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Human Resources and Skills Development Canada

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Advancing the Inclusion of People with Disabilities 2006

Chapter Four: Income, Income Support, and Tax Measures

Canadians with disabilities have a lower average income and rely more on government programs for income support.

People with a disability are not always able to earn an adequate income through employment. While the average earnings of people with disabilities increased by 3.7% between 1999 and 2004 (vs. 5.3% for people without disabilities), they remained substantially lower than the average earnings of those without disabilities (SLID 1999-2004).

Table 10: Average earnings for people with and without disabilities, and earnings of people with disabilities as a percentage of the earnings of those without, 1999-2004
Year People with Disabilities People without Disabilities %
1999 29,600 34,000 87.1
2000 30,400 35,400 85.9
2001 29,400 35,700 82.4
2002 30,100 35,900 83.8
2003 30,600 35,300 86.7
2004 30,700 35,800 85.8
PWD:
people with disabilities
PwoD:
people without disabilities

Source: Survey of Labour and Income Dynamics, 2004, Table R25468VT.

People with disabilities were more likely to have low earnings. About 17.1% of people with disabilities have earnings of less than $5,000 in contrast to 12.4% of people without disabilities. In addition, people with disabilities are less likely to have high earnings. About 18.4% of people with disabilities have incomes of $50,000 or more, compared to 23.4% of those without disabilities. There are significant differences between men and women. For both sexes, people with disabilities are more likely to have lower earnings and less likely to have higher earnings. However, women with disabilities are much more likely to have very low earnings (19.6% have earnings of under $5,000, in contrast to 14.6% of men with disabilities), and much less likely to have high earnings (10.9% earn $50,000 or more, in contrast to 25.6% of men with disabilities).

Table 11: Distribution of earnings of individuals aged 16-64 by disability status and sex, 2004 (%)

Salary

All

Men

Women
All PWD PwoD All PWD PwoD All PWD PwoD
$1-4,999 13.2% 17.1% 12.4% 10.6% 14.6% 9.7% 16.2% 19.6% 15.5%
$5,000-19,999 27.6% 28.6% 27.3% 22.6% 24.0% 22.2% 33.3% 33.4% 33.1%
$20,000-29,999 14.4% 14.6% 14.2% 12.6% 13.3% 12.1% 16.6% 16.1% 16.5%
$30,000-39,999 12.5% 12.4% 12.6% 12.6% 12.4% 12.5% 12.5% 12.4% 12.6%
$40,000-49,999 9.9% 8.9% 10.1% 11.1% 10.1% 11.4% 8.5% 7.6% 8.7%
$50,000-59,999 6.7% 5.9% 6.9% 8.4% 7.5% 8.6% 4.8% 4.2% 5.0%
$60,000 and over 15.6% 12.5% 16.5% 22.2% 18.1% 23.5% 8.1% 6.7% 8.6%

Source: Survey of Labour and Income Dynamics, 2004, Table R25468VT.

Although many people with disabilities can become self-sufficient if given the opportunity, some are unable to be in the labour market, and rely on governments to provide the financial resources to meet their basic needs (shelter, food, and clothing). People with disabilities are three times more likely to have income from government sources as their major source of income: 27% vs. 9% (SLID 2003). However, this reliance on government sources decreased over the years, from 32% in 1999. Moreover, in 2003, wages and salaries were the main source of income for 54% of adults with disabilities, while 74% of those without disabilities relied on wages and salaries. For people with disabilities, this represents an increase of three percentage points, up from 50% in 1999.

Table 12: Major source of income for working-age adults with disabilities, 1999-2003
  Wages and salaries Self-employment income Government sources Investment income; private insurance pensions Other income
1999 49.7% 5.2% 31.7% 7.8% 2.0%
2000 51.1% 5.6% 31.3% 6.7% 1.5%
2001 51.2% 5.6% 30.6% 7.0% 2.1%
2002 53.0% 6.2% 28.2% 7.0% 2.6%
2003 54.2% 6.1% 26.8% 7.3% 2.6%
Total 52.0% 5.7% 29.5% 7.2% 2.2%

Source: SLID, 1999-2003

Recognizing all of these factors, the Government of Canada uses its fiscal policy to support people with disabilities and their caretakers through a variety of income support measures. It also provides tax measures so that people with disabilities and those who care for them are treated more fairly. In addition, the Income Tax Act offers tax privileges to registered charities, which can contribute to building the capacity of the disability community.


