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Invesco Tax & Estate team | May 26, 2020

An overview of COVID-19 government support programs

Learn about the measures the federal government has introduced to help Canadians manage the impact of the COVID-19 pandemic.

 

The Canadian government has acted promptly in response to the COVID-19 pandemic, implementing supportive programs targeted at different groups. Here is an overview of some of the most significant measures announced to date.

For working individuals

Canada Emergency Response Benefit (CERB) [1]

Eligible workers (employed or self-employed) who are facing loss of income due to COVID-19 may receive a taxable benefit of $2,000 every four weeks for up to 16 weeks. For more details on the program, including eligibility, please see our blog post COVID-19 economic stimulus package. CERB is available from March 15, 2020 to October 3, 2020. Online application opened on April 4 and is currently in its third eligibility period, running from May 10 to June 6. The next eligibility period is June 7 to July 4.

To qualify for CERB, an individual must have at least $5,000 of pre-tax employment or self-employment income in 2019 or in the 12 months immediately before the application date. Also, for each benefit period of four weeks, the individual cannot expect to earn more than $1,000 of employment or self-employment income for at least 14 days in a row during the four-week period. Individuals who plan to return to work may not qualify for CERB. The Canada Revenue Agency (CRA) has confirmed that, although payments have already been made, it will be verifying individuals’ eligibility based on payroll information. As a result, any overpayment will need to be returned.

Learn more about who can apply.

For students and recent graduates

Canada Emergency Student Benefit (CESB) [2],[3]

CESB aims to support students and recent graduates who do not qualify for CERB or Employment Insurance (EI) and cannot find full-time employment or are unable to work due to COVID-19. Eligible individuals will receive a taxable payment of $1,250 every four weeks, plus an additional $750 for individuals who have a disability, a dependent child under age 12 or other dependants with disabilities.

The applicant must not be eligible for CERB or EI, and must be one of the following:

  • A student who is enrolled in a post-secondary educational program (at least 12 weeks in duration) that leads to a degree, diploma or certificate
  • A recent graduate who ended post-secondary studies in December 2019 or later
  • A high school student who has completed or expected to complete high school (or a high school equivalent), and has applied for a post-secondary educational program that starts before February 1, 2021

Note that international students do not qualify for CESB.[4]

In addition, the applicant is not able to work, is looking for but cannot find work, or is current working but has pre-tax employment or self-employment income of $1,000 or less in the four-week eligibility period for which he or she is applying.

Online application opened on May 15, 2020. Depending on whether the applicant is a post-secondary student or a graduating high school student, the number of eligibility periods and the maximum amount of the benefit differ. Each eligibility period has a specific start and end date. For example, the first eligibility period for post-secondary students runs from May 10 to June 6, 2020. Only payments for the specific eligibility period for which the individual applies will be made, and an individual can apply for only one eligibility period at a time. After each eligibility period, individuals must reapply for the next eligibility period, provided they continue to qualify. If applicants are set up for direct deposit with the CRA, they will receive payment within three business days. Otherwise, they will receive a cheque within about 10 business days.

Note that post-secondary students capable of working must continue to look for jobs during the eligibility period(s) they applied for. If they are not able to find employment after that period (or those periods) due to COVID-19, they may apply for the next eligibility period. The CRA may require proof of job searching from the receiving students/graduates.

Learn more about who can apply.

Changes to Canada Student Loan Program [5]

Eligibility requirements for the Canada Student Loan Program have changed for 2020–21 to allow more students to qualify for support and be eligible for higher amounts.

The government has doubled non-repayable Canada Student Grants for full-time and part-time students, as well as for students with disabilities and students with dependants, in the coming academic year.

In addition, repayments and interest on all student loans have been automatically suspended until September 30, 2020. This suspension applies to the federal portion of the student loan. Borrowers should check with provincial or territorial student loan providers for their policies.

Additional opportunities for students [6]

The “I Want to Help” platform is a new national service initiative that recognizes students’ significant contributions to COVID-19 efforts. A new Canada Student Service Grant will provide up to $5,000 to support a student’s post-secondary education costs in the fall. Watch for more details to come.

