Unlocking ‘gateway benefit’

Opinion

Michelle MacIver didn’t hear about the many government benefits available for her son, who has a disability, from a financial institution or a family physician.

Rather, she heard about them through word of mouth.

“I was talking to other parents who told me about the DTC (Disability Tax Credit),” says the Portage la Prairie mother of two young boys.

That began a multi-year journey of navigating doctor’s offices, government websites, social media and various organizations to understand not just how to apply for the credit, but also whether her son would even qualify.

“There is a lot of misinformation — like people on social media telling me my son wouldn’t qualify,” she says, noting it took two years before she finally sent the 16-page tax document to Canada Revenue Agency.

MacIver’s glad she did.

Not only does the credit provide more than $3,000 in tax savings annually, provincial and federal, it is also the “gateway benefit,” she says.

It leads to other programs aimed at providing financial support for Canadians with disabilities and their families, such as the Registered Disability Savings Plan (RDSP).

Those qualifying for the credit will also be eligible for the new Canada Disability Tax Benefit, which starts next month, paying adults with disabilities up to $200 a month, depending on family net income.

While that won’t help the MacIver family, given her son is nine years old, it will be a small boost to many Canadians with disabilities.

The poverty rate for people with disabilities is about twice the national average, according to Campaign 2000: End Child and Family Poverty.

What’s more, they face larger costs.

The cost of living is estimated to be about 30 per cent higher, given many require additional medical equipment and supportive care, a study from Inclusion Canada found.

Federal and provincial disability benefit programs are designed to help address these issues, but many are underused, including the gateway tax credit DTC.

A Statistics Canada report estimates most Canadians with disabilities have not received the credit. Take-up among those with the most severe impairments is only about four in 10. Use is estimated at about only about 20 per cent for those with severe disabilities, a little more than 10 per cent for Canadian moderate impairments and less than five per cent for people with mild disabilities.

These Canadians are not only missing out tax savings; they are forgoing tens of thousands of government monies to help them save for the future through an RDSP.

“It’s not being maximized well at all,” says Sara Kinnear, Winnipeg-based director of tax and estate planning at IG Wealth Management.

She points to the low take-up of the RDSP, which provides annual grants and bonds to individuals with disabilities age 49 and younger.

Statistics Canada data shows the use rate is about 35 per cent. That likely does not reflect the total number of disabled Canadians missing out because the gateway DTC, necessary to open an RDSP, has a much lower take-up rate.

One key reason for the low usage is the complexity involved in being approved for the DTC, says Liss Cairns, program manager with the Plan Institute in Vancouver, a non-profit that supports people with disabilities.

Applying for the credit is complicated, requiring a health-care provider to fill out and sign the form to confirm an individual’s disability. Many physicians now charge fees in the hundreds of dollars to do so, though Cairns adds new federal funding will help cover those costs.

Other challenges include public perception, especially for the RDSP.

Another issue is awareness even for individuals, who have the DTC and are eligible to open an RDSP. “Many think, ‘What value is this for me? I can’t save anything,’” Cairns says.

Even individuals who cannot contribute their own money to an RDSP could be missing out. They may be eligible for the Canada disability savings bond whereby the federal government contributes $1,000 annually to their RDSP to a lifetime maximum of $20,000.

Of course, individuals and their families able to contribute to an RDSP are eligible for the Canada disability savings grant. A matching grant, it provides up to $3,500 annually from the feds ($3 of benefit for every $1 contributed) to a lifetime maximum of $70,000.

Both the bond and grant are pared back gradually as household net income rises. The bond is eliminated when income exceeds about $56,000, and the matching grant is reduced to $1,000 maximum per year when income exceeds about $111,000.

“Overall, it’s a great program, but it’s also probably the most complicated registered program,” Kinnear says, noting individuals must be wary of early withdrawals for the plan.

Money withdrawn from an RDSP within 10 years of the last grant or bond may be subject to steep penalties, she adds.

It’s also important to start as soon as possible not only because money in the RDSP can compound tax-free. Grants and bonds can only be received up to age 49 though individuals can contribute to their plan up to age 59.

“The design is really to provide retirement savings for these individuals,” Kinnear says, adding all financial institutions can help set up an RDSP.

Another resource is the Plan Institute.

MacIver leaned on the organization, which provides free assistance, to access the gateway DTC, which allowed her to open the RDSP for her son.

Today, she is a word-of-mouth advocate, helping other parents of children with disabilities. “Generally, their response is: ‘I had no idea this all existed.’”

But they’re often elated they do exist. If only these many programs were easier to access.

“We know it can be very complex and overwhelming,” Cairns says. “But we also see the amazing financial empowerment that this can bring.”

Joel Schlesinger is a Winnipeg-based freelance journalist

joelschles@gmail.com