“Final Pivot” – COVID-19 Emergency Benefits expire October 23rd, replaced by targeted supports

On Thursday, October 22nd, 2021 Deputy Prime Minister and Finance Minister Chrystia Freeland announced the “final pivot in delivering the support needed to deliver a robust recovery.” This “Final Pivot” means several existing pandemic support programs for individuals and businesses will expire on October 23rd, 2021:

In their place, the Federal Government announced:

  • The Tourism and Hospitality Recovery Program – provides support through the wage and rent subsidy programs, to hotels, tour operators, travel agencies, and restaurants, with a subsidy rate of up to 75%.

  • The Hardest-Hit Recovery Program – provides support through the wage and rent subsidy programs, would support other businesses that have faced deep losses, with a subsidy rate of up to 50%.

  • Canada Worker Lockdown Benefit – provides $300 a week to workers facing local lockdowns, including those not eligible for Employment Insurance. Anyone whose loss of income is due to their refusal to follow vaccination mandates will be excluded from accessing the aid.

Full details are in the links below:

Federal Budget 2021 Highlights

On April 19, 2021, the Federal Government released their 2021 budget. We have broken down the highlights of the financial measures in this budget into three different sections:

  • Business Owners

  • Personal Tax Changes

  • Supplementary Highlights

Business Owners

Extending Covid -19 Emergency Business Supports

All of the following COVID-19 Emergency Business Supports will be extended from June 5, 2021, to September 25, 2021, with the subsidy rates gradually decreasing:

  • Canada Emergency Wage Subsidy (CEWS) – The maximum wage subsidy is currently 75%. It will decrease down to 60% for July, 40% for August, and 20% for September.

  • Canada Emergency Rent Subsidy (CERS) – The maximum rent subsidy is currently 65%. It will decrease down to 60% for July, 40% for August, and 20% for September.

  • Lockdown Support Program – The Lockdown Support Program rate of 25% will be extended from June 4, 2021, to September 25, 2021.

Only organizations with a decline in revenues of more than 10% will be eligible for these programs as of July 4, 2021. The budget also includes legislation to give the federal government authority to extend these programs to November 20, 2021, should either the economy or the public health situation make it necessary.

Canada Recovery Hiring Program

The federal budget introduced a new program called the Canada Recovery Hiring Program. The goal of this program is to help qualifying employers offset costs taken on as they reopen. An eligible employer can claim either the CEWS or the new subsidy, but not both.

The proposed subsidy will be available from June 6, 2021, to November 20, 2021, with a subsidy of 50% available from June to August. The Canada Recovery Hiring Program subsidy will decrease down to 40% for September, 30% for October, and 20% for November.

Interest Deductibility Limits

The federal budget for 2021 introduces new interest deductibility limits. This rule limits the amount of net interest expense that a corporation can deduct when determining its taxable income. The amount will be limited to a fixed ratio of its earnings before interest, taxes, depreciation, and amortization (sometimes referred to as EBITDA).

The fixed ratio will apply to both existing and new borrowings and will be phased in at 40% as of January 1, 2023, and 30% for January 1, 2024.

Support for small and medium-size business innovation

The federal budget also includes 4 billion dollars to help small and medium-sized businesses innovate by digitizing and taking advantage of e-commerce opportunities. Also, the budget provides additional funding for venture capital start-ups via the Venture Capital Catalyst Program and research that will support up to 2,500 innovative small and medium-sized firms.

Personal Tax Changes

Tax treatment and Repayment of Covid-19 Benefit Amounts

The federal budget includes information on both the tax treatment and repayment of the following COVID-19 benefits:

  • Canada Emergency Response Benefits or Employment Insurance Emergency Response Benefits

  • Canada Emergency Student Benefits

  • Canada Recovery Benefits, Canada Recovery Sickness Benefits, and Canada Recovery Caregiving Benefits

Individuals who must repay a COVID-19 benefit amount can claim a deduction for that repayment in the year they received the benefit (by requesting an adjustment to their tax return), not the year they repaid it. Anyone considered a non-resident for income tax purposes will have their COVID-19 benefits included in their taxable income.

Disability Tax Credit

Eligibility changes have been made to the Disability Tax Credit. The criteria have been modified to increase the list of mental functions considered necessary for everyday life, expand the list of what can be considered when calculating time spent on therapy, and reduce the requirement that therapy is administered at least three times each week to two times a week (with the 14 hours per week requirement remaining the same).

Old Age Security

The budget enhances Old Age Security (OAS) benefits for recipients who will be 75 or older as of June 2022. A one-time, lump-sum payment of $500 will be sent out to qualifying pensioners in August 2021, with a 10% increase to ongoing OAS payments starting on July 1, 2022.

Waiving Canada Student Loan Interest

The budget also notes that the government plans to introduce legislation that will extend waiving of any interest accrued on either Canada Student Loans or Canada Apprentice Loans until March 31, 2023.

Support for Workforce Transition

Support to help Canadians transition to growing industries was also included in the budget. The support is as follows:

  • $250 million over three years to Innovation, Science and Economic Development Canada to help workers upskill and redeploy to growing industries.

  • $298 million over three years for the Skills for Success Program to provide training in skills for the knowledge economy.

  • $960 million over three years for the Sectoral Workforce Solutions Program to help design and deliver training relevant to the needs of small and medium businesses.

