Written on behalf of Feigenbaum Consulting
Over the last several months, the difficulties that disabled Canadians have been having in dealing with the Canada Revenue Agency (CRA) and obtaining their disability tax credit (DTC) have been making headlines.
Earlier this year, Global News reported that an estimated 1.8 million Canadians live with a severe disability, but only 40% of them have been accessing the federal disability tax credit (DTC). Part of the reason for this are what the news outlet describes as “mind-numbing rules” for eligibility devised by the CRA.
The Disability Tax Credit
The DTC is a non-refundable tax credit that lowers or entirely eliminates the tax burden on Canadians who live with disability (and their caregivers), who often have both higher living expenses and lower income.
Eligibility for the DTC is also a precondition for other benefits, including the Child Disability Benefit as well as government contributions to Registered Disability Savings Plans. Overall, these benefits can be worth up to $12,000 annually for a median-income family, and $7,600 for an adult with a severe disability earning $45,000 in annual income.
Qualifying for the Disability Tax Credit
In order to be eligible for the disability tax credit, a person must pay a physician (or other health professional) to certify that he or she requires “life-sustaining therapy” that is administered at least three times a week, for a minimum of 14 hours weekly. In the alternative, a doctor must attest that the individual in question is “markedly restricted in performing a basic activity of daily living all or substantially all of the time, or that the cumulative effect of restrictions across several activities is equal to being markedly restricted in one basic activity of daily living”.
Disability benefits must be reapplied for periodically, which means this process must eventually be repeated, even where a disability is a severe and lifelong.
Global News reports that some health professionals refuse to follow this procedure, particularly where the patient requesting the assessment is a mental health patient (where eligibility is even more stringent). Physicians who do attempt to follow this protocol and fill out the necessary forms often have varying interpretations of what the CRA guidelines mean, which sometimes results in otherwise eligible patients being denied access to the credit. In yet other instances, physicians receive puzzling or inconsistent feedback from the CRA.
Eligibility Criteria Do Not Reflect the Reality of Living with a Disability
The experts interviewed by Global News note that the CRA’s “check-the-box” approach to evaluating disability claimants does not align with the realities of living with certain disabilities.
For instance, in a 2014 submission to the CRA, the Schizophrenia Society of Ontario noted that the DTC guidelines require that an impairment due to mental illness must be continuously present for at least 90% of the time. However, this does not reflect the nature of mental health disabilities which are often “temporary, episodic and changing in nature with symptoms varying in severity and duration over the course of people’s lives.”
Experts also note the “perplexing” recent change by the CRA which denies benefits to Canadians with diabetes on the basis that time spent using a portable insulin pump or monitoring their carbohydrates (which is essential for their day to day health) does not count as “life-sustaining therapy”.
Senate Committee Demands Overhaul
More recently, CBC News reported that a new Senate committee report has demanded an overhaul of the CRA’s disability support programs.
The report, which was released this past June, concluded that in 2016-2017, there were 15,000 more DTC rejections than there had been the year before. In finalizing their results, the committee heard from National Revenue Minister Diane Lebouthillier, as well as officials from the CRA, Employment and Social Development Canada, and the Department of Finance. The report concluded that the CRA was found to have applied the eligibility criteria for the DTC “inequitably and unfairly”.
The report makes 16 recommendations calling on the federal government to simplify the application process and clarify eligibility criteria to make them more transparent for those appealing decisions. The report also calls for government to embrace a philosophical shift in in how it treats Canadians with disabilities, including consulting with other agencies who have expertise in the needs of disabled individuals, including the Ministry of Health and the Ministry of Employment and Social Development, since, as one Senator puts it “those people have a greater sensitivity and understanding of the needs of disabled people than perhaps the tax collectors do.”
The Senate report came on the heels of public backlash after many disabled Canadians noticed an increased in DTC application rejections last year. This led to Lebouthillier announcing, last December, that there would be a review of rejected applications under the “life-sustaining therapy” category. The CRA subsequently reviewed more than 2,200 rejected applications and subsequently approved more than 1,300 of them.
A spokesperson for Lebouthillier told CBC news that the Minister is reviewing the Senate’s recommendations and will respond. The CRA, meanwhile, has taken steps to ensure that DTC rules are applied correctly and consistently.
If you have questions about the DTC or about any other element of personal tax planning, contact Feigenbaum Law. Regardless of the complexity of your matter, we believe it is important that you understand the processes and the steps we take on your behalf. To this end, we make it a priority to educate our clients and take the mystery out of their taxes. We also have processes in place to make sure that you can always reach us with your questions and are always kept well informed with respect to your matter. We truly value communication and strive to always be accessible. Contact us to learn more about how we can help or call us at (905) 695-1269 or toll free at (877) 275-4792.