By Olev Edur
A close look at this year’s federal budget reveals a number of provisions that should benefit retirees
At first glance, the March 2023 federal budget didn’t seem to offer much for retirees, but a deeper reading shows that some of the broader provisions could be of tangential benefit to many. Other provisions directly targeted small groups of Canadians, and a large number in those groups happen to be retirees.
The new Canadian Dental Care Program (CDCP), for example, builds on the Canada Dental Benefit (CDB) introduced last year for children under 12. The budget called for $13 billion over five years (plus $4.4 billion ongoing) to fund dental-care coverage for all uninsured Canadians with an annual family income of less than $90,000—that would include most retirees.
Details on the CDCP won’t be released until later this year (and may not be available until the beginning of 2024), but it will probably be similar in structure to the CDB—that program provides one or possibly two tax-free reimbursements of either $260, $390, or $650 (depending on family income) each July-through-June “benefit period”; the second payment is available if a child’s dental costs in a benefit period exceed $650. Good Times will provide a more in-depth look at the proposed CDCP when details are released.
Alongside the CDCP, another $250 million (plus $75 million ongoing) is to be spent on an Oral Health Access Fund to address health gaps among vulnerable populations and improve access to oral care, particularly in rural and remote communities. That’s an added bonus for the many retirees living outside our cities.
Also health care-related, the budget promised $359.2 million over five years (plus $5.7 million ongoing) to support a Canadian Drugs and Substances Strategy that would “guide the government’s work to save lives and protect the health and safety of Canadians.” This would include funding for community supports, prevention programs, supervised consumption sites, and actions to tackle drug trafficking. These efforts should help make safer the communities in which retirees and others live.
The Grocery Rebate
Another big bell-ringer upon its budgetary debut was the much-anticipated “grocery rebate” delivering $2.5 billion in one-time GST cheques to low- and modest-income Canadians. The proposed rebate amounts would be $255 for those aged 65-plus, $467 for families, and $234 for singles under 65, with delivery promised “as soon as possible”—not exactly a windfall, but always welcome news for retirees on a fixed income. And unlike most other budget provisions, which remain proposals, at press time this measure was to be rushed into law—perhaps even before you read this article.
For the benefit of those forced to use payday lenders, the budget’s attack on “predatory lending” proposed limits on how much they can charge, including a flat maximum $14 per $1,000 borrowed. Budget literature also touted an interest-rate-reduction deal with VISA and Mastercard to lower credit-card transaction fees for small businesses (while also protecting consumer-reward points plans offered by Canada’s large banks).
It’s expected that as a result of this deal, 90 per cent of the card-accepting businesses in Canada will see their fees reduced by up to 27 per cent, with small businesses saving about $1 billion over five years. These and other measures are in aid of the budget’s “making life more affordable” theme. The hope is that some of the savings will trickle down to consumers, including retired ones.
The budget also slammed what it called “junk fees…[which] could include higher telecom roaming charges, event and concert fees, excessive baggage fees, and unjustified shipping and freight fees.” It went on to promise that the federal government would “work with regulatory agencies, provinces, and territories to reduce junk fees for Canadians.” When it comes to inflated fees and unjustified costs, retirees are frequent victims.
A sizable chunk of space in this year’s budget documentation was devoted to changes to the Alternative Minimum Tax (AMT). For those unfamiliar with the concept, AMT is basically a parallel tax system for high earners who reduce their tax bills through the abuse of numerous deductions and credits. Proposed changes would include slashing many AMT credits in half, and the expectation is that these changes would extract an additional $3 billion from abusers over the next five years. While AMT undoubtedly affects few retirees, that $3 billion still represents money all the rest of us won’t have to send to Ottawa.
Registered Plan Changes
The foregoing were broader strokes in a generous (some would argue overly generous) budget, and, as noted above, several focused provisions could also affect smaller sets of retirees. For example, proposed changes to the rules regarding Registered Education Savings Plans (RESPs) would give access to jointly sponsored plans by divorced or separated couples. New RESP rules would also expand the limits on Educational Assistance Payments withdrawn by the student. As has been noted in many past issues of Good Times, RESPs are a dandy tax-assisted way for grandparents to help fund a grandchild’s education.