Until August 31, 2020, the government has temporarily lifted the restriction on international students that allowed them to work only up to 20 hours a week while classes were in session. International students can now work more than 20 hours a week in an essential service or function, such as health care, critical infrastructure, or the supply of food or other critical goods.

The government has also introduced various student and youth programs to help create, and connect students to, employment opportunities.

For seniors [7],[8],[9]

Registered Retirement Income Fund (RRIF) required minimum withdrawals in 2020 have been reduced by 25%. For more details on this change and associated planning strategies, please refer to our blog post Planning strategies for Registered Retirement Income Funds.

The government is providing a one-time tax-free payment of $300 for seniors eligible for the Old Age Security (OAS) pension, with an additional $200 for seniors eligible for the Guaranteed Income Supplement (GIS). Seniors who qualify for both OAS and GIS will receive a total of $500.

The government is also temporarily extending GIS and Allowance payments if seniors’ 2019 income information has not been assessed. Eligible seniors will continue to receive benefits; however, they should submit their income information no later than October 1, 2020.

In addition, the New Horizons for Seniors Program has been expanded, with $20 million of additional investment to support organizations that offer community-based projects that reduce isolation, improve seniors’ quality of life and help seniors maintain a social support network.

For families

There will be a one-time automatic increase in payment of $300 per child through the Canada Child Benefit (CCB) for 2019–2020, providing approximately $550 more for the average family. This benefit will be delivered as part of the scheduled CCB payment in May. Eligible families already receiving the CCB do not need to reapply.[10], [11]

There was also a one-time doubling of the GST/HST credit payment, made on April 9, 2020. The amount of the GST/HST credit depends on family size, adjusted family income and marital status. The average benefit increase will be close to $400 for single individuals and close to $600 for couples. The extra payment is automatic for individuals who qualify for the normal GST/HST credit, including individuals who qualified for the first time based on their 2018 income tax return. [12], [13], [14]

The filing due date for 2019 income tax returns for individuals (normally April 30) has been delayed until June 1, 2020. Any new income tax balances due and instalments can also be deferred until 1, 2020 without incurring interest or penalties.

Mortgage payments can be deferred for up to six months for homeowners facing financial hardship. The agreement is between the mortgage lender and the homeowner. Interest continues to accrue during the deferral period. [15]

For businesses

10% Temporary Wage Subsidy for Employers [16], [17]

The 10% Temporary Wage Subsidy for Employers is a three-month measure that allows eligible employers to reduce the amount of payroll deductions remitted to the CRA. Qualified employers can receive a taxable subsidy equal to 10% of the remuneration paid to employees from March 18 to June 19, 2020, up to $1,375 for each eligible employee to a maximum of $25,000 total per employer.

Eligible employers can be individuals (excluding trusts), certain partnerships, not-for-profit organizations, registered charities, or Canadian-controlled private corporations (CCPCs, including a cooperative corporation). Partnerships and CCPCs must meet certain criteria to qualify. Also, the employer must have an existing business number and payroll program account with the CRA on March 18, 2020, and pay salary, wages, bonuses or other remuneration to employees who are employed in Canada.

The subsidy must be calculated manually, either by the employer or whoever is responsible for making payroll remittances on behalf of the employer. The CRA will not automatically calculate the allowable subsidy. The subsidy calculation is based on the total number of eligible employees employed at any time during the three-month period.

There is no need to apply for this subsidy. The subsidy is applied in the form of a reduction in payroll income tax remittance to the CRA. The employer should continue to deduct income tax, Canada Pension Plan (CPP) contributions, and EI premiums from salary, wages, bonuses or other remuneration paid to employees as usual. Once the amount of subsidy is determined at the time of remittance, the amount of remittance to the CRA can be reduced by the amount of subsidy calculated.

Note that only federal and provincial or territorial income tax qualify for the reduction; CPP contributions and EI premiums are not subject to deduction under this program.

The amount of subsidy can only be calculated on remuneration paid within the specified three-month period ending on June 19, 2020. However, if the employer does not have sufficient remittance to “use up” the subsidy during the three-month period, the reduction in remittance can continue after June 19, until the full amount of subsidy is applied or until the end of 2020, at which time the CRA will refund any unused subsidy to the employer or transfer it to the following year to be applied towards the employer’s future remittance. The same rules apply if the employer qualifies for the subsidy but chooses not to reduce its remittances in 2020.

