By Rob Cosman, Partner, Jones & Cosman Chartered Professional Accountants
The March 2016 Federal budget brought about changes to several programs that affect seniors, including Old Age Security and the Guaranteed Income Supplement. The government has indicated that $670 million was added to these two programs. Many of the changes came into effect in July 2016, and others will come later. Find out what the changes are and how they could apply to you.
Changes to Old Age Security
The Old Age Security program is a monthly payment the Government of Canada makes to eligible Canadians over the age of 65. It is the country’s largest pension program and aims to ensure that seniors have a minimum guaranteed income. As of October 2016, individuals earning less than $119,615 are eligible for OAS, and the maximum monthly payment amount is $578.53.
In 2012, the government announced it would gradually phase in a change to the age of eligibility for OAS, eventually pushing it back to 67 years of age. In the March 2016 budget, the new government reversed this decision and announced the age of eligibility would remain at 65.
Another component of OAS is the allowance for people aged 60 to 64. Under this program, a benefit is available to the spouses or common-law partners of GIS recipients. The spousal allowance can reach a maximum of approximately $1,100 per month.
In the same 2012 announcement, the previous government had decided to change the age of eligibility from 60 to 64 years old to 62 to 66 years, harmonizing the program with the previous change. Here also, the March 2016 budget reversed this decision and kept the eligibility age range at 60 to 64.
Changes to the Guaranteed Income Supplement
As the name implies, the Guaranteed Income Supplement is an addition to OAS. The GIS provides a monthly nontaxable benefit to OAS pension recipients who have a low income and are living in Canada. To qualify for the GIS, seniors must receive OAS and have an income that is lower than the maximum annual threshold. The threshold varies depending on marital status, and it is indexed annually to account for inflation. For 2016, it is as follows:
- For single, widowed, or divorced pensioner: $17,544 (individual income)
- For spouses or common-law partners of persons receiving the full OAS pension: $23,184 (combined income)
- For spouses or common-law partners of persons not receiving the full OAS pension: $42,048 (combined income)
- For spouses or common-law partners of persons receiving the allowance: $42,048 (combined income)
- The March 2016 budget increased the GIS effective July 1, 2016, by up to $947 annually for seniors whose income is comprised almost exclusively of OAS and the GIS. This increase enhancement more than doubles the previous maximum.
To be eligible for the maximum annual amount of $947, single seniors must have an annual income, other than OAS and GIS, of approximately $4,600 or less. Above this level of income, the amount of the increased benefit is gradually decreased. At an income level of $8,400, the person can no longer receive the additional benefit. Of note, benefits are adjusted quarterly with increases in the cost of living.
The new rules also increase amounts that can be received by senior couples who live apart for reasons beyond their control, such as when one person is in a long-term care facility while the other still lives at home. Prior to the March 2016 budget, the law allowed for senior couples who were both GIS recipients to receive benefits based on their individual incomes in these circumstances. The 2016 changes extend this treatment to couples receiving both GIS and allowance benefits,
Future Proposals That Affect Seniors
Two other measures that may eventually have an impact on seniors were announced at the same time as these changes. First, the federal government announced it has launched discussions with provinces and territories along with public consultations to determine how the Canada Pension Plan can be enhanced. Second, the government is also looking into the creation and development of a senior-specific index to calculate the indexation rate of programs such as the GIS, OAS, and CPP. The index is provisionally called the Seniors Price Index and seeks to reflect the variations in the cost of living faced by seniors.
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About Rob Cosman
Rob Cosman, is a Chartered Professional Accountant who runs his own accounting and tax practice with his wife in Toronto, Ontario. Beginning in 2000, Rob’s career spanned over Halifax, Cayman Islands and Toronto. Rob held senior industry positions including CFO roles in public and private industries ranging from telecommunications, retail sales, and consumer packaged goods.
Rob has over 10 years of tax experience and is the author of numerous articles. He has the ability to take complex tax situations, explain them in common sense terms and guide clients to make the best decisions based on their individual situations.