The federal government has raised the income threshold that determines whether disabled children are “financially dependent” for the purpose of enabling tax-free rollovers from their parents’ RRSP and RRIF funds.

The federal budget raises the dependency threshold to $13,814 from $7,634.

That’s good news for advocates of the disabled, who have complained that changes introduced to the Income Tax Act in December were inadequate. Prior to that change, parents and grandparents had been able to transfer RRSP and RRIF funds to disabled children who were minors. The legislative change opened up the same strategy to parents of adult disabled children.

But the December change was called “a half fix” by advocates for the disabled, such as Richard Bridge, a Qualicum Beach, B.C., lawyer. Bridge does legal work for Planned Lifetime Advocacy Network, a national advocacy group for the disabled and their parents.

Federal tax rules enforced a dependency threshold of $7,624, effectively disallowing this estate-planning strategy for parents with disabled, adult children because the provincial disability benefits that the adult children received put them over the threshold, according to Bridge.

With today’s budget, that dependency threshold is increased, allowing more access to this strategy for parents of adult disabled children. Ottawa estimates that the measure will cost $10 million annually.

Ottawa is also unveiling a new $1,600 child disability benefit, effective July 2003, for families of low and modest income. The eligibility requirements are identical to those for the disability tax credit. The full benefit will be given to low-income families receiving both the child tax benefit and the national child benefit supplement. After that, the new CDB will be reduced based on family income.

Ottawa is also funding continued study and improvement of the disability tax credit programs — an exercise that will cost $25 million in 2003-2004, and $80 million in 2004-2005.

With this budget, the federal government has established a technical advisory committee on tax measures for disabled people. It will advise the federal ministers responsible for finance and the CCRA. Over a period of 18 months, the committee will look at three key issues: DTC eligibility, particularly for people who suffer episodic and mental conditions; the list of daily activities used to determine eligibility; and identification of professionals used to determine eligibility.

In August 2002, the federal government issued a response to a report by the House of Commons committee on the status of persons with disabilities regarding DTC eligibility, which resulted in an uproar. The committee’s chairwoman, Toronto Liberal MP Carolyn Bennett, alleged that the government had ignored eligibility recommendations made by the committee.