Update on Québec’s economic and financial situation – fall 2021
On November 25, 2021, Québec Minister of Finance éric Girard presented an economic update.
Here are the primary tax-related changes.
Measures impacting individuals
Extraordinary cost of living allowance
The increase in consumer prices seen in the last year has reduced Québec households' purchasing power. While it may be relatively easy for high-income families to absorb the price increase, the same is not true for low-and middle-income households.
Low-income households, which generally spend a higher proportion of their income on essentials like food and housing, are unable to increase their resources to pay for these essentials. Consequently, these households have tough choices to make about consumption.
In this context, the government is introducing the extraordinary cost of living allowance, a single, non-reducible lump-sum payment that comprises:
To get this benefit, a household must have received the refundable solidarity tax credit during the July 2021 to June 2022 payment period. The extraordinary allowance will be disbursed automatically to eligible households starting January 24, 2022.
Enhanced senior assistance amount
When it released the fall 2018 Update on Québec's Economic and Financial Situation, the government announced that it was introducing a senior assistance amount. With an initial value of $200 per senior, this tax assistance was designed to provide additional help to low-income seniors who were 70 years of age or older.
To provide additional financial assistance for low-income seniors, the government is enhancing the senior assistance amount as of the 2021 taxation year.
The maximum annual assistance offered will rise from $209 to $400 per senior aged 70 or older starting in 2021. Subsequent to this enhancement, seniors aged 70 or older will be able to benefit from the tax credit up to a family income of:
The refundable senior assistance tax credit remains reducible based on family income to ensure that the assistance goes solely to the low-income seniors who need it the most.
Therefore, for 2021, a single person will receive the maximum amount offered, $400, up to a family income of $23,575, while a couple in which both spouses are 70 years of age or older will receive a maximum of $800 up to a family income of $38,340.
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The additional assistance offered by the senior assistance amount will be combined with that provided by the extraordinary cost of living allowance. Implementation of these two measures will enable a person aged 70 or over who lives alone to receive additional assistance of $466 up to an income of $27,575 to deal with the rise in the cost of living in 2021.
A low-income senior living alone will receive up to $675 in total, namely:
To quickly reduce financial pressure on families facing high costs in non-subsidized childcare services, the government is enhancing the refundable tax credit for childcare expenses, beginning in the 2021 taxation year.
The enhanced tax credit is intended to ensure that parents pay a net fee that is relatively equivalent to that of a subsidized daycare, regardless of their family income.
The limit for qualifying childcare expenses for children under seven years old is increased to $10,400 per year, beginning in 2021, which is equivalent to a daily rate of $40 for a child attending daycare full time, or 260 days.
For parents whose children do not attend childcare all year, this new limit may cover a daily rate higher than $40. For example, the tax credit covers a daily rate of nearly $58 for a child who is in childcare for only 180 days a year.
This limit is also indexed annually and will rise to $10,675 in 2022, the equivalent of a daily rate of $41.06.
Initiatives to combat the labour shortage and stimulate economic growth
Although the number of unemployed has increased by more than 50,000 since the start of the pandemic, over 200,000 positions remain unfilled. The government plans to make this issue an economic priority in 2022.
This update therefore includes initiatives to give employers access to a sufficient pool of qualified labour in high-priority sectors. These initiatives will also enable the government to continue to provide essential public services, particularly health care, education and educational childcare services.
Resources are also being provided to support businesses in boosting their productivity.
The Minister of Labour, Employment and Social Solidarity will announce the details of measures to combat the labour shortage.
This article was written by Advanced Financial Planning for advisors. It is intended merely as an update, not as legal advice. Clients should consult a specialist for advice based on their specific circumstances.