blow all your new money on “penny whistles and moon pies”, remember this is a taxable benefit. The UCCB is taxable income, but, in the hands of the lower-income earner in the family. For the C8j family (which I think is the Tories target audience, surprisingly) it is not a bad thing, because Mrs. C8j’s income is less than mine, so the UCCB cheque will be a less taxed benefit, but those dual income families where both spouses have high paying jobs, are going to be paying the tax-man (more (depending on their income levels)) for their UCCB cheques.

UCCB and Taxes

Not Quite As Portrayed

I claim to be part of the Tory target audience since I also was able to take advantage of the Family Tax Cut as well (this one only works if your spouse makes significantly less than you do). It is kind of weird to think that I am one of their target audience, but bring on the tax breaks!!

Welcome back the Family Allowance Cheque, we have missed you so (yes this is how baby bonus cheques were handed out and clawed back).

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The CRA Does Not Like Change

Here is a Tuesday Quickie for you, I have pointed this one out a few times, but my Theory has been proven:

Whenever you have a major change in your life that causes a change in  your tax status, the CRA will ask for you to send receipts to verify it (i.e. a Review not an audit).

A simple theory, but it has been proven countless times for me:

  • Each time one of my kids started at University, either I or my child was asked to supply T2202A forms from the school.
  • When they moved from residence to a rental off campus, receipts for the rental
  • When I claimed my son’s school fees as a medical expense.
  • My middle daughter has just started a Chiropractic College, and the tuition fees are MUCH higher, thus the CRA wants receipts.


It’s not a big thing, and fairly easy to remedy, just keep this in mind, and keep those receipts.

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RDSP Questions and Answers

Yet another interview, helped me create this set of questions, and answers, on the topic of Registered Disability Savings Plans. As with all my advice in this area, I start with check the CRA RDSP Web Page Link, and read about this topic yourself, but hopefully some of these answers I put together will help. As for what happened to the article that was to come from this “interview”, I haven’t seen anything yet (I seem to be fun to interview, but the information I give out, isn’t very print worthy).

1. Approval for the Disability Tax Credit is required before an RDSP can be set up for an individual. It may be for a specified term or indefinite. How hard is it to obtain? Do you think disabled people or their caregivers need the assistance of a consultant (for fee or on commission) to get the approval?

For us, it wasn’t too hard, but luckily we had the help of Ottawa Children’s Treatment Centre through CHEO (Children’s Hospital of Eastern Ontario) when my son was diagnosed with Autism. They assigned a social worker to help us, and the Psychologist who did the diagnosis filled in the appropriate forms (T-2201) to get the DTC, and then helped us get the DTC review “backdated” to when my son was born, as Autism is viewed as a disorder of brain development  (or as a from birth disability).

I have been fairly vocal in my dislike of “for fee or commission” firms that “help” folks get their DTC, as I think it is something that most folks should be able to do (with the help of their diagnosing physician). Many of these firms take a percentage of the DTC pay out, and some even attach trailers, so that they get a commission every year, which I think is excessive (if not loathsome).

2. What other free or low cost services are available in the community to help people making an application?

As I have said, we got help from OCTC, I would assume that if you lived near a large metropolitan area, the children’s hospital should be able to help you out. Ultimately this is a job for the diagnosing physician.  I have been told by a few of my readers that there are help groups in many communities that help folks (for free) get things done, if their physicians are unfamiliar with what needs to get done. Look on-line is my advice to look for this information at sites such as , Autism Ontario, or Children at Risk.

3.  Can you give me some examples of situations where eligibility for the DTC might be time limited and require re-application?

Depending on the diagnosis or how it is written up it can be either in perpetuity or for a fixed period of time. In our case we will have to reapply in about 5 years, because with some diagnosis (like high functioning Autism), the CRA wants to see if a “disabled” label is still justified.

My guess would be that with other permanent disabilities, it would be unlimited, eligibility

4. Who can set up an RDSP?
OK, let me preface this by saying ALL of this information is on line on the CRA’s web page.

If the child is under the age of majority, the parents, guardian or any public department or agency, that is legally authorized to act for the child can open an RDSP.