Supplementary Highlights

Federal Minimum Wage

The federal budget also introduces a proposed federal minimum wage of $15 per hour that would rise with inflation.

New Housing Rebate

The GST New Housing Rebate conditions will be changed. Previously, if two or more individuals were buying a house together, all of them must be acquiring the home as their primary residence (or that of a relation) to qualify for the GST New Housing Rebate. Now, the GST New Housing Rebate will be available as long as one of the purchasers (or a relation of theirs) acquires the home as their primary place of residence. This will apply to all agreements of purchase and sale entered into after April 19, 2021.

Unproductive use of Canadian Housing by Foreign Non-Resident Owners

A new tax was introduced in the budget on unproductive use of Canadian housing by non-resident foreign owners. This tax will be a 1% tax on the value of non-resident, non-Canadian owned residential real estate considered vacant or underused. This tax will be levied annually starting in 2022.

All residential property owners in Canada (other than Canadian citizens or permanent residents of Canada) must also file an annual declaration for the prior calendar year with the CRA for each Canadian residential property they own, starting in 2023. Filing the annual declaration may qualify owners to claim an exemption from the tax on their property if they can prove the property is leased to qualified tenants for a minimum period in a calendar year.

Excise Duty on Vaping and Tobacco

The budget also includes a new proposal on excise duties on vaping products and tobacco. The proposed framework would consist of:

  • A single flat rate duty on every 10 millilitres of vaping liquid as of 2022

  • An increase in tobacco excise duties by $4 per carton of 200 cigarettes and increases to the excise duty rates for other tobacco products such as tobacco sticks and cigars as of April 20, 2021.

Luxury Goods Tax

Finally, the federal budget proposed introducing a tax on certain luxury goods for personal use as of January 1, 2022.

  • For luxury cars and personal aircraft, the new tax is equal to the lesser of 10% of the vehicle’s total value or the aircraft, or 20% of the value above $100,000.

  • For boats over $250,000, the new tax is equal to the lesser of 10% of the full value of the boat or 20% of the value above $250,000.

If you have any questions or concerns about how the new federal budget may impact you, call us – we’d be happy to help you!

Extended COVID-19 Federal Emergency Benefits

On Friday, February 19, 2021, Prime Minister Justin Trudeau announced an extension to several of the COVD-19 federal emergency benefits.  The goal of this extension is to support Canadians who are still being financially impacted by the COVID-19 pandemic.

The following benefits are impacted:

  • Canada Recovery Benefit 

  • Canada Recovery Caregiving Benefit

  • Canada Recovery Sickness Benefit 

  • Employment Insurance

Canada Recovery Benefit

The Canada Recovery Benefit (CRB) provides income support to anyone who is:

  • Employed or self-employed, but not entitled to Employment Insurance (EI) benefits.

  • Has had their income reduced by at least 50 percent due to COVID-19. 

You can receive up to $1,000 ($900 after taxes withheld) a week every two weeks for the CRB. The recent changes now allow you to apply for this benefit for a total of 38 weeks – previously the maximum was 26 weeks.  

Canada Recovery Caregiving Benefit

The Canada Recovery Caregiving Benefit (CRCB) helps support people who cannot work because they must supervise a child under 12 or other family members due to COVID-19. For example, a school is closed due to COVID-19 or your child must self-isolate because they have COVID-19.  

You can receive $500 ($450 after taxes withheld) for each 1-week period you claim the CRCB. The recent extension made now allows you to apply for this benefit for a total of 38 weeks instead of the previous 26 weeks. 

Canada Recovery Sickness Benefit

The $500 a week ($450 after taxes) Canada Recovery Sickness Benefit (CRSB) is also getting a boost. If you cannot work because you are sick or need to self-isolate due to COVID-19, you can now apply for this benefit for a total of four weeks. Previously, this benefit would only cover up to two missed weeks of work. 

Employment Insurance 

Finally, the government will also be increasing the amount of time you can claim Employment Insurance (EI) benefits. You will now be able to claim EI for a maximum of 50 weeks – this is an increase of 24 weeks from the previous eligibility maximum.

For full details, go to https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/covid-19-benefits-credits-support-payments.html

Self-employed: Government of Canada addresses CERB repayments for some ineligible self-employed recipients

Great news for some ineligible self-employed Canadians who received the Canada Emergency Response Benefit (CERB). As per canada.ca:

“Today, the Government of Canada announced that self-employed individuals who applied for the Canada Emergency Response Benefit (CERB) and would have qualified based on their gross income will not be required to repay the benefit, provided they also met all other eligibility requirements. The same approach will apply whether the individual applied through the Canada Revenue Agency or Service Canada.

This means that, self-employed individuals whose net self-employment income was less than $5,000 and who applied for the CERB will not be required to repay the CERB, as long as their gross self-employment income was at least $5,000 and they met all other eligibility criteria.

Some self-employed individuals whose net self-employment income was less than $5,000 may have already voluntarily repaid the CERB. The CRA and Service Canada will return any repaid amounts to these individuals. Additional details will be available in the coming weeks.”

For full details, see full news release at https://www.canada.ca/en/revenue-agency/news/2021/02/government-of-canada-announces-targeted-interest-relief-on-2020-income-tax-debt-for-low–and-middle-income-canadians.html