Update on government programs and federal budget proposals
Reminders relating to COVID-19 financial relief measures, and important details from the recent federal budget announced on April 19, 2021.
2020 Personal Tax Return Reminders
- The personal tax filing and payment deadline for many individuals passed on April 30th. Tax returns must be filed by June 15th if you or your spouse or common-law partner was self-employed during 2020. If this deadline applies to you and you have not already provided your tax information to us, please do so as soon as possible. Please note the payment deadline was April 30th for all personal tax returns and therefore interest charges are already accruing if you have a balance owing on your return.
- CRA is providing interest relief to certain taxpayers on 2020 tax balances owing. Interest charges will be waived until April 30, 2022 if you filed your 2020 tax return, reported taxable income of $75,000 or less and received at least one of the COVID-19 benefits offered during the year (CERB, CESB, CRB, CRCB, CRSB, EI benefits, or provincial or territorial emergency benefits). Late-filing penalties still apply, and interest relief will not be provided on debts other than your 2020 income taxes owing.
Canada Emergency Wage Subsidy (CEWS)
- CEWS is available on wages paid until June 30, 2021. The recent federal budget proposes to extend the wage subsidy until September 25, 2021, with the option to extend further to November 20, 2021 based on economic and public health conditions.
- The maximum subsidy rate for active employees remains at 75% for periods 15 and 16 (April 11 to June 5, 2021). The maximum weekly subsidy for furloughed employees remains at $595.
- Subsidy rates will be gradually phased out during the July to September periods if the proposed changes from the federal budget are implemented. As of July 4, only employers with a decline in revenue of 10% or more will be eligible for the subsidy.
- Applications for the period from April 11 to May 8, 2021 will open on May 9, 2021.
- The deadlines to submit the wage subsidy applications for the prior periods are as follows:
- May 20, 2021 for October 25 – November 21, 2020;
- June 17, 2021 for November 22 – December 19, 2020;
- July 15, 2021 for December 20, 2020 – January 16, 2021;
- August 12, 2021 for January 17, 2021 – February 13, 2021;
- September 9, 2021 for February 14, 2021 – March 13, 2021; and
- October 7, 2021 for March 14, 2021 – April 10, 2021.
Canada Recovery Hiring Program (CRHP)
- CRHP is a new program proposed in the federal budget. This new program provides eligible employers with a subsidy of up to 50 percent of the incremental remuneration paid to employees between June 6, 2021 and November 20, 2021. The subsidy rate will gradually reduce from 50% to 20% by the end of the program.
- The initial baseline period for calculating the incremental remuneration is March 14 to April 10, 2021. Wages paid to eligible employees in excess of baseline remuneration is eligible for a maximum weekly subsidy of $1,129.
- Eligible employers are largely the same as those that are eligible for CEWS. There is one notable change for corporations as only Canadian-Controlled Private Corporations are eligible. The qualifying periods and revenue decline criteria are aligned with CEWS as well.
- Eligible employers can claim either CEWS or CRHP for each qualifying period, but not both. CRHP will be beneficial for newly hired employees or existing employees who have low baseline remuneration but are now working increased hours.
Canada Emergency Rent Subsidy (CERS) and Lockdown Support
- CERS is available on rent paid until June 30, 2021. The application periods and deadlines to submit are the same as the CEWS periods discussed above.
- The maximum subsidy rate remains at 65% for periods 15 and 16 (April 11 to June 5, 2021).
- Lockdown Support of 25% is available for eligible businesses on top of the CERS amount, increasing the total maximum rent support to 90%. Eligible businesses include businesses that are required to shut down or are significantly restricted by a public health order, or property owners that earn rental income from a related business that is required to shut down or is significantly restricted by a public health order.
- The federal budget proposes to extend both CERS and Lockdown Support to September 25, 2021, with an option to extend further to November 20, 2021 based on economic and public health conditions. As of July 4, CERS will be available to eligible business with a revenue reduction of 10% or more and will be gradually phased out during the July to September periods. Lockdown Support will remain at 25% until September.
Canada Recovery Benefit (CRB)
- CRB is available until September 25, 2021. Eligible individuals can apply for a maximum of 19 periods (38 weeks) between September 27, 2020 and September 25, 2021. The periods do no need to be consecutively. Eligible individuals will receive $500/week ($1,000/period) with 10% deducted at source for income taxes.
