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Breakdown of Canada’s COVID-19 Economic Response Plan: what it means for you and your business


March 20, 2020
By Bonny Koabel CPA, CGA

Topics

We know everyone is concerned about who the shutdowns will affect you and your business. Here is an important breakdown of government funding programs by our expert, Bonny Koabel, president of AKR Consulting Canada in Mississauga, Ont.

The following article discusses COVID-19 financial compensation measures that were put in place by the federal and Ontario governments and banks as of March 27, 2020.

These measures may have changed and additional financial compensation may have been added since this date. Please see groundwatercanada.com for updated COVID-19 financial compensation measures.

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To maximize the compensation, it is recommended that you review this information with your accountant or bookkeeper.

FEDERAL GOVERNMENT SUPPORT FOR BUSINESSES

Wage subsidy of up to 75 per cent for existing employees

To support businesses that are facing revenue losses and to help prevent layoffs, the government is providing small businesses a temporary wage subsidy of 75 per cent on gross wages. The subsidy is will be retroactive to all T4 employees as of March 15. Details at this time are forthcoming.

For more information on the wage subsidy program see:

https://www.canada.ca/en/department-finance/economic-response-plan/covid19-businesses.html#wage_subsidies

Employee EI compensation for reduced work hours

The EI Work Sharing Program provides employment insurance benefits to workers who agree to reduce their normal working hours as a result of developments beyond the control of their employers such as COVID-19. Under the EI Work Sharing Program, employees agree to work a reduced number of hours per week and are compensated by EI for those reduced hours. The federal government is extending the eligibility to 76 weeks, easing eligibility requirements, and streamlining the application process.

For more information on the EI Work Sharing Program see:

https://www.canada.ca/en/employment-social-development/services/work-sharing.html

Canada Emergency Business Account

The Canada Emergency Business Account was announced on March 27 and offers small businesses a $40,000 interest free loan for the first year. For more details contact your bank or see the following link:

https://www.canada.ca/en/department-finance/economic-response-plan.html

Business Credit Availability Program (BCAP) 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. Relief measures include:

  • Working capital loans of up to $2 million
  • Flexible repayment terms, such as postponement of principal payments for up to six months,
  • Reduced rates on new eligible loans

In order to qualify, contact your bank and they will need to make a referral to BDC or EDC.

BDC contact information:

https://www.bdc.ca/en/contact_us/pages/default.aspx

EDC contact information:

https://www.edc.ca/en/contact-us.html

Flexibility for businesses filing taxes

The Canada Revenue Agency will allow all businesses to defer until after Aug. 31, 2020, the payment of any income tax amounts that were owed as of March 18, 2020, and before September 2020. This relief would apply to tax balances due as well as instalments.

Penalties and interest relief on corporate tax, HST and payroll tax

Penalties and interest relief applies to any penalties and Interest charges that your company receives on HST, payroll and corporate taxes late payments due to extraordinary business circumstances such as COVID-19.

To learn more, go to:

https://www.canada.ca/en/revenue-agency/services/about-canada-revenue-agency-cra/complaints-disputes/cancel-waive-penalties-interest.html

ONTARIO GOVERNMENT SUPPORT FOR BUSINESSES

Employer health tax deferrals

The Ontario government is providing assistance with employer health taxes (EHT). Beginning April 1, 2020, and for a period of five months, up until Aug. 31, 2020, the province will not apply any penalties or interest on any late-filed returns or incomplete or late tax payments. Therefore, EHT payments from April, May, June and July will not be due until Aug. 31, 2020.

In addition, employers with annual payrolls of up to $5 million will be exempt from EHT on the first $1 million of total Ontario T4 Payroll 2020. This increased EHT tax exemption limit will increase company savings from $9,945 to $19,500 in 2020. The EHT exemption limit will return to $490,000 on Jan. 1, 2021.

Workplace Safety and Insurance Board (WSIB)

Businesses covered by the WSIB’s workplace insurance are automatically eligible for the following relief package:

  • Schedule 1 employers with premiums owed to the WSIB will be allowed to defer reporting and payments until Aug. 31, 2020.
  • The deferral will also apply to Schedule 2 businesses that pay WSIB for the cost related to their workplace injury and illness claims.

In addition, no interest will be accrued on outstanding premium payments and no penalties will be charged during this six-month deferral period.

Property tax deferrals

The provincial government is allowing municipalities to defer property tax payments. As a result, property tax payments are being deferred in all cities. Deferral times differ per city. If you have submitted a series of post-dated cheques to the city to pay your property taxes, they will be held for the deferral period. To find out the deferral period have a look at your municipality’s website or call or email your city counsellor to find out details. In the City of Toronto there is a grace period without penalties for 60 days starting March 16, 2020.

FEDERAL GOVERNMENT SUPPORT TO CANADIANS

Canada Emergency Response Benefit

The Canada Emergency Response Benefit was announced on March 27 and will provide a taxable benefit of $2,000 a month for up to four months. Funding is available for any self-employed workers who are forced to stop work as a result of COVID-19 and do not have access to paid leave or other income support.

Flexibility on mortgage payments

All five of the major Canadian banks have put programs in place to allow homeowners to defer their mortgage payments for up to six months. After the six-month period the deferred mortgage payments will be rolled into the outstanding mortgage and amortized over the remainder of the mortgage period. This will result in slightly higher mortgage payments after six months. To apply call your bank and apply online.

Flexibility on personal tax return filing

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. The CRA encourages individuals who expect to receive benefits under the Goods and Services Tax Credit (GSTC) or the Canada Child Benefit not to delay the filing of their personal tax return to make sure their benefits for the 2020-21 tax year are properly determined.

The CRA will allow all taxpayers to defer, until after Aug. 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. No interest or penalties will accumulate on these amounts during this period.

Income support for families

The government is proposing to increase the maximum annual Canada Child Benefit (CCB) payment amounts, only for the 2019-20 benefit year, by $300 per child. The overall increase for families receiving CCB will be approximately $550 on average: these families will receive an extra $300 per child as part of their May payment. In total, this measure will deliver almost $2 billion in extra support. In addition, Ontario will be providing a one-time payment of $200 per child up to 12 years of age, and $250 for those with special needs, including children enrolled in private schools.

The proposed enhancements of the GSTC and CCB will give a single parent with two children and low to modest income nearly $1,500 in additional short-term support.

To read the entire federal and provincial government announcements, please see the following links:

https://www.canada.ca/en/department-finance/economic-response-plan.html

https://budget.ontario.ca/2020/marchupdate/action-plan.html

Useful links for COVID-19 financial relief for small businesses across Canada


Bonny Koabel CPA, CGA, is the president of AKR Consulting Canada located in Mississauga, Ont., a firm specializing in government grants, subsidies, tax credits, refunds and rebates since 2003. Bonny has specialized in assisting businesses with obtaining government funding for the past 15 years. Her expertise is working with companies and developing strategies to utilize government funding. Bonny can be reached at bonny@akrconsulting.com or 905-678-6368.