The budget also proposed a three-year extension (to December 2026) for the Registered Disability Savings Plan (RDSP) provision allowing a Qualifying Family Member (parent or spouse/common-law partner) to open an RDSP and be plan holder on behalf of a disabled family member who lacks the capacity to open their own plan. Also proposed was an expanded definition of QFM to include siblings of the disabled. With dementia on the rise, these provisions may end up being of benefit to more than a few senior families.
Small-business owners who are thinking of retiring soon and passing it all on to their kids should be pleased to hear of proposed changes to the anti-avoidance rules for transfers from owners to corporations owned by their offspring. The changes are designed to smooth the path for “genuine” intergenerational transfers from parents to kids by eliminating a technical snag that could have resulted in more tax being paid on a transfer to the kids than to a stranger.
Also related to small business, the budget proposed changes facilitating the creation of an Employee Ownership Trust (EOT). EOTs are shareholding arrangements geared to employees, and they’re good for workers as well as for the business. Owner/workers are inherently more motivated than employees, plus employee ownership represents an alternative exit option for those whose kids really aren’t into running the company.
The budget proposed a number of other measures directed at small business, but space limitations preclude complete coverage here; if you’re a business owner, ask your accountant or financial adviser what else in the budget might be worthy of your attention. There are a lot of money and tax credits to be doled out.
Small Mercies—and a Concern
Finally, the government’s backtrack on alcohol tax (the originally announced annual increase of six per cent prompted an uproar, leading to the budget announcement of a cap of two per cent for the year) will please those retirees who like a tipple now and then. It’s also good for all those hospitality workers and businesses still reeling in the aftermath of COVID.
In addition, the budget proposed a plan, starting in 2024, to create an automated tax-return filing service so vulnerable Canadians who don’t file returns can still receive the benefits to which they’re entitled.
The bottom line is that the March 2023 federal budget neither imposed any tax increases (except perhaps for AMT-targeted abusers) nor offered any broad-based tax reductions.
As expected, the budget was pretty long on spending, especially for health care and the environment. So, while business-oriented groups such as the Ontario Chamber of Commerce (OCC) responded favourably to some budget provisions, there has been an overriding concern.
“The OCC welcomes the new Dental Care Plan and looks forward to reviewing eligibility details,” its Rapid Policy Update states. And elsewhere: “The government’s decision to cap the alcohol excise tax temporarily is a positive step, and the OCC would encourage a longer-term freeze of the tax rate to support struggling restaurants, bars, and domestic alcohol producers as they recover from the pandemic.”
But there’s concern about our $43 billion deficit. “Unlike the most recent fall update, which projected a budget balance by 2027-28, this year’s budget no longer provides a clear date or strategy for balancing the books,” the OCC Update notes. A statement from Perrin Beatty, president of the Canadian Chamber of Commerce, was more pointed: “Our country cannot borrow its way to prosperity.”
The OCC Update goes on to point out, however, that Canada remains on relatively solid fiscal and credit grounds: “Despite the larger deficit, Canada’s net deficit- and debt-to-GDP ratios (measures used to indicate the government’s debt burden in relation to its capacity to repay) are among the lowest in G7 countries.” (See box.)
Canada’s federal debt doubled over the past decade—from $616 billion in January 2014 to $1,144 billion by January 2023, according to Statistics Canada monthly data. Debt costs us all, and this acceleration is scary: debt as a way of life can compound with ferocity until it reaches the inevitable brick wall—the dollar tumbles, services are slashed, and taxes are hiked.
It would seem, however, that for Canada, that brick wall isn’t an imminent threat. We’re far from the indebtedness levels of clearly still functional countries such as Japan. And the theory in Canada is that economic growth (in our case, based on immigration more than on improved productivity) will of itself cause the debt ratio to tumble—provided, of course, that deficits are brought under control.