Recent Tax Announcements and Reminders
Interest Payments on Prescribed Rate Loans
Prescribed rate loans are a common tax planning strategy to split income with a spouse or another eligible individual in a lower tax bracket. Interest on prescribed rate loans in effect during 2021 must be paid no later than January 30, 2022. Please ensure that payment is made by this date to avoid any adverse tax consequences.
Changes to Trust Tax Return Filing and Reporting Requirements
We previously informed you in December 2021 of expected changes to trust income tax filing and disclosure requirements which were expected to be in effect for trust income tax returns with a year-end of December 31, 2021 or later. As of today’s date, this legislation is pending and has yet to receive Royal Assent.
Canada Revenue Agency recently announced the proposed changes would not be administered until Royal Assent is received. Therefore, trusts which do not have income taxes payable for the year and did not distribute income or capital to beneficiaries during the year should not have an income tax filing requirement for 2021. These trusts should also not be subject to the additional disclosure requirements regarding the beneficial owners of the trust.
The legislation is expected to receive Royal Assent in the future. We recommend compiling the additional information required regarding beneficiaries, settlors, and trustees in advance of this change. You may also want to consider winding up dormant and inactive trusts to minimize future filing and reporting requirements.
Expansion of Local Lockdown Program and Canada Worker Lockdown Benefit
The Canada Emergency Wage Subsidy, Canada Emergency Rent Subsidy, and Canada Recovery Benefit were three of the primary programs made available to assist businesses and individuals throughout the pandemic. Each of these programs ended in October 2021 and were replaced by targeted measures for hard-hit industries. At the time, the Local Lockdown Program and Canada Worker Lockdown Benefit were announced to assist businesses and individuals subject to local lockdowns. Due to the lockdowns announced in many regions in December 2021, including Ontario, proposed changes were announced to these programs to expand access and benefits for the periods from December 19, 2021 to February 12, 2022.
The Local Lockdown program is available to employers, regardless of industry, who are subject to capacity-limiting restrictions of 50% or more. The proposed changes reduced the current-month revenue decline threshold requirement to 25% from the previously announced 40%. Eligible employers may receive wage and rent subsidies from 25% to a maximum of 75% depending on their revenue loss. Various options are available to calculate the subsidies and SRC LLP has a team dedicated to assist you with these calculations.
The Canada Worker Lockdown Benefit may provide payments of $300 per week if you are an eligible worker based on the following criteria:
- You earned at least $5,000 in 2020, 2021, or in the 12 months leading up to the application date;
- You filed a 2020 tax return;
- A region where you work or provide a service is designated as a COVID-19 lockdown region during the application period;
- A designated COVID-19 lockdown in your region resulted in one of the following during the application period:
- you lost your job and are unemployed
- you are self-employed but unable to continue your work
- you are employed or self-employed but had a reduction of at least 50% in your average weekly income as compared to the previous year.
You may apply for any weeks your region is eligible between October 24, 2021 and May 7, 2022. Applications are available for this program for 60 days after the end of the applicable period. The payments are subject to a 10% deduction for income taxes.
Home Office Expenses for Employees
Employees who worked from home more than 50% of the time for a period of at least four consecutive weeks in 2021 due to the pandemic can claim up to $500 under the Temporary Flat Rate Method (ie. $2 per day to a maximum of 250 eligible days). As with the 2020 tax year, employees can use the Temporary Flat Rate Method or the Detail Method. Employees will need to obtain a signed T2200 from their employers to be eligible to claim home office expenses under the detailed method.
Canada Emergency Bank Account Repayment
The Canada Emergency Bank Account provided interest-free loans of $40,000 or $60,000 to eligible businesses. $10,000 (for $40,000 loans) or $20,000 (for $60,000 loans) will be forgiven if certain conditions are met. The Government of Canada recently extended this repayment deadline to qualify for the partial loan forgiveness from December 31, 2022 to December 31, 2023.
The outstanding loans would be converted to a two year term loan effective January 1, 2024 bearing interest of 5% per annum, with the loans fully due by December 31, 2025.
Ontario COVID-19 Ontario Government Grants for Small Businesses
Small businesses in Ontario may be eligible for a relief grant of $10,000 if they were required to close due to the public health orders which took effect on January 5, 2022. The grant is available to eligible small businesses with fewer than 100 employees as of December 31, 2021 and were active businesses as of January 14, 2022.
Eligible small businesses include restaurants and bars, facilities for indoor sports and recreational facilities, performing arts and cinemas, museums and similar facilities, conference and event centres, and other businesses which were required to close. A complete list of eligible small businesses is available at the Government of Ontario website.
The application portal is expected to be available soon. Businesses which previously received the Ontario Small Business Support Grant will be pre-screened for eligibility.
Eligible Ontario businesses required to close or operate at reduced capacity can also apply for rebates of property tax and energy costs during this period. The Ontario Business Cost Rebate Program opened for applications on January 18, 2022.
Ontario Staycation Tax Credit
The Government of Ontario has announced the Ontario Staycation Tax Credit for 2022. Ontario residents may be eligible for a tax credit of up to 20% of eligible accommodation expenses (up to $1,000 for an individual, or $2,000 for a family) on their 2022 personal income tax return. The maximum credit is $200 for individuals or $400 for families.
The tax credit is available to individuals resident in Ontario on December 31, 2022. Eligible accommodation expenses include payments for hotels, motels, resorts, lodges, bed and breakfasts, cottages, or campgrounds in respect of leisure stays less than a month at locations in Ontario. Expenses for business travel, timeshare agreements, or stays on a vehicle such as a boat or train generally do not qualify.
The eligible accommodation expenses must be incurred between January 1 and December 31, 2022. Your accommodation receipt must include details like your name, address, GST/HST paid, and date of stay. You should keep all receipts in case CRA reviews the expenses claimed.
Automobile Income Tax Deduction Limits and Expense Benefit Rates
The maximum cost of passenger vehicles eligible for capital cost allowance claims has increased from $30,000 to $34,000 and the maximum cost of zero-emission vehicles eligible for capital cost allowance claims has increased from $55,000 to $59,000. These amounts are before sales tax. These limits apply to vehicles purchased on or after January 1, 2022.
Deductible leasing costs has increased from $800 to $900 per month, before sales tax. This limit applies to new leases entered into on or after January 1, 2022.
The limit on tax-exempt allowances paid by employers to employees for business use of their personal vehicles will increase by two cents to 61 cents per kilometre for the first 5,000 kilometres driven, and 55 cents per kilometre thereafter. Residents of the territories are eligible for higher rates of 65 cents for the first 5,000 kilometres driven and 59 cents for each additional kilometre. The general prescribed rate used to determine the taxable benefit of employees for the personal portion of expenses paid by their employer will be increase by two cents to 29 cents per kilometre.
Please contact us if you would like to discuss any of the above further and we would be happy to assist you.
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.