The Canada Child Benefit: Some Surprising Results

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:

Effects of the New Canada Child Benefit on Low-income Families

Scenario: Ontario family has three children under 6 and family net income of $30,000

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Conclusions:

• Under the new rules a low-income family with three children will be better off by almost $400 per month. 
• This family has after-tax income of $4409 per month.  
• Whether single-earner or two working spouses makes little difference. 
• The tax system added 75% to earned income under the new rules with one earner.

Higher Income Earners

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

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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

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Conclusions:

• Family net income can be as high as $70,000 before any net tax is paid (that is, taxes payable less refundable credits received).
• When this family’s’ income reaches $160,000 it is evident that the Univeral Child Care Benefits provided more money.
• However, while high income earners received more benefits under the Universal Child Care Benefits regime, the Canada Child Benefit delivers at least some dollars to more high income families as illustrated with the high income cut off chart below.
• It is still important to note that marginal tax rates are over 50% for income levels exceed $100,000 when we take the clawbacks into account.

Income Cut Offs

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.

Single Child Families

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.

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.

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