Seniors are getting a special payout from Ottawa, but not this month
Canadian seniors, many of whom may be facing significant health, economic and social challenges due to COVID-19, will indeed be getting their one-time government payment as promised, but it won’t be coming for another month. Today, Prime Minister Justin Trudeau announced that seniors eligible for the Old Age Security (OAS) pension and the Guaranteed Income Supplement (GIS) will receive their special one-time, tax-free payment during the week of July 6. The payment “will help Canadian seniors cover increased costs caused by COVID-19, and give them greater financial security in this time of crisis.”
Seniors eligible for an OAS pension will receive a payment of $300, and those also eligible for the GIS will receive an additional $200, for a total of $500. Seniors who receive the allowance (for an eligible spouse, aged 60 to 64), will receive a single payment of $500. There are currently 6.7 million seniors who are eligible for the OAS pension and 2.2 million who are eligible for the GIS. The total cost of the special one-time payments is estimated to be $2.5 billion.
To qualify for the payment, the senior must have been eligible to receive the OAS or GIS supplement in June 2020. The OAS pension is paid to all persons aged 65 or over who meet the residency requirements. In order to receive it, a senior must have applied or been automatically enrolled at age 65.
Seniors can choose to defer receiving OAS for up to 60 months after the date they become eligible, in exchange for a higher monthly amount. The monthly OAS payment is increased by 0.6 per cent for every month the senior delays receiving it, up to a maximum of 36 per cent at age 70. Seniors who choose to defer their OAS in exchange for a higher monthly amount are not yet eligible to receive the OAS, and will therefore not be eligible to receive this one-time payment.
High-income seniors will also get the payment. While the OAS pension is subject to a 15 per cent recovery tax, sometimes referred to as the “clawback,” when net income is above $79,054, the government has confirmed that as long as the senior is eligible for the OAS pension in June 2020, they will receive the full amount, regardless of income. The number of seniors subject to the clawback is relatively small, at approximately seven per cent of OAS pensioners, and only two per cent have income high enough to have the OAS fully clawed back. The vast majority of OAS pensioners (nearly 85 per cent) have after-tax income below $50,000, so this payment will largely benefit seniors with low or modest incomes.
The one-time payment will be paid directly to seniors’ bank accounts during the week of July 6, assuming they’re enrolled for direct deposit. Otherwise, a cheque will be issued that week. For seniors who reside outside Canada, the one-time payment will also be received in July for those on direct deposit, but the government warns those living abroad to expect “delays … for cheques, given international postal disruptions.”
The special payment is non-taxable and as a result, seniors will receive the full amount (either $500 or $300), with no withholding. No tax slip will be issued and it does not need to reported on the 2020 tax return.