Canada Emergency Wage Subsidy (CEWS) [18], [19]

Separate from the 10% Temporary Wage Subsidy for Employers, which is targeted towards small businesses, CEWS is designed to support employers of all sizes across all sectors who are experiencing financial difficulties due to COVID-19. CEWS runs from March 15 to June 6, 2020. Eligible employers can receive a 100% refund for certain employer contributions to EI, the CPP, the Quebec Pension Plan (QPP) and the Quebec Parental Insurance Plan paid in respect of employees who are on leave with pay. Like the 10% Temporary Wage Subsidy for Employers, CEWS is taxable to the employer.

To qualify, an employer must be considered an eligible employer and be able to demonstrate a drop in gross revenues of at least 15% in March, 30% in April and 30% in May for each of the three eligibility periods. In addition, the employer must determine its eligible employees and their respective eligible remuneration amounts to calculate the amount of CEWS available. The subsidy generally covers 75% of an employee’s wages, up to $847 per week. CEWS is reduced by any subsidy received under the 10% Temporary Wage Subsidy for Employers.

The subsidy will be processed at the payroll program account level. A separate application is required for each payroll program account. In addition, employers must apply for each CEWS eligibility period separately.

Canada Emergency Business Account (CEBA) [20]

CEBA provides interest-free loans of up to $40,000 to small businesses and not-for-profits to help cover their operating costs during a period where their revenues have been temporarily reduced due to COVID-19.

To be eligible, the organization must have been an operating Canadian business on March 1, 2020, have a federal tax registration, and have paid between $20,000 and $1.5 million in total employment income in 2019, among other requirements. Organizations can apply by contacting the banks or credit unions with whom they conduct business.

The funds from this loan must only be used by the organization to pay non-deferrable operating expenses, including payroll, rent, utilities, insurance, property tax and regularly scheduled debt service. The funds may not be used to fund payments or expenses such as prepayment/refinancing of existing indebtedness, payments of dividends, distributions and increases in management compensation.

Repaying the balance of the loan on or before December 31, 2022 will result in loan forgiveness of 25% (up to $10,000).

Canada Emergency Commercial Rent Assistance (CECRA) [21], [22]

CECRA provides relief for small businesses experiencing financial hardship due to COVID-19. It offers forgivable loans to eligible commercial property owners to reduce the rent owed by their impacted small business tenants and to meet operating expenses on commercial properties.

The program provides forgivable loans to qualifying commercial property owners to cover 50% of three monthly rent payments payable by eligible small business tenants who are experiencing financial hardship during April, May and June 2020. The loans will be forgiven if the property owner agrees to reduce the small business tenants’ rent by at least 75% under a rent forgiveness agreement, which will include a term not to evict the tenant while the agreement is in place. The small business tenant covers the remainder, up to 25% of the rent. Essentially, if conditions are met, the government will pay 50% of the original rent if the landlord (commercial property owner) agrees to reduce the rent by 75% or more for the three months indicated above. The other 50% of the original amount of rent will be shared between the landlord and the tenant, depending on the percentage of rent reduction.

To qualify for CECRA, the commercial property owner must:

  • Own or be the landlord of the commercial properties with “impacted small business tenants” (explained below)
  • Enter (or have already entered) into a rent reduction agreement for the period of April, May and June 2020, reducing an impacted small business tenant’s rent by at least 75%
  • Ensure the rent reduction agreement with impacted tenants includes a moratorium on eviction for the period of April, May and June 2020
  • Have declared rental income on the owner’s tax return (personal or corporate) for tax years 2018 and/or 2019

“Impacted small business tenants” are small businesses (including not-for-profit and charitable organizations) that pay no more than $50,000 in monthly gross rent per location (as defined by a valid and enforceable lease agreement), generate no more than $20 million in gross annual revenues (calculated on a consolidated basis at the ultimate parent level), and have experienced at least a 70% decline in pre-COVID-19 revenues. The baseline revenue used to determine the percentage of decline can be either the respective revenues during the same period (April, May and June) in 2019, or the average revenue in January and February 2020.

