In August 2021, the Government of Saskatchewan and the Federal Government signed a childcare agreement aimed at reducing childcare fees at licensed daycare institutions. This agreement is the first step in a five-year plan to reach, on average, $10 a day licensed daycare by 2025.
As a result of the agreement, licensed daycare centres in Saskatchewan are set to receive funding for services retroactive to July 1, 2021. This funding is to be provided in two payments: the first in January of this year and the second in March. These payments are intended to reduce daycare fees paid by parents and guardians for the period of July 1 to December 31, 2021.
However, due to how the agreement was structured, daycares are required to provide reimbursement to parents and guardians directly. While daycares are required to issue tax receipts for fees paid each calendar year to parents and guardians, there are new requirements as it relates to funding received.
What does this mean for licensed daycares in Saskatchewan?
Based on advice from Canada Revenue Agency, we have been advised that the following steps are necessary:
Firstly, upon receiving funding, daycares must provide direct reimbursement of a portion of fees paid by parents and guardians between the period of July 1 and December 31, 2021.
Secondly, after daycares provide reimbursement, they must also reissue updated receipts to parents and guardians for 2021 tax purposes. The formula for calculating reissued receipts is as follows:
- Fees paid in calendar 2021 (actual cash paid for fees)
- Less amount reimbursed in 2022 (actual cash reimbursed to parent/guardian)
- Equals new re-issued receipt amount
It is important to note that receipts can only be re-issued after reimbursement has occurred. It also important to note that there may be other approaches to addressing rebates based on individual circumstances so you should discuss with your accountant before re-issuing receipts.
What does this mean for parents and guardians?
According to the Government of Saskatchewan, although the reimbursement of net fees paid for the period of July 1 to December 31, 2021 will occur in the 2022 calendar year, parents and guardians must still claim the reimbursement on their 2021 tax return.
The taxpayer is responsible for reporting the reimbursement in their 2021 tax filing. There are two options available, depending on when receipts are reissued:
- Use the updated receipt at time of filing
- File an amendment to 2021 personal tax return after receiving the updated 2021 daycare receipt
Key takeaways:
Based on the agreement between the Government of Saskatchewan and the Federal Government, daycare centres are responsible for re-issuing amended receipts, which correctly reflect fees paid less the reimbursed amount for 2021.
The taxpayer is responsible to ensure that their 2021 personal income tax return is updated to include the final fee amount for 2021 (which includes the re-imbursed fees).
The information in this article is based on advice Virtus Group received directly from Canada Revenue Agency. If you’re unsure how these changes impact you, either as a facility operator or a parent or guardian, we recommend discussing this with your accountant or Canada Revenue Agency directly.
Jane Zaleschuk
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