Federal Budget 2023: 5 key takeaways
There’s no doubt that cost of living is one of the top financial concerns facing Canadians today.
With the latest federal budget pledging to make life in Canada more affordable, we examine 5 key areas that could possibly help in that regard.
1: FOOD COSTS
Food prices have seen a year-over-year increase of 11.4% – source: Statistics Canada.
To help alleviate the pocketbook pinch at the grocery store, the latest budget has introduced the Grocery Rebate for low and modest income Canadians.
What is it?
A one-time payment offered through the Goods and Services Tax Credit system that will be delivered by the Canada Revenue Agency.
How much will it put back into your wallet?
- If you’re a single adult/no children: up to $234
- If you’re a single senior: up to $225
- If you’re a family of 4 (2 adults/2 children): up to $467
When will it be made available?
As soon as legislation is passed, so stay tuned.
2: POST-SECONDARY EDUCATION COSTS
Canadian post-secondary tuition costs went up by an average of 2.6% year-over-year for 2022/23 – source: Statistics Canada.
In response to rising post-secondary costs, the federal budget has proposed changes to the following:
- An increase to Education Assistance Payment (EAP) withdrawal limits from a Registered Education Savings Plan (RESP)
- Enhancing the Canada student financial assistance program
RESP EAP withdrawal limit increase
While post-secondary costs have continued to rise exponentially over the past 25 years, EAP withdrawal limits for RESPs have not increased along with it.
What is the increase?
EAP withdrawal limits from an RESP have increased from $5,000 to $8,000 for full-time students and from $2,500 to $4,000 for part-time students during their first 13 weeks of enrolment.
When does the increase take effect?
As of March 28, 2023
Additional RESP update:
The 2023 budget also introduced changes to the rule for subscribers (the person or persons who open an RESP)—allowing divorced or separated parents to open joint RESPs for one or more of their children or to move an existing joint RESP to another promoter (the entity that administers/manages the RESP). This change also came into effect as of March 28, 2023.
Student financial assistance program updates
The federal government also pledged to inject $813.6 million to enhance student financial assistance for the (post-secondary) school year beginning August 1, 2023.
What does this mean for an individual student?
- Increase in Canada Student Grants by 40%, amounting up to $4,200 for full-time students
- Raising the interest-free Canada Student Loan limit from $210 to $300 per week of study
- The above increases will enable post-secondary students to access up to $14,400 in enhanced Canada Students Financial Assistance for the 2023/2024 school year
- Students with disabilities (defined as those with persistent, prolonged, or permanent disabilities) and students with dependents will also receive an increase of up to $20,000 per year in Canada Student Grants
Other notable changes:
The requirement for mature students (defined as 22 years of age and older) to undergo credit screening in order to qualify for federal student grants and loans for the first time has now been waived.
3: RISING COSTS ON HOME OWNERSHIP
EXISTING MORTGAGE HOLDERS
Regardless of where you are on the pay grid or what your pension income is like in retirement, rising interest rates have had an impact on everyone. However, if you’re a mortgage holder that happens to be particularly financially vulnerable, higher rates could push you beyond the means of affordability.
To help protect Canadian mortgage holders:
- The federal government is taking steps to ensure that federally-regulated financial institutions provide Canadians with fair and equitable access to relief measures that are appropriate for the circumstances they are facing (without having to incur unnecessary penalties, internal bank fees, or interest charges)
- This includes extending amortizations, adjusting payment schedules, or authorizing lump-sum payments
- Existing mortgage regulations may also allow lenders to provide a temporary mortgage amortization extension (even past 25 years)
FIRST-TIME HOME BUYERS
43% of Canadians plan on purchasing their first home in the next 5 years – source: The Harris Poll
If you’re an aspiring first-time owner, a friendly reminder that the Tax-Free First Home Savings Account (FHSA)—first introduced as part of the 2022 budget, will be available soon.
- A registered plan that gives prospective first-time homebuyers the ability to save up to $40,000 on a tax-free basis
- Similar to a Registered Retirement Savings Plan (RRSP), contributions will be tax-deductible
- Similar to a Tax-Free Savings Account (TFSA), withdrawals will be non-taxable (so long as they are used to purchase a first home)
Learn more about the new FHSA.
4: JUNK FEE COSTS
From wireless phone and internet overages to the never-ending list of airline charges, our daily lives are filled with what’s become known as ‘junk fees’. Over time, these fees can add up to hundreds of dollars (sometimes even more).
The federal government intends to work with regulatory agencies, provinces, and territories to reduce junk fees by strengthening existing tools (or creating new ones).
This builds on recent steps the government has taken to protect Canadians from hidden costs, including:
- Amendments to the Competition Actto strengthen protections against hidden prices
- Amendments to the Bank Actand Financial Consumer Agency of Canada Act to protect Canadians’ rights and interests when dealing with their banks
- A new policy direction to the Canadian Radio-television and Telecommunications Commission to ensure Canadians can affordably and easily change, downgrade, or cancel services
5: THE COST OF MISSING OUT ON TAX BENEFITS
Up to 12% of Canadians currently don’t file income tax returns, the majority of whom are low-income – source: Government of Canada
To help more, lower-income Canadians access the benefits and supports in which they are entitled (I.e. Canada Child Benefit, Guaranteed Income Supplement), the federal government will expand a current automatic tax-filing program that’s been in place for the past 5 years.
- Since 2018, the Canada Revenue Agency (CRA) has delivered a free tax-filing service to Canadians called File My Return
- File My Return allows eligible Canadians to auto-file their tax return over the phone after answering a series of brief questions
- Those with simple tax situations and who are bringing in a lower (or are on a fixed) income then receive an invitation letter from the CRA to use File My Return
- Budget 2023 announced that the federal government will increase the number of Canadians who are eligible for File My Return to 2 million people by 2025 (almost triple the current number)
When it comes to balancing your daily cash flow beyond the federal budget—remember that we’re here to support you, every step of the way.
Since 1975, Educators Financial Group has been helping members to navigate the financial ups and downs of ever-changing times. So, if you’re looking to achieve a particular goal, overcome a challenge, or simply have a question, reach out to us. Our financial specialists offer expert, educator-specific advice and you’re never under any obligation. That’s the Educators difference.
Let’s start working on bettering your financial situation, right now.