Canada Education Savings Grant

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The information contained on this page is technical in nature and is intended for Registered Education Savings Plan (RESP) and Canada Education Savings Program promoters. For general information, visit the RESP section.

Official title: Revised Income Brackets for additional Canada Education Savings Grant (CESG)

Information Bulletin

Number:
CESP/PCEE-2010/11-001-395
Date:
July 6, 2010
Objet:
Notice #395 - Revised Income Brackets for additional Canada Education Savings Grant (CESG).

Previous Bulletin

This Information Bulletin supersedes the Information Bulletin PCEE/CESP-2009/10-002-373 dated January 4, 2010.

Purpose

The purpose of this Information Bulletin is to inform Promoters and Trustees of changes to the Canada Education Savings Act (CESA) regarding income brackets used to determine rates of payment for additional Canada Education Savings Grant (CESG) for 2009 and 2010.

Changes to CESA and Income Thresholds to Determine Additional CESG

Budget 2009 increased the two lowest personal income tax brackets in the Income Tax Act (ITA) above their indexed values, thus creating a discrepancy between the income brackets in the ITA and the income thresholds in CESA. As such, consequential amendments have been made to CESA to ensure that the financial eligibility for both the additional CESA and Canada Learning Bond are aligned. These amendments will become law with the Royal Assent of Bill C-9.

Subsection 2(1) of CESA will be amended to include the following definitions:

"first threshold" for a particular year means the dollar amount referred to in paragraph 117(2)(a) of the Income Tax Act, as adjusted under that Act for the particular year;

"second threshold" for a particular year means the higher dollar amount referred to in paragraph 117(2)(b) of the Income Tax Act, as adjusted under that Act for the particular year.

CESA clause 5(4)(a)(i)(A) and subparagraph 5(4)(a)(ii) will be amended to ensure that the individual's adjusted income used to determine the amount of additional CESG a beneficiary is eligible for is linked to the taxation rates stipulated in paragraph 117(2) of the ITA, and no longer refer to specific dollar amounts.

Therefore, the income thresholds found in the Information Bulletin dated January 4, 2010 will be replaced as follows:

In the Year... The additional CESG rate is 20% when net family income is…(First Threshold) The additional CESG rate is 10% when net family income is more than…(Second Threshold)
Old New Old New
2010 $39,065 or less $40,970 or less $39,065 but not more than $78,130 $40,970, but not more than $81,941
2009 $38,832 or less $40,726 or less $38,832 but not more than $77,664 $40,726 but not more than $81,452

No Change to Basic CESG

Calculations for basic CESG remain unchanged at 20% of RESP contributions per beneficiary per year.

How These Changes Affect Promoters and Trustees

The new definitions for income brackets and the consequential amendments to CESA noted above are retroactive to the 2009 contribution year. As such, RESPs with transactions dated between January 1st, 2009 and July 1st, 2010 will be re-examined, and where applicable, reprocessed. In all cases of reprocessing, changes will result in an increased amount of grant paid to the RESP of the beneficiary.

The reprocessing of all affected transactions will take place in the July 2010 processing period.

Promoter Tools

Due to the above changes, the RESP Provider User Guide, the InfoCapsules and the CESG-CLB Quick Facts will be updated and available for download on the Promoter Tools page.

Contact Us

Questions on this Information Bulletin should be directed to the Canada Education Savings Program by e-mail at cesp-pcee@hrsdc-rhdcc.gc.ca or by calling 1-888-276-3624.

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