Last updated: March 22 2016
The changes the Liberal government has introduced for families has some surprising results, now that we’ve had some time to do some number crunching.
The clawback of the Canada Child Benefit has changed from the original proposals announced in the election campaign platform.
Depending on family net income, how many children the family has, and whether they are under 6 or between 6 and 17 there are a number of varying results for families with combined net incomes that can run into the high six figures. In other words it becomes clear that a surprising number of high income families could receive some benefits.
Let’s look now at the effects of the changes on a low income family; in this case net family income is $30,000 and there are three little children in the family – each under 6:
Scenario: Ontario family has three children under 6 and family net income of $30,000
Both work ($15K each) | One Works ($30K) | |||||
Old Rules | New Rules | Difference | Old Rules | New Rules | Difference | |
Earned Income | $30,000 | $30,000 | $0 | $30,000 | $30,000 | $0 |
- Federal Tax | 1,318 | 454 | +864 | 1,466 | 602 | +864 |
- Provincial Tax | 0 | 0 | 0 | 0 | 0 | 0 |
= Net After Tax | $28,682 | $29,546 | +$864 | $28,534 | $29,398 | +$864 |
+ UCCB | 5,760 | 0 | -5,760 | 5,760 | 0 | -5,760 |
+ CTB | 9,656 | 19,200 | +9,544 | 9,656 | 19,200 | +9,544 |
+ GSTC | 987 | 987 | 0 | 987 | 987 | 0 |
+ Prov CTB | 3,324 | 3,324 | 0 | 3,324 | 3,324 | 0 |
= Total Income | $48,409 | $53,057 | +$4,648 | $48,261 | $52,909 | +$4,648 |
Monthly Income | $4,034 | $4,421 | +$387 | $4,022 | $4,409 | +$387 |
©2016 Knowledge Bureau, Inc. All Rights Reserved.
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Conclusions:
Now let’s take a look at the amount of Canada Child Benefit receivable and resulting marginal tax rates at higher income levels. The scenario is the following: Ontario family has three children under 6 and various family net income levels below. But in this case one spouse is working. First let’s take a look at the old rules:
Table 1: Old Rules
Income | Income Tax | UCCB | CTB | GSTC | After Tax | Effective Tax Rate |
$30,000 | $1,466 | $5,760 | $9,656 | $987 | $44,937 | -50% |
$40,000 | 3,406 | 5,760 | 6,140 | 652 | $49,146 | -23% |
$50,000 | 6,101 | 5,760 | 4,385 | 152 | $54,196 | -8% |
$60,000 | 9,165 | 5,760 | 3,985 | 0 | $60,580 | -1% |
$70,000 | 12,280 | 5,760 | 3,585 | 0 | $67,065 | +4% |
$80,000 | 15,549 | 5,760 | 3,185 | 0 | $73,396 | +8% |
$90,000 | 19,014 | 5,760 | 2,785 | 0 | $79,531 | +12% |
$100,000 | 23,268 | 5,760 | 2,385 | 0 | $84,877 | +15% |
$110,000 | 27,609 | 5,760 | 1,985 | 0 | $90,136 | +18% |
$120,000 | 31,949 | 5,760 | 1,585 | 0 | $95,396 | +21% |
$130,000 | 36,291 | 5,760 | 1,185 | 0 | $100,654 | +23% |
$140,000 | 40,632 | 5,760 | 785 | 0 | $105,913 | +24% |
$150,000 | 45,261 | 5,760 | 385 | 0 | $110,884 | +26% |
$160,000 | 50,058 | 5,760 | 0 | 0 | $115,702 | +28% |
©2016 Knowledge Bureau, Inc. All Rights Reserved.