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1. Tax Measures for People with Disabilities

Two departments play a key role in developing and administering the income tax system. The Department of Finance is responsible for formulating tax policy and introducing new tax legislation, and the Canada Revenue Agency (CRA) administers the tax laws. In addition, the Department of Justice provides legal advice and litigation services to both the CRA and Finance Canada.

This section further describes the roles of Finance Canada and the CRA. It also contains a description of the programs HRSDC undertakes to provide income support.

Finance Canada is actively involved in the Government’s policy and legislative agenda, helping to develop and implement fiscal, economic, social, and financial policies and programs. Its responsibilities include preparing the federal budget, developing tax and tariff policy and legislation, managing federal borrowing on financial markets, administering major transfers of funds to provinces and territories, developing regulatory policy for the country’s financial sector, and representing Canada in international financial institutions and fora.

Finance Canada is responsible for developing tax policy. The personal income tax system provides a number of tax credits and deductions for people with disabilities and their caregivers, including:

  • the disability tax credit;
  • the disability tax credit supplement for children;
  • the medical expense tax credit;
  • the caregiver credit;
  • the infirm dependant credit;
  • the disability supports deduction; an
  • the refundable medical expense supplement.

These tax measures recognize that people with disabilities and their caregivers face extra disability-related expenses that reduce their ability to pay tax. This function of recognizing costs in the tax system helps to level the playing field for people with disabilities and their caregivers.

In addition to these tax measures, the Government of Canada offers a benefit delivered through the tax system to families caring for children with disabilities, the Child Disability Benefit.

Technical Advisory Committee on Tax Measures for Persons with Disabilities

In 2003, the Technical Advisory Committee on Tax Measures for Persons with Disabilities was established to provide advice on how to address tax issues affecting people with disabilities. The Committee’s final report, submitted in December 2004, contains 25 recommendations.

Budget 2006 completed the implementation of the committee’s policy recommendations and went beyond by:

  • Increasing the maximum annual Child Disability Benefit to $2,300 from $2,044 effective July 2006. The Child Disability Benefit is a supplement of the Canada Child Tax Benefit payable in respect of children in low- and modest-income families that are eligible for the DTC.
  • Extending eligibility for the Child Disability Benefit to middle- and higher-income families caring for a child who is eligible for the DTC, including virtually all families that are currently eligible for the Canada Child Tax Benefit base benefit, effective July 2006.  
  • Increasing the maximum amount of the refundable medical expense supplement to $1,000 from $767 for the 2006 tax year. The refundable medical expense supplement improves work incentives for Canadians with disabilities by helping to offset the loss of coverage for medical and disability-related expenses under social assistance when recipients move into the labour force.

Other

An expert panel was appointed in July 2006 by the Minister of Finance to examine ways to help parents save for the long-term financial security of a child with a severe disability, and reported its recommendations to the Minister of Finance on December 12, 2006.  A New Beginning - The Report of the Minister of Finance's Expert Panel on Financial Security for Children with Severe Disabilities can be found at www.fin.gc.ca/activty/pubs/disability_-eng.asp.

The Canada Revenue Agency administers:

  • tax laws for the Government of Canada and for most provinces and territories; and
  • various benefit and credit programs delivered through the tax system.

The CRA has taken significant steps during the past year to enhance tax fairness for people with disabilities. Many of these changes were prompted by the report of the Technical Advisory Committee on Tax measures for Persons with Disabilities, entitled Disability Tax Fairness. Several of these initiatives are ongoing, such as a review of Form T2201 (Disability Tax Credit Certificate), yearly consultations with external partners, and increasing awareness of the various tax measures available to people with disabilities, to name a few.

Information on tax expenditures for measures directed at individuals is available in Appendix B.

The Office of the Auditor General of Canada regularly audits the CRA. The administration of the disability tax credit has been exempt from an in-depth audit because the CRA does an up-front review of Form T2201 when it is initially received, unlike post-assessing reviews of other credits and allowable expenses that taxpayers claim.

