Friday, 10th April 2020 | Management
Update on Canada’s Covid-19 Economic Response Plan
On an almost daily basis, the Canadian government has introduced, and adjusted relief measures for businesses and individuals. Here's a consolidated summary of support for Canadians, as of April 8, 2020.
As Canada struggles with the COVID-19 pandemic, the federal government has implemented a number of measures to assist businesses improve their cash flow such that they can survive over the coming months. They can be sorted into three primary categories: payroll support, financing, and deferrals of tax payments. While sole proprietors are eligible for many of these measures, some additional measures will be discussed in the Individuals section of this newsletter.
There are generally three payroll programs available:
- 10% Temporary Wage Subsidy (10% WS)
- 75% Canada Emergency Wage Subsidy (75% WS)
- Employment Insurance (EI) Work-sharing Program.
In general, the 10% WS is available only to smaller businesses, but does not require a revenue decline, and the 75% WS is available to a wide variety of entities whose revenue has dropped by at least 30%. In cases where employers are entitled to both, amounts received under the 10% WS will reduce the amounts receivable under the 75% WS.
The EI Work-sharing Program is different in that it enables the employees and employer to agree to reduce working hours by 10% to 60%. This reduces the employer’s payroll costs, while the employees receive EI payments directly for the reduction in their hours. While the Work-sharing Program can be used in combination with a subsidy, the government has specifically noted that receipts under the 75% subsidy will be eroded by the EI received by the employee. The legislation implementing the 10% subsidy does not provide for any similar reduction.
10% Temporary Wage Subsidy (10% WS)
A business may benefit immediately from a 10% subsidy by reducing their remittances of income tax withheld from their employees’ remuneration.
In order to be eligible, the employer must meet three criteria:
(a) employ one or more individuals in Canada (“eligible employees”);
(b) was registered, with a business number and a payroll remittance account, on March 18, 2020; and
(c) be any of the following:
(i) most Canadian-controlled private corporations (CCPCs), based on eligibility for the small business deduction (see below);
(ii) an individual (other than a trust);
(iii) a partnership, all members of which are entities described in (i), (ii), (iii) or (v);
(iv) a non-profit organization (exempt from income tax); or
(v) a registered charity.
To be eligible, a CCPC must have had a business limit, for purposes of the small business deduction greater than nil for its most recent tax year ended prior to March 18, 2020 (or, if it had no taxation year ended before that date, would have had a business limit greater than nil if its taxation year ended on March 17, 2020).
For this purpose, the reduction to the business limit caused by the passive income grind (which commences when passive income exceeds $50,000) is not considered. However, a CCPC which had no business limit for other reasons (for example, its taxable capital, in combination with other associated corporations, exceeded $15 million; it was a member of an associated group of corporations and was not assigned any portion of the business limit; or it assigned its entire business limit to one or more other CCPCs under the specified corporate income rules) would not qualify for the subsidy.
A portion of remuneration (e.g. wages, salaries) paid to employees from March 18, 2020 to June 19, 2020, inclusive, will be recoverable by the employer. The legislation affords the government the ability to change several amounts that determine the availability of the subsidy. Items in italics are amounts that have been announced to date.
The subsidy will be equal to the least of three amounts, as follows:
- a fixed maximum for each employer of $25,000. CRA has indicated that this amount is per employer and is not required to be shared between related or associated employers;
- a fixed percentage, being 10% of remuneration paid to eligible employees during the period from March 18, 2020 to June 19, 2020; or
- the number of eligible employees employed during the period from March 18, 2020 to June 19, 2020, multiplied by a fixed amount, $1,375.
Therefore, to get the maximum benefit of $25,000, the employer must have more than 18 employees with total wages no less than $250,000 during the period.
There is no formal application process. Source deduction remittances for income tax, but not for CPP or EI, can be reduced for the available subsidy, providing an immediate cash flow benefit to the employer. Presumably, there will be an eventual requirement to account for the subsidy claimed, possibly when T4 slips are prepared and filed in early 2021.
The legislation does not prevent salaries to the owners (or related persons) from being eligible for the subsidy. Note, however, that a proprietor or partner is not an employee of their unincorporated business, so no subsidy would be available for their work.
75% Canada Emergency Wage Subsidy (75% WS)
On March 27, 2020 the government announced a 75% wage subsidy program for eligible employers for up to 12 weeks, retroactive to March 15, 2020. Unlike the 10% WS, the 75% WS is not limited to smaller businesses. However, a significant reduction of revenue is generally required to be eligible. The 75% WS also differs from the 10% WS in that it will be paid in cash to the employer.
Eligible employers include individuals, taxable corporations (large and small), partnerships consisting of eligible employers, as well as non-profit organizations and registered charities. Unlike the 10% WS, individuals were not noted as “other than trusts”, however it was not specifically stated that trusts would qualify, leaving the eligibility of trusts which have employees uncertain. Public bodies would not be eligible (including municipalities and local governments, Crown corporations, public universities, colleges, schools and hospitals).
30% revenue decrease
This subsidy would be available to eligible employers that see a drop of at least 30% of their revenue. However, only a 15% drop is required in respect of March as only some sales during that month were generally affected. The employer will be required to formally attest that the required decline in revenue occurred. An employer’s revenue for this purpose would be its revenue from its business carried on in Canada earned from arm’s-length sources. Revenue would be measured either on the basis of accrual accounting (as they are earned) or cash accounting (as they are received), but the selected method would be required to be used for the entire duration of the program.