Note negative figures represent an excess of benefits received over taxes payable. Now, let’s take a look at what happens under the new rules with our 3 child family and net taxes payable as calculated together with their eligible refundable tax credits:
Table 2: New Rules
Income | Income Tax | UCCB | CTB | GSTC | After Tax | Effective Tax Rate | Difference | %Diff | MTR |
$30,000 | $602 | 0 | $19,200 | $987 | $49,585 | -65% | $4,648 | 15% | 15% |
$40,000 | 3,406 | 0 | $17,300 | 652 | $54,546 | -36% | $5,400 | 14% | 43.15% |
$50,000 | 6,030 | 0 | $15,400 | 152 | $59,522 | -19% | $5,326 | 11% | 48.65% |
$60,000 | 8,944 | 0 | $13,500 | 0 | $64,556 | -8% | $3,976 | 7% | 48.65% |
$70,000 | 11,909 | 0 | $12,150 | 0 | $70,241 | 0% | $3,176 | 5% | 37.15% |
$80,000 | 15,028 | 0 | $11,350 | 0 | $76,322 | 5% | $2,926 | 4% | 39.48% |
$90,000 | 18,343 | 0 | $10,550 | 0 | $82,207 | 9% | $2,676 | 3% | 45.91% |
$100,000 | 22,588 | 0 | $9,750 | 0 | $87,162 | 13% | $2,285 | 2% | 51.41% |
$110,000 | 26,929 | 0 | $8,950 | 0 | $92,021 | 16% | $1,885 | 2% | 51.41% |
$120,000 | 31,370 | 0 | $8,150 | 0 | $96,780 | 19% | $1,384 | 1% | 51.41% |
$130,000 | 35,611 | 0 | $7,350 | 0 | $101,739 | 22% | $1,085 | 1% | 51.41% |
$140,000 | 39,952 | 0 | $6,550 | 0 | $106,598 | 24% | $685 | 0% | 51.41% |
$150,000 | 44,582 | 0 | $5,750 | 0 | $111,168 | 26% | $284 | 0% | 55.97% |
$160,000 | 49,379 | 0 | $4,950 | 0 | $115,571 | 28% | -$131 | 0% | 55.97% |
©2016 Knowledge Bureau, Inc. All Rights Reserved.
Conclusions:
The following table shows the income level at which the Canada Child Benefit will be eliminated for various families. The full benefit is only received up to family net income of $30,000 but the benefit is available over a surprisingly large income range.
Ages of Children
|
Income Cut-Off
|
1 child under 6
|
$188,437
|
1 child over 6
|
$157,187
|
2 children, both under 6
|
$206,667
|
2 children, one under 6
|
$189,123
|
2 children, both over 5
|
$171,579
|
3 children all under 6
|
$221,875
|
3 children, two under 6
|
$209,375
|
3 children, one under 6
|
$196,875
|
3 children, all over 5
|
$184,375
|
4 children, all under 6
|
$249,737
|
4 children, three under 6
|
$239,211
|
4 children, two under 6
|
$228,684
|
4 children, one under 6
|
$218,158
|
4 children, all over 5
|
$207,631
|
In the following scenarios, we take a look at the results under old and new rules that focus on the removal of the Universal Child Care Benefit (UCCB) in favour of the Canada Child Benefit and the net results for families at $30,000, $60,000 and $120,000. In this case, there is only one child.
Family Income |
One Child |
Old Rules |
New Rules |
|
||||||
Income Tax |
CTB |
UCCB |
Net |
Income Tax |
CCB |
UCCB |
Net |
Difference |
||
$30,000 |
<6 |
$1,466 |
$3,354 |
$1,920 |
$33,808 |
$602 |
$6,400 |
$ - |
$35,798 |
$1,990 |
$30,000 |
>5 |
$1,466 |
$3,354 |
$720 |
$32,608 |
$602 |
$5,400 |
$ - |
$34,798 |
$2,190 |
$60,000 |
<6 |
$9,506 |
$1,195 |
$1,920 |
$53,609 |
$8,944 |
$4,300 |
$ - |
$55,356 |
$1,747 |
$60,000 |
>5 |
$9,273 |
$1,195 |
$720 |
$52,409 |
$8,944 |
$3,300 |
$ - |
$54,356 |
$1,947 |
$120,000 |
<6 |
$32,322 |
$0 |
$1,920 |
$89,598 |
$31,270 |
$2,190 |
$ - |
$90,920 |
$1,322 |
$120,000 |
>5 |
$32,058 |
$0 |
$720 |
$88,398 |
$31,270 |
$1,190 |
$ - |
$89,920 |
$1,522 |
Of note is the fact that single-child families are better off with one child under the new rules at either age and across large income ranges.
Knowledge Bureau's Canada Child Benefit Worksheet has been updated to reflect the rules in the Notice of Ways and Means. We invite you to try it out.