The Canada Child Benefit (CCB) Explained
Let’s face it, having kids is an expensive proposition. Because of this, the federal government provides eligible families with a monthly tax-free payment, to help shoulder the costs.
Aptly titled the Canada Child Benefit, or CCB, the funds can be used in any number of ways, at the parent’s discretion.
For our government, it’s considered money well spent. After all, they have a vested interest in the success of an entire generation of young Canadians.
So whether the extra money is spent on groceries, to cover the cost of soccer registration, or placed into long-term savings, their goal is simple: To help Canadian families manage the high costs of raising kids.
How Does the CCB Work?
In a way, the CCB is the product of two previous government benefits, namely the longstanding Canada Child Tax Benefit, or CCTB, and the separate Universal Child Care Benefit (UCCB), which was originally introduced in 2006.
The CCB replaced both the CCTB and UCCB in 2016.
Unlike the UCCB, that paid a fixed amount each month to Canadian parents of all income levels, the CCB is income-tested. This means that it’s designed to provide a larger benefit to lower income Canadians.
Conversely, as a family’s income grows, the monthly CCB payment decreases, until it is no longer available to parents at the highest income levels.
For the lowest income families, the maximum benefit is currently $6400 per child under the age of 6, and $5400 for children between the age of 6 and 17.
The government reports that on average, CCB-eligible families receive approximately $6800 per year in benefits.
Updates to the CCB for 2018-19
Beginning in July 2018, the CCB benefit will be indexed to inflation, meaning that annual benefits will grow in line with the increase to the cost of living.
Here’s an example. For 2018-19, the government has set indexation at 1.5%, and is projecting an increase of 2.0% for 2019-20.
Using these numbers, a family currently receiving an annual benefit of $6400 can expect an increase to $6496 for 2018-19, and $6,626 for 2019-2020, should remain in line with current projections.
Is The CCB Taxable?
Another way that the CCB benefit differs from the UCCB is its tax-free status. The UCCB was considered taxable income, reported by the parent. For married or common-law couples, the lower income earning spouse reported any UCCB income received. CCB income is non-taxable.
Additional CCB Benefits
Important Canada Child Benefit Dates
When factoring the CCB benefit into your family’s budget, there are some key dates to keep in mind.
For starters, the monthly CCB payment resets every July and is based on a family’s net income from the previous year.
The annual benefit is divided into twelve equal payments, beginning in July and continuing through to the following June.
It’s also important to note that CCB payments are made on the 20th of every month.
To be eligible for the CCB, there are a number of conditions you must meet.
For starters, you need to live with the child, and the child must be under 18 years of age. You must be the child’s primary caregiver, as well as a resident of Canada.
Finally, providing you are the parent, spouse, or common-law partner, you must be a Canadian citizen, a permanent resident, protected person, or a temporary resident who has lived in Canada for the previous 18 months.
You need to file a tax return each year if you want this benefit. Even if you don’t have any income to report, you should still file a tax return so that you can continue receiving the Canada Child Benefit. If you fail to file, CCB payments will cease.
How To Register Your Newborn For The CCB
Providing you are the birth mother, and you haven’t already completed an application, CRA makes it easy for new parents to apply for the CCB.
It’s called the Automated Benefits Application. Here’s how it works.
At the time you register the birth of your newborn with your province, you can consent to have your birth registration information shared securely with the Canada Revenue Agency.
There will be a section in the birth registration that allows for this.
You will need to provide your Social Insurance Number when submitting the application, but once it’s sent, the CCB application process is complete.
If you don’t provide your consent, it means that you will need to apply for the CCB separately.
Other Ways To Apply For The CCB
If you did not use the Automated Benefits Application, there are two other ways you can apply to receive the CCB.
Using the “My Account” service through CRA’s website, you can choose an option to “Apply for Child Benefits”. From there, you will need to confirm your marital status, contact information, as well as your citizenship. You will also enter your child’s personal information.
Once you’ve submitted your application, CRA will allow you to return anytime to check the status of your application.
If you haven’t either of the above options, you can apply by filling out CRA Form RC66.
A link to this form can be found here.
You will be required to provide supporting documentation in the following circumstances:
If you share custody of a child, need to provide proof of birth, if you are applying for a period of time which began more than 11 months ago, or lastly, if you or your spouse or common-law partner are a new, or returning resident, or citizen of Canada.
The Canada Child Benefit Calculator
On their website, the CRA allows families to see what their CCB benefits might look like, using this interactive calculator.
Simply input the birthdates of your children, as well as some basic income information for you and your spouse, and the calculator will figure out the rest. It’s a great tool, and only takes a few minutes to use.
Ways To Use Your CCB Benefit
As a parent, how you allot your CCB payments is up to you. But if you are looking to place the funds into long-term savings for your child, there are options. I’ve highlighted a few here:
Contribute To Your Child’s RESP
One of the most effective ways to save for your child’s education is through a Registered Education Savings Plan, or RESP. Through the Canada Education Savings Grant (CESG), the government provides a 20% match on annual RESP contributions, to a maximum of $500 per child.
If you’re not already maximizing your contributions, consider topping them up with monies from the CCB. Another huge benefit of an RESP is that it offers tax-sheltered growth for the duration of the plan, until the funds are withdrawn.
Contribute to an RDSP
If your child has a prolonged physical or mental disability and qualifies for the Disability Tax Credit, they may be eligible to open an Registered Disability Savings Plan (RDSP).
Similar to other registered savings plans, the RDSP offers tax-sheltered growth, and the contributions are eligible to be matched by the government through the Canada Disability Savings Grant as well as Canada Disability Savings Bonds.
Investing For Your Child
Funds that originate from a CCB payment can be invested in the child’s name, without the income being attributed back to the parent.
This provides an opportunity to shelter additional investment income, outside of an RESP or RDSP account.
Because presumably, your child will have little to no employment income to declare, their basic personal amount ($11,635) should eliminate any potential tax owing on investment income earned.
If you qualify for the Canada Child Benefit and are not currently receiving it, you may be missing out on a valuable source of income that can provide a much needed boost to your family’s financial well being.
A good idea is to start with the previously mentioned CCB calculator, which will help to determine your potential benefit. From there, simply select your preferred application method and you’ll be well on your way.