Ottawa is planning two changes to the Canada Child Tax Benefit. The first will increase the portion of the CCTB that goes to families with disabled children. The second is the controversial proposal to phase out the national child benefit supplement for low-income families and replace it with the proposed Universal Child Care Benefit – giving all families $100 per month for each child under the age of six.

The CCTB is the principal federal instrument for providing financial assistance to families with children. It currently has three components: the CCTB base benefit, the National Child Benefit supplement, and the Child Disability Benefit.

The CDB is payable to low- and modest-income families who meet the eligibility criteria for the disability tax credit.

The 2006 federal budget is proposing two changes to the CDB. One will be an increase in the maximum annual CDB to $2,300 from $2,044, starting in July 2006. Thereafter, the benefit will continue to be indexed for inflation. The second change proposes to extend the CDB to more families by lowering the rate at which the CDB is reduced as family income rises.

Effective July 2006, the CDB will be reduced to zero as net family income reaches $151,378 for a family caring for one or two children eligible for the disability tax credit, and $208,878 for a family caring for three children eligible for the disability tax credit.

Meanwhile, the Conservatives are moving ahead with their plan to introduce, effective July 2006, the Universal Child Care Benefit, to provide all families with $100 per month ($1,200 per year) for each child under the age of six.

Amendments will be made to the Income Tax Act to make the UCCB taxable in the hands of the lower-income spouse or common-law partner. However, amounts received under the UCCB will not reduce other benefits, such Employment Insurance or parental leave benefits. The UCCB will also not reduce the amount of expenses claimable under the childcare expense deduction.

Currently, the National Child Benefit supplement enhances the CCTB base benefit for children under the age of seven years. But Ottawa intends to eliminate this as of July 1, 2006.

This change has drawn criticism. The Ottawa-based Caledon Institute for Social Policy noted in a report published in late April that the abolishment of the NCB supplement – set by the previous government to reach $249 a year in 2006 – must be deducted from the $1,200.

This supplement goes to low and modest-income families, wrote the Caledon Institute’s president, Ken Battle, while high-income families are more likely to claim childcare expenses.

Meanwhile, Ottawa is proposing to boost the number of childcare spaces in Canada by setting aside $250 million a year, beginning in 2007-08.

It plans to hold consultations for delivering effectively on this promise. The budget promises more information regarding the consultations will be forthcoming after the budget.

Finally, Ottawa is proposing a new non-refundable tax credit up to $500 toward fees for enrolling a child under 16 in “an eligible program of physical activity.” This new measure is set to begin in 2007 and be available in subsequent tax years. Eligible expenses will include fees for operation and administration of the program, instruction, renting facilities, equipment used in common, for example, team jerseys, referees and judges, and incidental supplies such as trophies. The purchase or rental of equipment for exclusive personal use, travel, meals and accommodation will not be eligible.

The federal government intends to set up a small group of health and physical fitness experts to advise it in defining an “eligible program of physical activity.” The group will consider whether the activity should include instruction or supervision, and programs for children with disabilities.

Claims for the children’s fitness tax credit will need to be supported by a tax receipt that contains sufficient information for the Canada Revenue Agency to monitor compliance. Similarly, organizations will be required to keep relevant books and records.

The CRA will be guarding against any attempts to make dual claims for the children’s fitness tax credit and childcare expenses.