Canadians travelling south of the border should be aware of how a proposed border tracking system could impact their government benefits.
Under the 2011 perimeter security pact, Canada and the United States agreed to set up co-ordinated systems to track entry and exit information from travellers at land borders.
According to a recent news report by The Canadian Press, the federal government will use its planned border exit-tracking system to avoid paying hundreds of millions of dollars in social benefits now going to people who may no longer be eligible to receive them.
The initiative is still in development and no official implementation date has been announced.
Here are five things that could be affected if you are travelling outside of Canada for an extended amount of time.
Access to the United States
If U.S. border officers believe that you may be extending your stay in the U.S. beyond the its tourism and visit (B-2) visa – which allows for 182 days (about six months) in a calendar year – you could be denied future re-entry to the country.
"For those Canadians who might choose to push the envelope while visiting the U.S. and extend their stay beyond 182 days, they could risk being denied entry to the U.S. in the future for a period of time or for life, " says Terry Ritchie, director of cross-border wealth services for Cardinal Point, a wealth management company with offices in Canada and the United States. "For many snowbirds, this is all about a U.S. lifestyle. So compromising this by pushing the envelope is just foolish. And now that both countries share travel information, it's just not possible any more."
Under the proposed tracking system, if the number of days a Canadian is present in United States exceeds 182 days, the U.S. government declares that individual as a U.S. resident for tax purposes, says Warren Dueck, cross-border taxation expert with W.L. Dueck & Co. LLP in Vancouver.
"The border tracking system certainly has both U.S. and Canadian tax implications once an individual has been deemed a U.S. resident," says Mr. Dueck. Canadians may be subject to Canada's departure tax, he says. In addition, if they were unaware they would be deemed a U.S. resident, their Canadian investment strategy and tax planning may have adverse U.S. tax results.
While the tracking system is currently proposed for sharing information with the federal government, provincial health-care authorities could request to tap into the network to monitor those Canadians no longer eligible for provincial health care but still receiving benefits.
"[One big abuse] is with provincial health care as there are people that have lived abroad for numerous years and then come back and visit family and use the system when they shouldn't be eligible," says Wayne Bewick, a partner with Trowbridge Professional Corp.
Child tax benefits
Families who no longer legally reside within Canada are no longer eligible to claim child tax benefits.
The Canada Revenue Agency and Employment and Social Development Canada expect to save between about $194-million and $319-million over five years once the long-anticipated system is fully in place, according to the Canadian Press report. Of that amount, it is anticipated between $125-million to $250-million will be saved by the CRA for the child tax benefit program.
"There are individuals who continue to file returns while living abroad, reporting nominal income in order to claim child tax and other benefits when they shouldn't be eligible to do so," says Mr. Bewick. "Having a tracking system in place would identify that these individuals are outside of the country well beyond the eligibility periods."
Old Age Security
Traditional snowbirds should not be concerned about losing their OAS based on the number of days they are outside of Canada, says Mr. Ritchie.
Eligibility for OAS does not rely on the number of days a Canadian resides in this country. A non-resident senior is eligible to receive an OAS payment as long as they were a Canadian resident for at least 20 years after the age of 18.
Seniors who could be affected by the tracking system are those living in the U.S. who have not been a Canadian resident for the required period of time but have continued to file a Canadian income tax return in a bid to make up the qualifying years, according to Mr. Ritchie.