The CRA regularly conducts internal evaluations and audits in the form of monitoring trips to tax centres and offices in Canada and focus testing of existing and new forms, policies, procedures, and compliance programs. As well, the CRA has established a Centre of Expertise in Sudbury where a team of qualified personnel will review, on request, disability tax credit claims that have been disallowed.

Surveys and service evaluation

Based on one of the recommendations made in the Disability Tax Fairness report concerning awareness of the disability tax credit, a telephone survey has been developed and will be completed by the end of 2006. Selected taxpayers who receive a Canada Pension Plan Disability benefit are going to be surveyed about their awareness of the disability tax credit and other tax measures that the CRA offers to people with disabilities.

Since 2004, the CRA has held consultations with external partners, including lawyers, physicians, and representatives of various health organizations. These consultative sessions resulted in some very positive changes to letters from the CRA to the public, and to Form T2201.

In an effort to increase awareness of the tax measures available to people with disabilities, the CRA attended a number of conferences in 2006, both as an exhibitor and presenter. Although initially surprising to some audiences, the CRA's attendance at these conferences was felt to be very worthwhile and it is anticipated that this practice will be continued.


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2. Registered Charities

Many organizations that work with people with disabilities qualify as registered charities. This contributes to building the capacity of the disability community by providing tax benefits to registered charities and people who donate to these organizations. A charity that is registered with the CRA72 has two privileges associated with its registration:

  • It is exempt from paying income tax; and
  • Individuals who make donations to the charity can claim a non-refundable tax credit in respect of the donation, and corporate donors can claim a charitable deduction.

An organization may also benefit from the special rules that apply to charities with regard to the Goods and Services Tax and other federal taxes. Provincial, territorial, and many municipal governments provide favourable treatment to registered charities. For example, like the federal government, all provinces and territories provide charitable donation credits or deductions in respect of charitable donations.

When filing annual information returns with the CRA, charities must indicate the fields in which they operate and the relative importance of each activity for the organization. Of the 77,496 registered charities that filed a 2004 return, 1,955, or 2.5%, listed "services for the physically or mentally challenged" as their most important field. An additional 1.1% listed this as the second (585) or third (267) most important field. 

3. Other Programs that Provide Income Support to People with Disabilities

Canada Pension Plan (Disability)

In 2005-06, almost 296,000 individuals with severe and prolonged disabilities, along with 89,000 of their dependent children, received $3.3 billion in Canada Pension Plan Disability (CPPD) monthly benefits. The 2006 maximum monthly benefit is $1,031, and the average is $775 per month. The children’s monthly benefit in 2006 is $200.47 for each eligible child. 

Since January 31, 2005, beneficiaries who stop receiving CPPD benefits because they return to work are entitled to have their benefits automatically restarted if their disability returns and prevents them from working. During 2005-06, 161 CPPD clients were able to have their benefits quickly restarted using these provisions. While the new provision has only been in effect for a relatively short time, early feedback is positive.

In January 2006, Human Resources and Social Development Canada concluded a new agreement with long-term disability insurers that provides increased protection for CPP Disability children’s benefits. The agreement improves transparency and accountability with respect to the reimbursement of retroactive CPPD payments. Specifically, insurers cannot seek reimbursements in cases when CPP children’s benefits are offset by the insurer.

Human Resources and Social Development Canada partnered with the United States Social Security Administration to host a second international seminar on disability income policy. The seminar focused on measures and supports that facilitate successful and long-term employment experiences for recipients of disability income programs. Conference participants included government officials and non-government experts in the field of disability from several countries that are members of the Organisation for Economic Co-operation and Development.

Employment Insurance sickness benefits

Employment Insurance provides up to 15 weeks of sickness benefits to help people who cannot work due to short-term illness, injury, or quarantine. Sickness benefits are intended to complement a range of other supports that are available for longer-term illness and disability, including benefits offered through employer-sponsored group insurance plans, private coverage held by individuals, and long-term disability benefits available under the Canada Pension Plan.

Expenditure

Annual spending for EI Sickness Benefits in 2004-05 was $813.2 million.

