On Posted on by Dellendo Farquharson to Accounting and Tax, Personal Taxes, Tax Planning & Management

Financial Planning for New Immigrants in Edmonton

Welcome to Edmonton, one of Canada’s most vibrant and diverse cities. Moving to a new country is an exciting journey filled with opportunities and challenges. One of the essential steps to settling in is understanding the Canadian financial landscape, particularly the tax system, and taking advantage of the credits and benefits available to you as a newcomer. This guide aims to provide you with fundamental insights into the Canadian tax system and offer practical financial planning tips to help you establish a strong financial foundation in your new home.

Financial Planning for New Immigrants in Edmonton
Financial Planning for New Immigrants in Edmonton

Understanding the Canadian Tax System

Residency for Tax Purposes

  • Resident vs. Non-Resident: In Canada, your tax obligations depend on your residency status for tax purposes, not just immigration status. Factors include the length of stay, ties to Canada (home, family), and intentions.
  • New Residents: As a newcomer who establishes significant residential ties with Canada, you become a resident for tax purposes from the date of arrival.

Taxation of Worldwide Income

  • Global Income Reporting: Canadian residents are required to report their worldwide income, including earnings from foreign sources.
  • Foreign Tax Credits: To avoid double taxation, Canada offers foreign tax credits for taxes paid on income earned abroad.

Tax Year and Filing Deadlines

  • Tax Year: The Canadian tax year runs from January 1st to December 31st.
  • Filing Deadline: Individual income tax returns are generally due by April 30th of the following year.
  • Self-Employed Individuals: If you or your spouse/common-law partner are self-employed, the filing deadline extends to June 15th, but any taxes owed must still be paid by April 30th.

Social Insurance Number (SIN)

  • Importance of SIN: A SIN is a nine-digit number required to work in Canada and access government programs and benefits.
  • Application: Apply for a SIN through Service Canada by providing proof of identity and immigration status.

Types of Taxes

Federal and Provincial Income Taxes

  • Dual Taxation: Canadians pay both federal and provincial income taxes. Rates vary based on income levels and province of residence.
  • Progressive Tax System: Higher income is taxed at higher rates, making the system progressive.

Goods and Services Tax (GST)

  • GST: A federal tax of 5% applied to most goods and services.
  • Provincial Sales Tax: Alberta does not have a provincial sales tax, only the GST applies.

Property Taxes

  • Municipal Taxes: If you own property, you are required to pay property taxes to the City of Edmonton, which fund local services like schools, roads, and emergency services.

Filing a Tax Return

When and How to File

  • Obligation to File: If you owe taxes or want to claim a refund or credits, you must file a tax return.
  • Methods: Returns can be filed electronically using NETFILE-certified software, by mail, or through a tax professional.

Required Documents

  • Income Slips: T4 slips from employers, T5 slips for investment income.
  • Receipts: For deductions and credits, such as childcare expenses, medical expenses, and charitable donations.
  • Foreign Income Statements: Documentation of any income earned outside Canada.

Credits and Benefits Available to Newcomers

1. GST/HST Credit

Overview
  • Purpose: A tax-free quarterly payment that helps individuals and families with modest incomes offset all or part of the GST they pay.
  • Benefit Amount: Varies based on family income, marital status, and number of children.
Eligibility Criteria
  • Residency: Must be a resident of Canada for income tax purposes.
  • Age Requirement: Must be 19 years or older, or have (or had) a spouse/common-law partner, or be a parent and live with your child.
  • Income Threshold: Benefit reduces as income increases.
Application Process
  • Automatic Application: When you file your income tax return, the CRA automatically determines your eligibility.
  • First-Time Applicants: Complete Form RC151 – GST/HST Credit Application for Individuals Who Become Residents of Canada.

2. Canada Child Benefit (CCB)

Overview
  • Purpose: A tax-free monthly payment to eligible families to help with the cost of raising children under 18.
  • Benefit Amount: Up to $6,997 per year for each child under 6, and up to $5,903 per year for each child aged 6 to 17 (as of July 2023).
Eligibility Criteria
  • Residency: Must be a resident of Canada for tax purposes.
  • Primary Caregiver: Must be primarily responsible for the care and upbringing of the child.
  • Tax Returns: Both you and your spouse/common-law partner must file tax returns every year.
Application Process
  • Online: Apply using the My Account service on the CRA website.
  • Form: Complete Form RC66 – Canada Child Benefits Application.
  • Birth Registration: Some provinces offer automatic enrollment when registering the birth of a child.