If the beneficiary is old enough and competent they can open one themselves, or their legal representative (guardian, parent, etc.,) can do so as well. A Qualified Family Member (QFM) can also do so, under the right circumstances.

5. What are minimum/maximum ages for participation in an RDSP?

Minimum age is birth, the maximum age and benefits stop being paid into the plan after the age of 59, so I guess that is the maximum age, but it may not make a lot of sense around that age, as the grants stop being added after the beneficiary turns 49.

6. When can the funds be withdrawn?
At any time, however, the program is designed for long term savings, so the government will ask for all bonds & grants paid over the past 10 years (up to that amount) as a penalty, if money is taken out early. Now if there is a shorter life expectancy (less than 5 years) there are rules to allow for limited withdrawals with less penalties.

7. Is the money in the fund taxable when it comes out?
Yes, parts of the money are taxable, depending on how large the grants were that were put into the plan by the government, and the growth of the money in the fund.

8.When selecting a financial institution to set up an RDSP, what questions should a consumer ask and what answers should they be looking for?
In our case, the obvious questions were: am I going to be able to  buy whatever I want? or will I be restricted to only buying specific Mutual Funds or GICs offered by the institution? For our situation, we went with TD Waterhouse because we had a great deal more flexibility in how the money could be invested in (in our cose low management fee index funds and GICs). Also TD Waterhouse was one of the first institutions to offer the savings program (that had this flexibility), and I had accounts already with Waterhouse.

9. How can funds in an RDSP be invested?

That depends on what the institution lets you purchase. If it is a GIC based vehicle that is all you can buy, if it is a Mutual Fund based solution, only the funds available from the provider, but ideally it should be like an RRSP, RESP or TFSA, saving in whatever you want to save in.

10. In your experience, do fees vary significantly among financial institutions?
I am not sure what other institutions charge, I know about the TD set up, but any fees over and above Management Fees for funds strike me as punitive and a bad thing, given who the money is intended to help.

11. What happens if you don’t have enough money to contribute every year on behalf of your child or dependant? Carry-forward of grant and bond eligibility?
The maximum amount eligible to deposit into a single RDSP (you can only have one for each beneficiary), is $200,000, and there is no maximum how much you can put in any year, so in theory, you could put the whole thing in, at the beginning, HOWEVER, the matching grants do have limitations.

12. Can a parent, relative or friend transfer money from an RRSP or RRIF to an RDSP? What are the tax implications of doing so?
Yes, there is an ability to roll moneys from an RRSP into an RDSP, but it does count against the total $200K limit, and will only get some grants money, for the year.

13. In what circumstances might it make sense to borrow money to make an annual contribution?
That’s a very good question, and I don’t really have an answer on that one. It depends on your ability to withstand interest payments and such? Given the grant and bond money is dependant on the parents’ income (until the age of majority is reached), it becomes a catch-22, should the parents go into debt on this? I think folks need to do the arithmetic for themselves and see whether it is worth taking on that risk.

14. What happens to the money in the account, the bond and grant money if an individual no longer meets the criteria for the DTC? i.e gets a heart transplant and resumes the normal activities of daily life.
Not sure about the heart transplant, I think you are still disabled, but that doesn’t matter. If the DTC is lost, you can apply to have the RDSP extended for a period, but eventually. All grant & bond moneys from the past 10 years must be paid back, but the growth in the fund can be rolled into an RRSP (I believe, not sure on that one though).

 

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The Bank of Canada decided that the best way to wean an economy that is addicted to stimulation is to lower the interest rates ? To be honest, Canada does seem to be in a recession, but lowering Interest Rates is an interesting way to deal with it. Their exact statement about the economy (which they now claim won’t recover until mid-2017):

The lower outlook for Canadian growth has increased the downside risks to inflation. While vulnerabilities associated with household imbalances remain elevated and could edge higher, Canada’s economy is undergoing a significant and complex adjustment. Additional monetary stimulus is required at this time to help return the economy to full capacity and inflation sustainably to target.

Exchange Rate

CAD/USD Noon Rate

What did that do to the Canadian Dollar, you might ask? Have a look at this graph (on the right).

