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As many of you are most likely aware, the Canadian Government announced measures this week to support Canadians and Canadian businesses who have been impacted by the COVID-19 pandemic. While the economists amongst us like to refer to these measures in terms of value and % of GDP, I am going to avoid those references as in general the amounts are part estimation and part fabrication. What really matters is getting aid into the hands of those who need it and how that impacts you, your family, your business and your employees.
These are very challenging times for not just Canadians, but for the global population as a whole and the shockwaves from around the world will affect Canadians for many months to come. The measures outlined by the Federal Government are covered in detail here, so I won’t duplicate the content in this email, but will try to cover the items that may be more relevant to you at the present time.
So out of the measures announced, what are they, how do they impact you and what steps are needed to take advantage of them?
Support For Individuals and Families
Temporary Income Support for Workers and Parents:
For Canadians without paid sick leave (or similar workplace accommodation) who are sick, quarantined or forced to stay home to care for children, the Government is waiving the one-week waiting period and the requirement to provide a medical certificate as well as introducing an Emergency Care Benefit of up to $900 bi-weekly for those in similar circumstances who are not usually covered by EI.
For Canadians who lose their jobs or face reduced hours as a result of COVID’s impact, the Government is introducing an Emergency Support Benefit delivered through the CRA to provide up to $900 bi-weekly in support to workers who are not eligible for EI and who are facing unemployment.
EI sickness benefits are available as of March 15, whereas the Emergency Support Benefit will not be available until early April. Please be advised that as of now there is still a 1 week waiting period for any employee laid off as a result of workplace disruptions that is applying for standard benefits.
It is generally understood there may be cases where certain individuals will apply for and receive benefits that they may not be entitled to. The government, however, doesn’t see this as a negative, but rather as getting money in the hands of as many people as they can to support the continued flow of goods and services, to the extent that they are available. So, if you have a question as to whether you would be entitled to any of the above benefits, my suggestion is that if you are concerned make the application as even though you may be still working, it may only be a matter of time before cash flows start to dry up.
In order to apply for these benefits you can apply online through the CRA MyAccount and the My Service Canada Account or by telephone to Service Canada. If you have not already activated either one of these accounts I strongly suggest doing so as the process is somewhat slow and cumbersome, and you would be advised to get this out of the way before having to apply for benefits.
Income Support for Individuals Who Need It Most:
The Government has announced a one-time increase to the Goods and Services Tax Credit (GSTC) and an increase to the Canada Child Benefit (CCB) to provide additional income in the hands of low-income individuals and families. These benefits are set to increase in May and will be calculated based on your 2019 tax returns. My recommendation is that if you believe you are entitled to thee benefits that we take care of filing your 2019 returns as soon as possible to ensure you are not left behind.
In addition to the increase benefits above the Government has:
Placed a six-month interest-free moratorium on the repayment of Canada Student Loans for all individuals currently in the process of repaying these loans.
Reducing required minimum withdrawals from Registered Retirement Income Funds (RRIFs) by 25% for 2020, in recognition of volatile market conditions and their impact on many seniors’ retirement savings. This means that seniors currently drawing from their RRIF can reduce the minimum annual amount required to be withdrawn to avoid unnecessary liquidation of their pensions in such a volatile market.
Flexibility for Taxpayers: In order to provide greater flexibility to Canadians who may be experiencing hardships during the COVID-19 outbreak, the Canada Revenue Agency will defer the filing due date for the 2019 tax returns of individuals until June 1, 2020 and certain trusts, with taxation years ending December 31, 2019, until May 1, 2020. The Canada Revenue Agency will allow all taxpayers to defer, until after August 31, 2020, the payment of any income tax amounts that become owing on or after today and before September 2020. This relief would apply to tax balances due, as well as instalments, under Part I of the Income Tax Act. No interest or penalties will accumulate on these amounts during this period. However, based on the announced enhanced credits and reduced income that Canadians are experiencing at this time I recommend filing your returns as if the deadlines have not changed. This will ensure you receive any credits or refunds you are entitled to as quickly as possible. It is currently business as usual for me and I am available to consult by phone or electronically in order to ensure the swift completion of your returns. Support to Businesses Helping Businesses Keep their Workers: To support businesses that are facing revenue losses and to help prevent lay-offs, the government is proposing to provide eligible small employers a temporary wage subsidy for a period of three months. The subsidy will be equal to 10% of remuneration paid during that period, up to a maximum subsidy of $1,375 per employee and $25,000 per employer. immediately from this support by reducing their remittances of income tax withheld on their employees’ remuneration. Employers benefiting from this measure will include corporations eligible for the small business deduction, as well as non-profit organizations and charities. If you are a business owner and currently operating with employees, I would suggest you consider this support measure as it can be take advantage of immediately by reducing remittances of income tax withheld on employees’ remuneration. Employers benefiting from this measure will include corporations eligible for the small business deduction, as well as non-profit organizations and charities. Flexibility for Businesses Filing Taxes: The Canada Revenue Agency will allow all businesses to defer, until after August 31, 2020, the payment of any income tax amounts that become owing on or after today and before September 2020. This relief would apply to tax balances due, as well as instalments, under Part I of the Income Tax Act. No interest or penalties will accumulate on these amounts during this period. Ensuring Businesses Have Access to Credit: The Business Credit Availability Program (BCAP) will allow the Business Development Bank of Canada (BDC) and Export Development Canada (EDC) to provide more than $10 billion of additional support, largely targeted to small and medium-sized businesses. This will be an effective tool for helping viable Canadian businesses remain resilient during these very uncertain times. BDC and EDC are cooperating with private sector lenders to coordinate on credit solutions for individual businesses. Many financial institutions have implemented deferred principal payments on business loans for up to 6 months. While the interest will still be payable on these loans it may be advantageous to take advantage of the principal deferral in times of reduced cash flow. The Office of the Superintendent of Financial Institutions (OSFI) announced it is lowering the Domestic Stability Buffer by 1.25% of risk-weighted assets, effective immediately. This action will allow Canada’s large banks to inject $300 billion of additional lending into the economy. Please note that applications are still subject to your credit application, possible personal guarantees and credit history of the business. At this time there are no offers from the Federal of Provincial Government for loan guarantees which is something that I believe will be required within the not too distant future if the current state of affairs is prolonged.
While these are trying times for every one of us there is support and potentially more on its way to help us work through this together. If you have questions or concerns, would like clarification on any of the financial measures announced or ongoing needs please feel free to reach out and contact me.
Disclaimer:
Although every reasonable effort has been made to ensure the accuracy of the information contained in this letter, no individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
It is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.
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