New Horizons for Seniors Program

The New Horizons for Seniors Program provides funding for community-based projects that encourage seniors to contribute to their communities through their social participation and active living. Although not targeted directly to seniors with disabilities, projects funded under this program have both a direct and indirect impact on seniors with disabilities. Among the projects that the New Horizons for Seniors Program funded in 2005-06, 15 involved organizations that deal with people with disabilities. These projects received a total of $319,825 in funding.

4.First Nations

Indian and Northern Affairs Canada is responsible for supporting First Nations and Inuit in developing healthy, sustainable communities and in achieving their economic and social aspirations, in part through its Assisted Living Program,73 and through special needs assistance provided through the Income Assistance Program.

The Assisted Living Program was part of the federal government’s general policy to provide First Nations on reserves with access to services reasonably comparable to those provided by the provinces and territories to other Canadians. It came into existence in 1981-82.

The Assisted Living Program supports First Nations people who have functional limitations due to age, health problems, or disability to maintain their independence, to maximize their level of functioning, and to live in conditions of health and safety.

The program is divided into three components:

  • In-Home Care - provides financial assistance for non-medical personal care services such as attendant care, housekeeping, and meal preparation.
  • Institutional Care - reimburses some expenses for social care in designated facilities.
  • Foster Care - provides funding for supervision and care in a family-like setting to individuals who do not require 24-hour care but are unable to live on their own;
  • Disabilities Initiatives - provides funding for projects to improve the coordination and accessibility of existing disability programs and services on reserves. These may include such things as advocacy, public awareness, or regional workshops.

Program objectives and services

The objective of the Assisted Living Program is to provide social support services, based on an assessed need, that meet the special needs of individuals with functional limitations due to age, chronic illness, or disability, at a standard that is comparable to the reference province or territory of residence, regardless of age.

The program provides individuals with social support services and assistance with their daily activities, allowing them to remain at home and in their communities whenever possible. When providing services at home is not feasible and institutional care is required, the Assisted Living Program may fund non-medical care for people in designated provincial or territorial facilities (up to federal level Type II).

The Disabilities Initiative provides funding for projects to improve the coordination and accessibility of existing disability programs and services on reserves. These projects may include advocacy, public awareness, and regional workshops.

Program impact and results

The anticipated results of the program are to:

  • alleviate hardship;
  • support individuals in maintaining functional independence in their homes or in supportive housing environments or foster placements that are in or close to their communities. This support is provided through social support services that are comparable to those that the reference province or territory provides to the general population; and
  • encourage greater self-sufficiency for First Nation individuals and communities.

National allocation

The 2006-07 national allocation for the Assisted Living Program is $94.5 million.

Indian and Northern Affairs’ Income Assistance program74 provides funding for First Nations communities to administer income assistance activities with the objective of providing all eligible individuals and families on reserve with the means to meet the basic needs of food, clothing, and shelter. Indian and Northern Affairs must adopt the rates and eligibility requirements of the host provincial or territorial income assistance program and, following those criteria, may also fund special needs, such as dietary requirements, personal incidentals, household items, guide dogs, transportation, accommodation, and equipment which are essential to the physical or social well-being of a final recipient, but may not be included as items of basic needs. The financial need is determined through an income test and other eligibility requirements.

  • [72] The Charities Directorate of the CRA registers qualifying organizations as charities, gives technical advice on operating a charity, and handles audit and compliance activities. To qualify for registration, an organization must be established and operated exclusively for charitable purposes, and it must devote all of its resources to charitable activities. These charitable purposes and activities are defined through common law. The courts have recognized as charitable those organizations that have been established to prevent and relieve sickness and disability (both physical and mental). For example, this includes hospitals, clinics, nursing and convalescent homes, and home care services. More information on registered charities is available on the CRA website at www.cra-arc.gc.ca/charities.
  • [73] More information on the Assisted Living Program can be found at http://www.ainc-inac.gc.ca/hb/sp/alp-eng.asp.
  • [74] Further information regarding Indian and Northern Affairs Canada’s Income Assistance Program can be found at http://www.ainc-inac.gc.ca/hb/sp/iap-eng.asp.

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Date Modified:
2011-08-05