The Canadian government has made a significant stride in healthcare accessibility by making psychotherapy and counseling services tax-exempt. This change, which took effect in 2024, makes mental health care more accessible for everyone. This exemption allows people to afford the care they need without the financial burden.
This move is seen as a step towards aligning mental health services with other health care services, which have long been exempt from taxes. It also underscores the importance of mental health in public policy and acknowledges the critical role that these services play in supporting the mental well-being of Canadians.
Understanding the New Tax Exemption
Historically, these essential mental health services were subject to GST/HST. This meant that individuals seeking these services were required to pay an additional 5% to 15% on top of the service fees, depending on the province. posing financial hurdles for both practitioners and clients. However, with the passage of Bill C-59, services provided directly to individuals by psychotherapists and counseling therapists are now exempt from GST/HST. This shift aims to make mental health care more affordable and accessible across Canada. The decision to make these services tax-exempt reflects the growing recognition of mental health as an essential aspect of overall health and well-being.
This exemption applies to services provided by licensed psychotherapists, registered social workers, and other regulated mental health professionals.
Why Is This Change Important?
Mental health is just as crucial as physical health. Many Canadians struggle with anxiety, depression, and other mental health issues. Previously, the cost of therapy often deterred people from seeking help. Now, with the tax exemption, more individuals can prioritize their mental health without worrying about the added expenses.
Think of it like this: if you needed glasses but they were twice the price because of tax, you might put off getting them. But without that extra cost, you can see clearly again much sooner.
Who Benefits from This Tax Exemption?
The change benefits everyone in Canada. Whether you’re a student, a professional, or a retiree—all individuals can access psychotherapy and counseling services without added financial stress. Families can also benefit as their loved ones may find the help they need sooner. Imagine a parent who’s been struggling but couldn’t afford therapy. Now, they can seek help and improve not just their own well-being, but also their family's overall happiness.
How Does It Work in Practice?
To utilize this tax exemption, you simply need to find a licensed therapist or counselor. When you pay for their services, no tax will be added to your bill. It’s a straightforward benefit. Just ensure that your provider meets the necessary qualifications. Keep your receipts. Not only will they serve as proof of payment, but they can also help track your spending for future reference.
Action Steps for Providers
If you’re a psychotherapy or counseling therapy provider affected by these changes and no longer need to charge GST/HST, consider these steps to determine if you should cancel your GST/HST account.
1. Verify Eligibility: Ensure your services meet the criteria outlined in Bill C-59 for the exemption. If you still offer taxable services of $30,000 or more in 4 consecutive quarters, you will be required to maintain your GST/HST account. Please note that these now-exempt services rendered to an individual do not count toward your threshold.
2. Access CRA Online Services: Log in to the CRA’s Business Account portal for account management. Click on the RT0001 account.
3. Navigate to GST/HST Account Services: Look for options related to managing your GST/HST account, if you scroll down you should see “Close your GST/HST account” on the right-hand side.
4. Submit Your Request: Follow the prompts to initiate the cancellation of your GST/HST account. Provide accurate information to expedite the process and select the date that you would like to de-register.
5. Confirmation: Once processed, you’ll receive official confirmation of your account cancellation from the CRA.
6. Timeline: You will have 30 days from the date you selected as your final GST/HST registrant date to file and pay any previously collected sales tax.
Embracing Change for Better Mental Healthcare in Canada
The new tax-exempt status for psychotherapy and counseling services in Canada stands as a beacon of hope for many. It empowers individuals to seek help and prioritize their mental well-being. While mental health has always been important, this change makes getting support simpler and more affordable.
The elimination of GST/HST on eligible therapy services marks a significant shift for practitioners in Canada. This change makes therapy more accessible for clients but also introduces new administrative and financial considerations for practitioners. To navigate these changes effectively, practitioners should update their systems, prepare for increased costs, and consider deregistering from GST/HST if they only provide non-taxable services. Consulting with an accountant for complex situations, such as taxable services, will ensure a smooth transition. These adjustments will help streamline operations and continue providing essential therapy services to those in need.
Connect with Filing Taxes at 416-479-8532. Schedule an NTR engagement appointment with us and take the first step toward proper management of your finances.
Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.