The Canada Revenue Agency (CRA) extended the income tax-filing deadline last year from April to September due to the COVID-19 pandemic. But the CRA has made it clear that it won’t do so this year. Make sure you do your taxes on time this year, even if your tax bill is zero. Why? Because the CRA offers refundable tax credits to those who file income tax returns. One such credit is the Goods and Services Tax/Harmonized Sales Tax (GST/HST) refund.
The CRA believes that GST accounts for a larger portion of income for low- and mid-income earners compared to high-income earners. Hence, it refunds some portion they paid to buy taxable goods and services.
When are you eligible for the GST refund?
If you file your income tax returns, the CRA automatically considers you for the GST refund. You should be at least 19 years old and a resident of Canada at the beginning of the month in which the agency refunds the amount and in the month prior. Your GST refund amount will depend on the following conditions:
- You have or had a spouse or common-law partner.
- You are or have been a parent and live or have lived with your child.
If you are sharing the custody of your child, you are eligible for half of the GST refund for that child.
How much can you get in GST refund in 2021-22?
To receive the GST refund, you need to fill Form RC66 if you have children and Form RC151 if you do not have children. The CRA will calculate the GST credit amount based on your 2020 tax returns and give you the benefit between July 2021 and June 2022.
If the combined 2020 adjusted net income of your family is less than $38,892, you can get up to
- $456 if you are single;
- $598 if you are married or living common-law; and
- $157 for each child under the age of 19.
If your adjusted family net income is above $38,892, the GST refund amount will begin to phase out.
The CRA credits the GST refund into your account on the fifth day of every quarter: January 5, April 5, July 5, and October 5. If you are turning 19 this year, the agency will issue the first GST refund on the payment date that comes after your 19th birthday.
How to maximize your GST refund
Investing at an early age can go a long way and help you retire early. Make the most of your tax credit and put the GST refund in the Tax-Free Savings Account (TFSA). You can invest up to $6,000 in your TFSA and earn tax-free income for life. You can even withdraw your dividend income or capital gains from this account tax-free.
Enbridge (TSX:ENB)(NYSE:ENB) is a good stock to start your TFSA investing. Leading oil and natural gas pipeline operator Enbridge is a Dividend Aristocrat. It has been paying incremental dividends for more than 25 years now. It paid dividends even during the pandemic when all other companies either ceased or cut dividends. The company’s robust pipeline infrastructure it built over the past +60 years helped it gain this reputation.
Enbridge transports around 20% of the natural gas consumed in the United States and nearly 25% of the crude oil produced in North America. This has helped it become the third-largest natural gas utility in North America. The company has a dividend yield of 7.3%.
If you invest your GST refund of $451 in Enbridge, you can earn an annual dividend of $33. The company could increase its dividend per share at a compounded annual growth rate (CAGR) of 8% over the next decade, which will increase your annual dividend income to $71. If you invest $592, your annual dividend after 10 years will surge to $93. This goes to show that small savings can create a pool over time.
File your returns and start investing at an early age.