Highlights of the 2023 federal budget

This year’s federal budget, A Made-in-Canada Plan: Strong Middle Class, Affordable Economy, Healthy Future, includes: 

• A national dental care plan for lower income people 
• Numerous funding and tax credit initiatives for promoting a green economy  
• A “grocery rebate” – a one-time payment of cash to approximately 11 million lower-income people who receive the GST tax credit.  
• Changes to registered education savings plans (RESPs) and registered disability savings plans (RDSPs)
   

Registered educational savings plans

A registered education savings plan (RESP) is an investment designed to help families save for their child’s post-secondary education. 

Increasing educational assistance payment withdrawal limits 

An educational assistance payment (EAP) is the amount paid to a beneficiary from an RESP to help finance the cost of an eligible post-secondary education. EAPs are limited to $5,000 for beneficiaries enrolled full-time and $2,500 for beneficiaries enrolled part-time in respect of the first 13 consecutive weeks of enrollment in a 12-month period.

Budget 2023 proposes to amend the Income Tax Act to permit EAP withdrawals of up to $8,000 for beneficiaries enrolled in full-time programs, and up to $4,000 for beneficiaries enrolled in part-time programs in respect of the first 13 consecutive weeks of enrollment. 

Allowing divorced or separated parents to open joint RESPs 

Currently, only spouses or common-law partners can be joint owners of an RESP. Parents who opened a joint RESP prior to their divorce or separation can maintain this plan afterwards but new joint RESP plans are unable to be opened. Budget 2023 proposes to enable 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.

These changes would come into force on March 28, 2023. 

Registered disability savings plan 

A registered disability savings plan (RDSP) is a savings plan intended to help parents and others save for the long-term financial security of a person who is eligible for the disability tax credit. Where the capacity of an individual who is 18 years of age or older is in doubt, the RDSP plan holder must be that individual’s guardian or legal representative as recognized under provincial or territorial law.

Currently, a temporary measure exists that is legislated to expire on Dec. 31, 2023, which allows a qualifying family member, who is a parent, spouse or common-law partner, to open an RDSP and be the plan holder for an adult whose capacity to enter into an RDSP contract is in doubt, and who doesn’t have a legal representative.

Budget 2023 proposes to extend the qualifying family member measure by three years, to Dec. 31, 2026. A qualifying family member who becomes a plan holder before the end of 2026 could remain the plan holder after 2026.

Budget 2023 also proposes to broaden the definition of ‘qualifying family member’ to include a brother or sister of the beneficiary who is 18 years of age or older. This proposed expansion of the existing qualifying family member definition would apply as of royal assent of the enabling legislation and be in effect until Dec. 31, 2026. A sibling who becomes a qualifying family member and plan holder before the end of 2026 could remain the plan holder after 2026.

Contact me if you’d like to discuss how these changes or other items in the 2023 budget may affect your financial plans.