Tax Alert - Climate Action Incentive Payments Announced

November 22, 2018

The federal government recently made a move to levy carbon taxes on fuel in provinces that have not created robust carbon tax plans of their own. New regulations to the Greenhouse Gas Pollution Pricing Act were introduced on October 23, 2018 to ensure that there is a price on carbon pollution across Canada starting in 2019. As part of this new plan, the government also announced that residents of provinces affected by the federal fuel charge will be eligible for a rebate in the form of the Climate Action Incentive payment. Details about this payment are contained in draft federal income tax legislation released on October 24, 2018.

It is proposed that the federal carbon pollution charges will apply in Ontario, New Brunswick, Manitoba, and Saskatchewan. Consequently, only residents of those provinces will be able to apply for the Climate Action Incentive payment. Residents of provinces that currently have, or will have in 2019, a carbon tax plan that meets a certain federal standard, will not be entitled to this payment. The implementation of the carbon pollution charges for Yukon and Nunavut recognizes that the Northwest Territories will have a carbon pollution pricing system in place as of July 2019. As a result, the government’s approach seeks to align the implementation date of carbon pollution pricing across all territories and has not yet announced payment amounts for any of the territories.

The federal government will set the payment amount, but the amount will vary by province, and is based on family size. This new payment will be administered through the income tax system in the form of a refundable tax credit. Consequently, individuals aged 18 and older will need to file a tax return to receive this payment or reduction of taxes owing for 2018 even if they wouldn’t otherwise file an income tax return. Although the general requirement is to be age 18 or older, individuals who are younger than 18 and are a parent who resides with their child, are married, or in a common-law partnership will also be able to apply for the credit by filing an income tax return. Only residents of Saskatchewan, Manitoba, Ontario and New Brunswick will be able to apply for the Climate Action Incentive refundable credit with their 2018 tax return.

The chart below shows the 2019 anticipated credit amount in the affected provinces, based on government sources. The amounts are not income dependent, but are dependent on family size (number of dependants).

Figures are not currently available for Yukon or Nunavut territories.

Family Member Saskatchewan Manitoba Ontario New Brunswick
Single adult or the first adult in a couple $305 $170 $154 $128
Second adult in a couple (single parents will receive this amount for their first child) $152 $85 $77 $64
Per child in the family (starting with the second child for single parents) $76 $42 $38 $32
Total for a family of four $609 $339 $307 $256

The Department of Finance has also proposed additional fuel charge relief for greenhouse operators and power plant operators that generate electricity for remote (i.e., off-grid) communities. In addition, farmers, fishers, and residents of small and rural communities will see additional targeted relief. Canadians are invited to provide comments on these additional proposals detailed below by November 23, 2018.

For more information, please contact one of our trusted BDO advisors.

The information in this publication is current as of November 5, 2018.

This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.