Northern travel tax benefit expanded to include more residents
But changes also introduce more complexity for tax-filers, says chartered accountant
More northern residents will be able to take advantage of a tax perk this year, following changes the federal government has made to the northern residents travel benefit.
The expanded benefit offers up to $1,200 in tax deductions to northern residents who travelled to southern Canada. Previously, the benefit was only available to northerners whose employers paid travel benefits. This typically excluded lower-income residents.
The updated benefit allows northern residents to claim any medical trips and up to two non-medical trips.
Northern taxpayers will also be able to claim expenses from each family member included on a trip.
But the changes may not be as helpful to Nunavummiut as it appears on the surface, said Shawn Lester, a managing partner of accounting firm Lester Landau, which has an office in Iqaluit.
Lester said the changes to the travel benefit may disadvantage families because in the past, members of a household were able to claim more than two trips per person for their northern travel benefit, but that is limited to two now.
The new benefit should help Nunavummiut who are retired or self-employed, since those people may be able to afford to travel but are not employed by someone else, Lester said.
He added it will not be as likely that the changes help those in poverty since people on low income aren’t as likely to pay income tax anyway.
With northerners able to choose between the previous method of using employer paid travel as a benefit or the new $1,200 deduction, filing for the northern travel benefit will also be more complicated, Lester said.
“It’s just added one more question mark to the preparation of tax returns,” he said.
The change was announced in the 2021 federal budget. The federal government first proposed the change in late 2019, when Prime Minister Justin Trudeau stated in his mandate letter to Northern Affairs Minister Daniel Vandal that a tax deduction of up to $1,200 needed to be implemented for all northerners who travel.