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: Budget 2010 and Budget 2011 measures that impact the Canada Education Savings Program (CESP).
- Date :
- August 15, 2011
- Budget 2010 and Budget 2011 measures that impact the Canada Education Savings Program (CESP).
This Information Bulletin will provide Promoters and Trustees with an overview of Budget 2011 announcements that affect the CESP.
Additionally, an update on the implementation date of the Budget 2010 Shared Custody measure is included.
Coming Into Force
The amendments introduced by each Budget 2011 measure have not yet received Royal Assent, however, the CESP is moving forward with implementation. Key dates for each measure will vary, as outlined below.
The Income Tax Act (ITA) amendments introduced by the Budget 2010 Shared Custody measure became law on December 15, 2010 with the Royal Assent of Bill C-47.
Budget 2011: Asset Sharing Among Siblings
Under current legislation, a subscriber of an RESP can transfer assets to another RESP without resulting in any penalty tax, if:
- the beneficiary of the receiving RESP is the same beneficiary named under the sending RESP; or
- a beneficiary under the receiving RESP is a sibling of a beneficiary under the sending RESP and
the beneficiary of the receiving plan has not attained 21 years of age at the time of the transfer.
Concerns were raised regarding the age condition for transfers between siblings in individual plans because tax penalties and the repayment of the Canada Education Savings Grant (CESG) may apply unless the transfer meets one of the conditions above. On the other hand, beneficiaries named to a family plan may share their assets and the CESG in the account regardless of their age.
Therefore, changes to the transfer rules found under subparagraph 204.9(5)(c)(ii) of the Income Tax Act (ITA) have been proposed to allow transfers between individual RESPs for siblings without tax penalties and without triggering the repayment of CESG. Even if the receiving beneficiary is over 21 years of age, the transfer will be allowed, provided that the beneficiary under the receiving RESP had not attained 21 years of age when the receiving RESP was opened.
This change will allow more flexibility to share assets among individual plans, and therefore ensure that beneficiaries of family plans and individual plans will have equal access to funds for the purpose of Educational Assistance Payments (EAPs).
A consequential amendment to the Canada Education Savings Regulations (CESR) has also been proposed in Budget 2011 to ensure that the CESP legislative framework aligns with the ITA in this respect.
The proposed amendment to the CESR is retroactive and will apply to transfers made after 2010.
Should there be any transfers made after 2010 that were previously ineligible but would now be eligible under the new measure, the CESP will deal with such instances on a case-by-case basis. Please contact your Promoter Support Officer by e-mail at email@example.com or by calling 1-888-276-3632.
Budget 2011: Education Tax Measures – Study Abroad
Budget 2011 proposes to reduce the minimum course duration requirement from thirteen (13) consecutive weeks to three (3) consecutive weeks for Canadian students enrolled on a full-time basis at a university outside Canada. This measure will improve access to Educational Assistance Payments (EAPs) for Canadian residents who pursue post-secondary studies outside Canada.
The reason for this change is that many programs at foreign universities are based on semesters that are shorter than 13 weeks, which result in many Canadian students being denied access to EAPs.
EAPs may now be made to Canadian students enrolled on a full-time basis in programs of at least 3 consecutive weeks in length, at a university outside Canada.
The CESP is aligning to this measure by allowing CESG to be paid as part of EAPs. This will improve access to CESP incentives for Canadian students studying abroad.
Note that this change does not apply to colleges or other educational institutions outside Canada.
This measure will apply to EAPs made after 2010.
Questions related to the Study Abroad Education Tax Measures for EAP purposes can be directed to the Canada Revenue Agency Registered Plans Directorate telephone enquiries service. This services is available Monday to Friday from 8:00 a.m. to 5:00 p.m., Eastern Time (with a voice mailbox system to take messages outside those hours):
In the Ottawa area
For service in English 613-954-0419
For service in French 613-954-0930
Toll free elsewhere in Canada
For service in English 1-800-267-3100
For service in French 1-800-267-5565
Budget 2010 Update: Shared Custody
Budget 2010 proposed to allow more than one eligible individual to receive the Canada Child Tax Benefit (CCTB) and the Universal Child Care Benefit (UCCB) in a given month. This measure will improve the allocation of child benefits between parents who share custody of a child on a more or less equal basis.
This change impacted the CESP since eligibility for the Additional Canada Education Savings Grant (Additional CESG) is linked to eligibility for the CCTB.
In order to pay Additional CESG in respect of a beneficiary, the CESP requires custody information and the income level of the Primary Caregiver (PCG) of the beneficiary (this could be an individual or an agency). In cases of shared custody, the CESP previously selected the income of the PCG that had custody of the child closest to January of the benefit year.
With the introduction of the shared custody provision in Budget 2010, a beneficiary under 18 years of age could have up to two PCGs in the same month in a given year. In administering this shared custody provision as it pertains to Additional CESG, the CESP will select the income of the PCG that is named on the contribution transaction that is reported to the CESP system by the Promoter to determine the Additional CESG entitlement.
This change will apply to contributions requesting Additional CESG processed by the CESP on or after July 1, 2011.
Previous Information Bulletin
For more information, please refer to previous Information Bulletin PCEE/CESP-2010/11-003-399 – Budget 2010 Measures that Impact the Canada Education Savings Program dated July 23, 2010.
Questions on this Information Bulletin should be directed to the Canada Education Savings Program by e-mail at firstname.lastname@example.org, or by calling 1-888-276-3632.
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