There are issues that the Canada Revenue Agency can address immediately to make sure those eligible for the disability tax credit actually receive it.
Disability income supports should be designed to provide benefits and not create burdens for eligible recipients. Unfortunately, this is not the reality when it comes to one of the main benefits open to Canadians with disability: the federal disability tax credit (DTC).
Administered by the Canada Revenue Agency (CRA), the DTC is designed to recognize some of the higher costs faced by people with severe disabilities and their caregivers. Yet reports from Autism Canada and disability groups across the country suggest recent CRA decisions have resulted in people diagnosed with autism and intellectual disability having their eligibility for the DTC suddenly revoked or denied, despite having qualifying impairments in physical or mental functions, as described in the Income Tax Act.
This is unsettling news for families caring for children with disability, given that three in four children with disability identify as having a cognitive or mental-health-related disability. This issue goes beyond the credit itself, because DTC eligibility is frequently used for access to additional federal and provincial disability benefits.
Reports suggest recent Canada Revenue Agency decisions have resulted in people diagnosed with autism and intellectual disability having their eligibility for the disability tax credit revoked or denied, despite having qualifying impairments in physical or mental functions.
Revoking DTC eligibility means a family with a child with a severe disability can no longer receive up to $2,730 through the Child Disability Benefit and $4,000 or more in federal and provincial disability-related tax credits (depending on income and where they live). Such families also must close their child’s Registered Disability Savings Plans, forfeiting contributions from the government of up to $70,000 over the lifetime of the plan.
We commend the recent announcement by Revenue Minister Diane Lebouthillier that the Disability Advisory Committee will be reinstated next year. The committee’s mandate of advising on the CRA’s administration and interpretation of laws and programs relating to disability tax measures is sorely needed, as are efforts to improve awareness of the DTC and related benefits.
However, the committee has its work cut out for it. Recent concerns about people having their DTC eligibility revoked are only the tip of the iceberg.
Research tells us the DTC is already underutilized, meaning most Canadians with qualifying disabilities are not accessing the described benefits and credits. Of those who do claim the credit on their tax returns in any given year, only half of all claimants (including caregivers) actually receive value from the DTC.
In addition to awareness, three major barriers to accessing the DTC need to be addressed.
First, the DTC is a nonrefundable tax credit, which means that the credit itself is valuable only to those earning enough taxable income. This means it would be of little or no direct benefit to the one in five families in Canada with a child with a severe disability living in low income.
Second, eligibility criteria are poorly operationalized. Criteria have been criticized for lacking clarity, being open to interpretation, failing to accurately reflect the practicalities of living with a disability and requiring people with impairments in mental functions to meet a higher bar than for those with physical impairments. The CRA has even departed from wording in the Income Tax Act in tests of impairment in the DTC application form, which can impact whether a person receives DTC eligibility or not.
Finally, the application process is burdensome. The CRA’s public consultations in 2014 demonstrated that the application process was not user-friendly, and the result was a shorter form. However, access to help and information from the CRA has been reduced in recent years; the Auditor General found in November that two in three calls to the CRA’s call centres go unanswered.
The absence of a clear and transparent appeals process is also a problem. Consequently, some seek paid professional support to access the tax credit, including people with limited resources to spare. Third-party companies to help people apply for the DTC, many with hefty fees, are commonly used, necessitating laws to limit the amount they can charge applicants (something else that’s been on the government to-do list for years).
The good news is that these are problems that an empowered and transparent Disability Advisory Committee can advise on. But this is a lot to take on for a committee of 12 voluntary unpaid members meeting three times a year.
The CRA is the gatekeeper to several key federal disability benefits underutilized by eligible Canadians. There are issues that the CRA can — and should — address immediately, such as amending eligibility criteria to better align with the Income Tax Act.
It is time the federal government started taking this matter seriously.
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