- The federal budget proposes to increase the maximum number of weeks to 50. The first four weeks of the extension will be eligible for the current amount of $500/week. Payments will be reduced to $300/week for the final 8 weeks of the extended period.
- It is important to plan for your 2021 tax return if you receive this benefit. 10% is withheld at source from each payment, but you will likely owe additional income taxes if you earn other sources of income during the year. Some or all of the benefit will also need to be repaid when you file your 2021 income tax return if you earn more than $38,000 during the year. $0.50 needs to be repaid for each $1 you earn above $38,000.
Canada Recovery Caregiving Benefit (CRCB)
- CRCB is available until September 25, 2021. Eligible individuals can apply for a maximum of 38 weeks between September 27, 2020 and September 25, 2021. Eligible individuals will receive $500/week with 10% deducted at source for income taxes.
- The federal budget proposes to increase the maximum number of weeks to 42. The weekly payment of $500 will remain unchanged for this extended period.
Other Federal Budget Highlights
The 2021 federal budget announced on April 19, 2021 includes the following proposals that may be enacted into law.
- Repayments of COVID-19 benefits were previously reflected as a deduction from taxable income in the year of repayment. If you received a benefit in 2020 that you were not eligible for and repaid the amount in 2021, the benefit would be taxed on your 2020 tax return and deducted on your 2021 tax return. Per the federal budget, any repayments made before 2023 can now be reflected as a deduction in the year of the original payment.
- Recipients of Old Age Security (OAS) that are 75 or older by June 2022 will be eligible for a one-time payment of $500 in August 2021 which will not be subject to clawback. These individuals will also see a permanent 10% increase in their benefits beginning in July 2022.
- Eligibility for the Disability Tax Credit (DTC) will be expanded to include additional impairments to mental functions as assessed by a doctor, and the minimum required frequency of therapy will be reduced from three times per week to two.
- Canadian-Controlled Private Corporations can fully expense certain purchases of depreciable property up to $1.5M per year that is purchased on or after April 19, 2021 and becomes available for use prior to 2024. The $1.5M limit must be shared by associated corporations. This measure is largely targeted towards machinery and equipment that can be used to grow your business. Purchases with longer depreciable periods, such as buildings or goodwill, are excluded.
- Manufacturers of zero-emissions technology will be eligible for reduced corporate income tax rates for tax years beginning after 2021 and will be phased out by tax years ending after 2031.
- Purchases of clean energy or energy conservation equipment are eligible for accelerated tax deductions. The budget proposes to expand the assets eligible for this accelerated deduction for purchases on or after April 19, 2021.
- Certain timelines for both the Canadian Film or Video Production Tax Credit and the Film or Video Production Services Tax Credit will be extended by 12 months due to the impact of COVID-19 on film and video productions. These measures apply to productions for which eligible expenditures were incurred during taxation years ending in 2020 or 2021.
Other Tax Measures
- Cars and personal aircraft priced greater than $100,000, or boats priced greater than $250,000, will be subject to a luxury tax on purchase or importation beginning January 1, 2022. The tax will be calculated as the lesser of 20% of the value above the threshold, or 10% of the full value.
- Non-resident owners of Canadian residential real estate will be subject to a vacancy tax at a rate of 1% of the property value on vacant or underused properties beginning January 1, 2022.
- A Digital Services Tax will be assessed to both foreign and domestic corporations that earn revenue from certain digital services that are reliant on data and content contributions from Canadian users beginning January 1, 2022. The tax is targeted at larger businesses earning global revenues of at least 750M Euros and revenue associated with Canadian users of at least $20M.
Ontario Corporations Information Act annual returns
- Effective May 15, 2021, Ontario annual information returns will no longer be included with the annual corporate income tax return filing and will have to be filed separately.
Do not hesitate to contact us if you have any questions regarding how any of the above impacts you, your family, or your Company. SRC LLP has a team designated to assist you in navigating the many programs available and completing all applications.
NOTE: Due to the rapidly evolving changes with respect to the Government’s Economic Response Plan to Covid-19, please understand that any posts written in the past may not be reflective of the current applicable obligations, rights and benefits of individuals and businesses.