Weddings? Yes, my eldest daughter (Daughter 1.0), was married this past weekend and it was a wonderful event. She looked radiant, and it was interesting to be back in Kitchener. I thought Ottawa’s construction problems were insane, but Kitchener has taken it to a new level, ripping up King Street.

For those who have not participated in a wedding as a parent of one of the participants, it is a very different experience, and I was not really ready about how emotionally draining it was, and yet another event that reminds you of your own mortality.

Greece? Seriously? Who is writing this stuff? Anybody investing in Greece trying to maybe make some quick money? You are? You are NUTS!!!


My Writings for Week Ending July 17th

I was recovering from my daughter’s wedding, so not much new from me this week, but maybe some more helpful family posts :

I did buy something on Amazon Prime day, but what was the impact of Amazon? The Economist has something for you:

Kobo Canada
For more great personal finance stories, click here 💰

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More Full Time Jobs in Canada in June

The numbers from Stats Canada on Friday were effectively unchanged, with Unemployment running at 6.8%  but there were some interesting tidbits in there, if you chose to dig deeply to find them.

In June, gains of 65,000 in full-time work were offset by losses of 71,000 in part-time.

So we really lost 6000 jobs, and they were part-time, month to month, so good and bad news in that we lost jobs but we have more full-time jobs.

Employment Graph

Employment For Past Little While

How do we compare to our friends down south?

In June, the employment rate in Canada (adjusted to US concepts) was 61.9%, compared with 59.3% in the United States. On a year-over-year basis, the employment rate was unchanged in Canada, while it increased by 0.3 percentage points in the United States.

So in terms of jobs, this talk of recession in Canada might be premature, but then again, recession has little to do with jobs (directly).

Some disheartening news in the report was:

Employment declined for youths aged 15 to 24 and increased for men aged 55 and over. There was little change among the other demographic groups.

Youth unemployment is still running at the 12% range, and for men 55 and over my concern is, that is me!

Unemployment in Canada

Unemployment for Past Little While

The graph keeps showing no change in unemployment for a good long while, is the Canadian economy stuck?

The Big Table

 

The big report this time is from Employment by class of worker and industry (based on NAICS1) – Seasonally adjusted, and Stats Canada is now making it easily changed for your needs:

  May
2015
June
2015
May to
June 2015
June 2014
to June 2015
thousands thousands change in
thousands
change in
thousands
Class of worker
Employees 15,203.8 15,219.7 15.9 194.0
Self-employed 2,749.9 2,727.7 -22.2 -17.9
Public/private sector employees
Public 3,566.5 3,608.7 42.2 75.8
Private 11,637.3 11,611.0 -26.3 118.2
All industries 17,953.8 17,947.4 -6.4 176.1
Goods-producing sector 3,871.3 3,869.4 -1.9 -11.5
Agriculture 292.5 287.9 -4.6 -16.4
Natural resources3 354.8 358.3 3.5 -8.2
Utilities 140.3 138.7 -1.6 1.7
Construction 1,363.5 1,371.5 8.0 7.9
Manufacturing 1,720.2 1,713.0 -7.2 3.5
Services-producing sector 14,082.5 14,078.0 -4.5 187.6
Trade 2,739.8 2,742.4 2.6 14.9
Transportation and warehousing 924.2 931.7 7.5 35.3
Finance, insurance, real estate and leasing 1,111.8 1,116.8 5.0 39.5
Professional, scientific and technical services 1,353.9 1,360.8 6.9 24.6
Business, building and other support services 769.6 755.9 -13.7 22.2
Educational services 1,283.5 1,283.6 0.1 44.4
Health care and social assistance 2,289.6 2,295.2 5.6 81.2
Information, culture and recreation 742.5 740.1 -2.4 -11.6
Accommodation and food services 1,222.8 1,214.1 -8.7 20.3
Other services 762.8 746.0 -16.8 -62.8
Public administration 881.9 891.4 9.5 -20.6

Note(s):

The sum of individual categories may not always add up to the total as a result of rounding.

Source(s):

CANSIM tables 282-0088 and 282-0089.

 

Reports from 2015

So far here are the employment reports on this site:

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