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Archived - Helping Canadians Upgrade Their Skills

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February 1998


"Canadians know that their ability to continue earning depends on their ability to continue learning."

Finance Minister Paul Martin
1998 budget speech

Canadians know that the economy is becoming increasingly knowledge-based. And this is not only because of the new "high-skill" jobs in "high-tech" industries. There has been a steady rise in skill requirements in all sectors of the economy and in most types of jobs.

Today, more than ever, good jobs require greater knowledge, broader skills and higher education. And it is clear that more and more Canadians want or need to upgrade their knowledge and skills. For example, over the last 20 years, the number of adults returning to full-time study has tripled, most of them returning for job-related reasons.

The Canadian Opportunities Strategy will expand access for Canadians to the knowledge, skills and learning they will need for better jobs that deliver a better standard of living in the 21st century.

Tax-Free RRSP Withdrawals for Lifelong Learning

To keep their job or get a new one, many Canadians who are already in the workforce want to take time away from work to upgrade their skills through full-time study. But often they do not have the necessary financial resources. For many, the most readily accessible source of funds may be their registered retirement savings plans (RRSPs) -- a resource that, until now, they could not use without permanently reducing the amount of their retirement savings.

Few things are more critical to ensuring an adequate income in retirement than earning a good income while working. Allowing Canadians access to their RRSPs for retraining is a good way to achieve both goals.

Therefore, beginning on January 1, 1999, Canadians will be able to make tax-free withdrawals from their RRSPs for lifelong learning.

Who will be eligible?

How much can I withdraw?

Will I have to pay it back?

How will the repayment work?

What happens if I don't repay on time?

Am I restricted to only withdrawing funds once?

Example

John loses his job in 1999 and decides to take a one-year, full-time computer programming course. To finance his studies, he withdraws $5,000 from his RRSP, tax-free. He obtains a new job in the year 2000. He must repay $500 into his RRSP for each of the 10 years starting in 2001, although he can repay more rapidly at any time.

Tax Relief for Part-Time Students

Canadians know that the realities of the new job market require them to continually upgrade their knowledge and skills. A growing number are seeking to do this through part-time study, and the majority are trying to manage the difficult balance of work, family and study. The Canadian Opportunities Strategy will provide further support to them.

Education Credit

The education credit is one of the major ways the government provides assistance to post-secondary students. It helps with their non-tuition costs such as books and living expenses but, until now, has only been available to full-time students.

For the first time, beginning in 1998, about 250,000 part-time students enrolled in eligible post-secondary programs will be able to claim a portion of the education tax credit.

How much can I claim?

Example

Lynne is a part-time student. She is enrolled in two eligible courses for eight months during a year, and could be eligible for an education amount of $480 (i.e. eight months at $60 per month). This would result in an average combined federal-provincial tax saving of about $120. If her tuition is $1,200, the tuition and education credits together would be worth about $420 in tax relief.

Child Care Expense Deduction

Parents who want or need to upgrade their skills and knowledge may face the added costs of caring for their children. The 1996 budget enabled full-time students who are parents to claim the child care expense deduction against all types of income.

The 1998 budget proposes to enhance this deduction -- about 50,000 part-time students with dependants will now be able to deduct child care expenses.

Who will be eligible?

How much can I claim?

Example

Lynne, a single parent with two children age 8 and 6, is a part-time student for eight months of the year. She claims an education amount of $480, for a tax saving of $120. In addition, she will now be eligible to also claim all her child care expenses up to $2,200, for an additional saving of $550. Together, these new measures provide tax savings of $670.

If her tuition is $1,200, she currently gets a tax reduction of $300. Under the current system, that is the total tax relief she receives with respect to her education expenses. With this budget's two new measures for part-time students, the tax assistance for her education more than triples to $970.

The Canadian Opportunities Strategy

The Canadian Opportunities Strategy contains important measures to enhance affordable access to knowledge and skills.

How can I get more information?

For more information, call the Department of Finance, General Enquiries, at (613) 992-1573.

Copies of this brochure and other information regarding the Canadian Opportunities Strategy will be available at post-secondary institutions across Canada.

You can also obtain copies of this brochure or other budget papers from:

Distribution Centre
Department of Finance
300 Laurier Ave. West
Ottawa, Ontario, K1A 0G5
Tel.: (613) 995-2855
Fax: (613) 996-0518

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