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In its Throne Speech on Sept. 23, the federal government announced its agenda for this session of Parliament. Mostly it appeared to be an update to Canada’s Covid-19 Economic Response Plan. From a tax perspective, there were a number of key changes to provisions for pandemic relief. Here’s a summary.
Stock options: This has long been an issue near and dear to the government. Some budgets ago, the government intended to shut down the deferral and tax benefits associated with issuance of stock options by limiting the deferral to $100,000. That measure was since pulled back, but then a variation was introduced in the 2019 budget that focused on limiting the stock option benefits for executives of large corporations (although no details were released at the time as to how that would be applied). The Throne Speech again reiterated the restriction of stock option deductions for executives of large corporations – so we will have to sit tight until we get more specifics, but this issue is still at the forefront.
The First-Time Home Buyer Incentive: This plan allows for tax-free withdrawals from your RRSP if you are a first-time homebuyer (but withdrawals are currently limited to $35,000). It was announced that this plan will be subject to further enhancements.
Old Age Security: OAS will be increased once individuals reach the age of 75. Higher CPP survivor benefits will also be available.
Tax Filings: Free, automatic tax filing for simple returns is to be developed. This will be a welcome development as we are forced to move to a more digitized life.
Disability Inclusion Plan: This new plan will have a new Canadian Disability Benefit modelled after the Guaranteed Income Supplement for seniors, a robust employment strategy for Canadians with disabilities; and a better process to determine eligibility for government disability programs and benefits.
Essential workers: Targeted measures for personal support workers, who do an essential service helping the most vulnerable in our communities will be provided.
The end of Canada Emergency Response Benefit (CERB) and the new alternatives: Unfortunately for many Canadians, CERB was not extended beyond Sept. 26, 2020. The CRA is continuing to accept and process retroactive applications for period 7 (Aug. 30 to Sept. 26, 2020). But happily, there are some alternatives that are available for those Canadians who are still in need of assistance.
New Employment Insurance (EI): Many Canadians who were on CERB will transition to a more flexible and more accessible EI, which is administered through Service Canada. Under EI, you will be required to self-report on your employment status and apply every two weeks in order to keep receiving support. Under the new EI, eligible Canadians may be able to collect EI through regular benefits or special benefits.
EI regular benefits apply to individuals who involuntarily lost their jobs and are actively looking for work, while EI special benefits are for those who have been unable to work due to specific life circumstances, including sickness, maternity, parental benefits, as well as compassionate care or family caregivers.
Canada Recovery Benefit (CRB): This program may offer some relief for those who were self-employed and may not necessarily meet EI eligibility. Similar conditions that were required to claim the CERB would be relevant for the CRB: you must have lost your job for a coronavirus-related issue; you cannot have left your job voluntarily; and you have to have made $5,000 in 2019 or the last 12 months for eligibility.
If you are eligible for the CRB, you can receive $1,000 ($900 after taxes withheld) for a two-week period. If your situation continues past two weeks, you will need to apply again (and can apply up to a total of 13 eligibility periods (26 weeks) between Sept. 27, 2020, and Sept. 25, 2021). Those who apply for the CRB must be looking for work and must accept work “where it is reasonable to do so.”
Canada Recovery Sickness Benefit (CRSB): This new initiative provides $500 per week for up to two weeks for workers who are sick or who must self-isolate because of Covid-19 because they have an underlying health condition that puts them at greater risk of getting Covid-19.
If your situation continues past one week, you will need to apply again. You may apply up to a total of two weeks between Sept. 27, 2020 and Sept. 25, 2021.
Canada Recovery Caregiving Benefit (CRCB): Those who are unable to work because they need to care for a child under the age of 12 or a family member because schools and daycares are closed are entitled to the this benefit of up to $500 per week ($450 after taxes withheld) for up to 26 weeks per household. The benefit is also available for those caring for a child or family member who is sick and/or required to quarantine.
If your situation continues past one week, you will need to apply again (and may apply up to a total of 26 weeks between Sept. 27, 2020 and Sept. 25, 2021).
Canada Emergency Wage Subsidy (CEWS): The subsidy program for employers will be extended up until the summer of 2021 (although no specific details were announced about any potential changes to the program).
Canada Emergency Business Account (CEBA): This program will be extended to Oct. 31, 2020. According to the CRA, 4,880 applications were approved for $195 million in just one week in October. To date, the program has approved 767,336 applications under CEBA and disbursed $30.63 billion. I would highlight, of course, that any forgiven amounts under CEBA (up to the $10,000 limit) will be subject to tax to the business (this is not a statistic that is highlighted on the CRA website, by the way).
As part of their commitment to addressing corporate tax avoidance, the government announced that it would be focusing on digital giants. What that entails however, remains to be seen.
The government will also launch a new fund to attract investments in making zero-emissions products and cut the corporate tax rate in half for these companies to create jobs.
Samantha Prasad, LL.B., is a Partner with Toronto law firm Minden Gross LLP, a Meritas Law Firm Worldwide affiliate, and specializes in corporate, estate, and international tax planning. She writes frequently on tax issues, and is the co-author of Tax and Family Business Succession Planning, 3rd Edition. She is also co-editor of various Wolters Kluwer Ltd. tax publications. This article first appeared in The TaxLetter, © 2020 by MPL Communications Ltd. Used with permission.
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