The program assistance is applicable to April, May and June 2020. Commercial property owners can apply retroactively, but no later than August 31, 2020. If an application is made after rent has already been collected from the tenants for the respective months, the property owner must either refund the rent to the tenants or credit the tenant’s future rent for the same amount, calculated based on the agreed upon rent reduction.

The application process is not yet open. Commercial property owners can sign up for updates from the Canada Mortgage and Housing Corporation (CMHC) and receive details when they become available.

Large Employer Emergency Financing Facility (LEEFF) [23], [24]

LEEFF aims to provide bridging financing to Canada’s largestmployers whose financing needs cannot be met through conventional financing, in order to keep their operations going, avoid bankruptcies and be prepared for a rapid economic recovery. The support is available to large for-profit businesses with the exception of those in the financial sector, as well as certain not-for-profit businesses, with annual revenues generally in the order of $300 million or higher. To qualify, eligible businesses must be seeking financing of about $60 million or more, have significant operations or workforce in Canada, and not be involved in active insolvency proceedings. Key guiding principles will be used to evaluate the eligibility of the employers to ensure fairness and timeliness of the support provided. Watch for more details to come.

If you have any questions about any of these programs, feel free to reach out to us. Ask to speak with the Tax & Estate InfoService.

 

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1 www.canada.ca/en/department-finance/economic-response-plan.html
2 www.canada.ca/en/revenue-agency/services/benefits/emergency-student-benefit.html
3 www.canada.ca/en/department-finance/news/2020/04/support-for-students-and-recent-graduates-impacted-by-covid-19.html
4 www.canada.ca/en/revenue-agency/services/benefits/emergency-student-benefit/cesb-who-apply.html
5 www.csnpe-nslsc.canada.ca/en/what-is-new
6 https://pm.gc.ca/en/news/news-releases/2020/04/22/support-students-and-new-grads-affected-covid-19
7 www.canada.ca/en/department-finance/economic-response-plan.html
8 pm.gc.ca/en/news/news-releases/2020/05/12/prime-minister-announces-additional-support-canadian-seniors
9 www.canada.ca/en/employment-social-development/programs/new-horizons-seniors.html
10 pm.gc.ca/en/news/news-releases/2020/05/03/families-receive-increased-support-through-canada-child-benefit
11 www.canada.ca/en/department-finance/economic-response-plan.html
12 www.canada.ca/en/revenue-agency/services/child-family-benefits/covid-19-gsthstc-increase/covid-19-frequently-asked-questions-gsthstc-increase.html
13 www.canada.ca/en/revenue-agency/services/child-family-benefits/covid-19-gsthstc-increase.html
14 business.financialpost.com/personal-finance/taxes/the-gst-hst-credit-has-been-boosted-due-to-covid-19-heres-what-you-need-to-know
15 www.cmhc-schl.gc.ca/en/finance-and-investing/mortgage-loan-insurance/the-resource/covid19-understanding-mortgage-payment-deferral
16 www.canada.ca/en/revenue-agency/campaigns/covid-19-update/frequently-asked-questions-wage-subsidy-small-businesses.html
17 www.canada.ca/en/department-finance/economic-response-plan.html
18 www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy/cews-who-eligible-employer.html
19 www.canada.ca/en/department-finance/economic-response-plan.html
20 www.canada.ca/en/department-finance/economic-response-plan.html
21 www.cmhc-schl.gc.ca/en/finance-and-investing/covid19-cecra-small-business
22 www.canada.ca/en/department-finance/economic-response-plan.html
23 pm.gc.ca/en/news/news-releases/2020/05/11/prime-minister-announces-additional-support-businesses-help-save
24 www.canada.ca/en/department-finance/economic-response-plan.html

For more information about this topic, call us at 1.800.874.6275.

The information provided is general in nature and may not be relied upon nor considered to be the rendering of tax, legal, accounting or professional advice. Readers should consult with their own accountants, lawyers and/or other professionals for advice on their specific circumstances before taking any action. The information contained herein is from sources believed to be reliable, but accuracy cannot be guaranteed.