3. Alberta Child and Family Benefit (ACFB)

Overview
  • Purpose: Provides direct financial assistance to lower and middle-income families with children under 18 in Alberta.
  • Benefit Amount: Combines a base component and a working component, with maximum benefits ranging from $1,330 to $3,325 depending on the number of children.
Eligibility Criteria
  • Residency: Must be an Alberta resident.
  • Child Under 18: Must have at least one child under 18.
  • Income Threshold: Based on family net income.
Application Process
  • Automatic Enrollment: No separate application is needed. Eligibility is determined when you apply for the Canada Child Benefit.
  • Tax Filing: Annual tax returns must be filed to assess eligibility.

4. Canada Workers Benefit (CWB)

Overview
  • Purpose: A refundable tax credit that supplements the earnings of low-income workers.
  • Benefit Amount: Up to $1,428 for single individuals and $2,461 for families.
Eligibility Criteria
  • Income Requirements: Must have working income over $3,000 and meet net income thresholds.
  • Residency: Must be a resident of Canada throughout the year.
  • Exclusions: Full-time students (unless they have dependents) and individuals incarcerated for 90 days or more are not eligible.
Application Process
  • Tax Filing: Claim the benefit on your annual tax return using Schedule 6.
  • Advance Payments: Apply for advance payments to receive benefits throughout the year.

5. Newcomers’ Guide

  • CRA Resources: The CRA provides a Newcomers to Canada guide, which is a valuable resource for understanding tax obligations and benefits.
  • Language Support: Information is available in multiple languages to assist non-English speakers.

Financial Planning Tips

Opening Bank Accounts

  • Chequing and Savings Accounts: Essential for daily transactions and savings.
  • Documents Required: Passport, SIN, and proof of address.
  • Credit Union vs. Bank: Explore options to find accounts with low fees and suitable services.

Building Credit History

  • Importance: A good credit history is crucial for obtaining loans, mortgages, and even renting apartments.
  • Secured Credit Cards: Start with a secured credit card to build credit.
  • Timely Payments: Always pay bills on time to maintain a good credit score.

Retirement Savings Plans (RRSPs)

  • Tax-Deferred Growth: Contributions are tax-deductible, and investments grow tax-free until withdrawal.
  • Contribution Limits: Based on your earned income, up to a maximum limit.
  • Withdrawal Rules: Withdrawals are taxed and may have penalties if taken out before retirement.

Tax-Free Savings Accounts (TFSAs)

  • Tax-Free Growth: Investment income earned in a TFSA is tax-free, even upon withdrawal.
  • Contribution Limits: Annual contribution limit (e.g., $6,500 in 2023), with unused room carried forward.
  • Flexibility: Funds can be withdrawn at any time without penalty.

Budgeting and Financial Literacy

  • Create a Budget: Track income and expenses to manage finances effectively.
  • Emergency Fund: Set aside savings to cover at least three to six months of living expenses.
  • Financial Education: Utilize resources like the Financial Consumer Agency of Canada for tools and information.

How Bomcas Canada Accounting Firm Can Help

Navigating the Canadian financial and tax systems can be complex, especially for newcomers. At Bomcas Canada Accounting Firm, we specialize in assisting new immigrants in Edmonton and across Canada with personalized financial planning and tax services.

  • Tax Preparation and Planning: Ensure compliance with tax laws and maximize eligible credits and benefits.
  • Financial Consultation: Provide guidance on budgeting, saving, and investing in the Canadian context.
  • Credit Building Strategies: Advise on building and maintaining a strong credit history.
  • Business Services: For entrepreneurial newcomers, offer support with business registration, accounting, and tax planning.
  • Multilingual Support: Our team can assist clients in multiple languages to ensure clear communication.

Contact Us Today

Embark on your new journey in Canada with confidence and a solid financial foundation.

At Bomcas Canada, we’re dedicated to helping newcomers integrate smoothly into Canadian society by providing expert financial and tax guidance.