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New Canada Child Benefit is a win for most families

An OECD study shows that upper-income Canadian families with two working parents spend about 18 per cent of their net income on daycare.

Christinne Muschi/The Globe and Mail

High-income families have reason not to like the new Canada Child Benefit, but it's a win for most everyone else.

The Liberal government has said that 90 per cent of families will be better off with the CCB than the collection of programs offered by the previous government. "That's accurate," said Jamie Golombek, managing director of tax and estate planning at CIBC Private Wealth Management. "We did some modelling on this and [the government's number] is pretty consistent with what we think."

Mr. Golombek said the key to understanding the new child benefit, which applies to familes with children under 18, is to look at how much you have on an after-tax basis. The CCB is non-taxable, which means every cent you receive is yours to keep and does not have to be reported as income on your tax return.

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It's possible that previous programs may have delivered a higher total pre-tax amount of money to some families, he said. But these programs included the Universal Child Care Benefit, which was taxable. "You could end up paying 53 per cent of the UCCB back in Ontario if you were a high-income person," Mr. Golombek said. "So you never really knew exactly what you had at any point. That's why the new system is much simpler."

The UCCB did provide at least something to high-income families, whereas the new Canada Child Benefit will not. Mr. Golombek's calculations show that an Ontario couple with a child under six years of age would stop receiving a CCB payment with an income reaching $188,437.50 in net family income. At $150,000 in net income, families start receiving less than they would under the old system.

The government says families will see an average child benefit increase of $2,300 in 2016-17. Mr. Golombek said the number sounds reasonable, although it's hard to pin this down exactly because of variables like the number and age of children used in this example. He said there are four different thresholds for determining benefits – one child, or two, three or four or more children. Another factor is whether a child is under age six, or aged six to 17, while still another is family income.

The federal government does offer an online calculator to help people see how much they will receive (find it here).

To be clear, the entitlement to the CCB is based on adjusted family net income, which is gross income minus deductions for things like contributions to registered retirement savings plans and union dues. Families with less than $30,000 in annual net income receive $6,400 per year for children under the age of six and $5,400 per child from ages six to 17. As a family's income rises, the benefit declines and finally disappears.

For both taxpayers and tax professionals, the CCB is a step forward in simplifying family personal finances. The new program replaces not only the UCCB, but the Canada Child Tax Benefit, the family tax cut (also known as income splitting for families) and the children's arts and fitness tax credits.

"The Canada Child Benefit makes the system a lot easier, a lot cleaner and a lot tighter, and also a lot easier to administer," Mr. Golombek said.

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In his interaction with clients, Mr. Golombek has found two objections to the CCB. One is from high earners who are upset that they will not receive anything, and the other is from single people who object to subsidizing families with kids. "The majority of people we speak to about it are quite positive because they'll get more money," he said.

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About the Author
Personal Finance Columnist

Rob Carrick has been writing about personal finance, business and economics for close to 20 years. He joined The Globe and Mail in late 1996 as an investment reporter and has been personal finance columnist since November 1998.Rob's personal finance columns appear in The Globe on Tuesday and Thursday, and his Portfolio Strategy column for investors appears on Saturday. More


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