Overview of the Automatic Federal Benefits Proposal
As part of Budget 2025, the Canadian government proposes to amend the Income Tax Act to allow the Canada Revenue Agency (CRA) to file a tax return on behalf of eligible individuals who meet specified criteria. The goal is to reach low-income Canadians who often don’t file returns—yet may miss out on benefits such as the GST/HST credit, Canada Child Benefit, Canada Workers Benefit, and others. (budget.canada.ca)
Eligibility Criteria: Who Exactly Qualifies
An individual must satisfy all of the following:
- Taxable income is below the lower of either the federal basic personal amount or the provincial equivalent (plus age/disability amounts, if relevant).
- All income is from sources already reported via information returns filed with CRA.
- Has not filed a return for at least one of the prior three taxation years.
- Filed no return for the current year before or within 90 days after the deadline.
- Meets any additional criteria specified by the Minister. (budget.canada.ca)
If eligible, the CRA would prepare a draft return, provide it to the individual, who would have 90 days to review and make modifications. If they don’t respond, CRA may go ahead and file. A notice of assessment would follow. (budget.canada.ca)
Why This Matters: Compliance & Access
- Ensures that individuals who don’t file still receive benefits and credits they are entitled to. “Missing out” becomes less common.
- Reduces burden for those who avoid filing due to complexity, cost, or lack of knowledge.
- Potentially increases compliance and administrative efficiency—more people brought into the tax-net for benefits properly without full active participation.
Examples to Illustrate
Example 1: Maria is 65, no dependents, small pension income of $9,000/year, below basic personal amount. She did not file for three years, but her only income source was pension with T4A slips. CRA could prepare a return for 2025, send it to Maria for review. If she doesn’t respond in 90 days, they file it. Maria then receives her full credits.
Example 2: Alex has interest income, freelance work and employment income; some income not reported to CRA. Alex likely doesn’t qualify, since “all income must come from reported sources.”
What To Do Now: Practical Steps
- Low-income Canadians should check whether they’ve missed filing tax returns—especially if you may have been entitled to credits.
- Keep copies of all slips and documentation for all income, even small amounts.
- If CRA sends a draft return, review it carefully and correct any missing or incorrect information.
- Consult a tax professional or CRA resources if unsure about eligibility.
Caveats & Things to Watch For
- Law is proposed, not yet in force. Timing could shift with legislative process.
- Individuals always have ability to opt out if they prefer not to have CRA file for them.
- Possible privacy or administrative concerns about accuracy—CRA requires reliable information to prepare returns.
- Some benefits depend on marital status or partner/spouse returns—may need coordination.
This represents a big step toward ensuring fairness and ease of access to benefits. If you may qualify, start organizing your documents now so you’re ready when it comes into effect.