The taxpayer would have two options for comparing revenues. Option 1 is to compare the 2019 to 2020 revenue for the calendar month in which the period began. Option 2 is to compare the applicable month’s revenue to the average revenue earned in January and February 2020. The selected method would be required to be used for the entire duration of the program. The wage subsidy received by the employer in a given month would not be considered revenue for purposes of these calculations.
Non-profit entities and charities will have the option to include or exclude government funding in calculating revenue, but again, the selected method must be used for all applicable months.
The table below outlines each claim period and the month for which a decline in revenue would be required:
|Claiming period||Reference period for eligibility|
|Period 1||Mar 15 to Apr 11||March 2020 over:
|Period 2||Apr 12 to May 9||March 2020 over:
|Period 3||May 10 to Jun 6||May 2020 over:
The subsidy for most employees on eligible remuneration paid between March 15 and June 6, 2020 would be the greater of:
- 75% of remuneration paid, up to a maximum of $847 per week; and
- the full remuneration paid, up to a maximum of $847 per week or 75% of the employee’s pre-crisis weekly remuneration, whichever is less.
“Pre-crisis remuneration” will be the average weekly remuneration paid to the employee between January 1 and March 15, excluding any seven-day periods in respect of which the employee received no remuneration (so if an employee was hired on February 1, the lack of any remuneration in January would not reduce their pre-crisis remuneration).
In effect, employers may be eligible for a subsidy equal to 75% of the employee’s pre-crisis wages or salaries, to a maximum of $847 per week, provided the employee is paid at least that amount during the subsidy period. Employers would be expected to make “best efforts” to maintain existing employees’ pre-crisis employment earnings, however the documents acknowledge that some employers will be unable to top wages up to pre-crisis levels.
Eligible remuneration may include salary, wages, taxable benefits and other remuneration for which employers would generally be required to withhold or deduct amounts. However, it does not include severance pay, or items such as stock option benefits or the personal use of a corporate vehicle. There will be no overall limit on the subsidy amount that an eligible employer may claim.
For new employees, the subsidy will be 75% of salaries and wages paid, not exceeding $847 per week. Business owners and their family The subsidy amount for these and other non-arm’s length employees will be limited to the eligible remuneration paid up to a maximum benefit of $847 per week or 75% of the employee’s pre-crisis weekly remuneration. In other words, if there was no pre-crisis weekly remuneration, no 75% WS would be available for these employees, regardless of whether wages were paid after March 15, 2020.
Application will be available through CRA’s My Business Account portal as well as a web-based application. CRA recommends that businesses that haven’t already registered for My Business Account should do so as soon as possible. Employers would have to keep records demonstrating their reduction in arm’s-length revenues and remuneration paid to employees.
On April 8, 2020, the Prime Minister announced that they are aiming to get the program ready within 3 weeks. The original target was 3-6 weeks from the April 1, 2020 announcement date. CPP, EI, QPP
Employers eligible for the 75% WS will be entitled to receive a 100% refund for certain employer-paid contributions to EI, the CPP, the Quebec Pension Plan, and the Quebec Parental Insurance Plan.
This refund would recover the entire amount of employer-paid contributions in respect of remuneration paid to furloughed employees (no work whatsoever is done in the relevant week) in a period where the employer is eligible for the 75% WS in respect of that employee. This refund would not be subject to the weekly maximum benefit per employee of $847. There would be no overall limit on the refund amount that an eligible employer may claim.
Repayments will be required where the employer does not meet the eligibility requirements and pay their employees accordingly. In addition, anti-abuse rules will be proposed to ensure that the subsidy is not inappropriately obtained and that employees are paid the amounts they are owed. Penalties may apply in cases of abusive or fraudulent claims. The government is considering the creation of new offences that will apply to individuals, employers or business administrators who provide false or misleading information to obtain access to this benefit or who misuse any funds obtained under the program. These more severe penalties may include fines or even imprisonment.
Interaction with the 10% Temporary Wage Subsidy
For employers that are eligible for both the 75% WS and 10% WS for a period, any benefit from the 10% WS would generally reduce the amount available to be claimed under the 75% WS in that same period. Therefore, reducing income tax withholdings on employee payroll remittances will allow businesses to benefit from a portion of the 75% WS earlier.
Interaction with the Canada Emergency Response Benefit
The Government has indicated that the 75% WS is not intended to be available for periods when the employee has also collected the Canada Emergency Response Benefit. Adjustments to how these programs interact are being considered to encourage recently laid off workers to be re-hired.
Interaction with the Work-sharing Program
For employers and employees that are participating in a Work-sharing Program, EI benefits received by employees through the program will reduce the 75% WS that their employer is entitled to receive.
Employment Insurance Work-sharing Program
The Work-sharing Program, which provides EI benefits to workers who agree to reduce their normal working hours (from a 10% to 60% reduction) as a result of developments beyond the control of their employers, is not a new program. However, it has been broadened as a consequence of COVID- 19.
In general, the employer must have experienced a recent decline in business activity of at least 10% to be eligible for the program, which means that many businesses who are experiencing a downturn due to COVID-19 should be eligible. Effective March 15, 2020, the maximum duration of such agreements was extended from 38 weeks to 76 weeks, eligibility requirements were eased, and the application process has been streamlined.
Employers and employees must agree to participate in work-sharing and apply together. The employer must:
- be a year-round business in Canada in operation for at least 1 year;
- be a private business or a publicly held company; and
- have at least 2 employees in the work-sharing unit.
Also note that eligibility was also extended to:
- Government Business Enterprises, and
- not-for-profit employers experiencing a shortage of work due to a reduction of business activity and/or a reduction in revenue levels due to COVID-19.
- be year-round, permanent, full-time or part-time employees needed to carry out the day-to-day functions of the business ("core staff"),
- be eligible to receive EI benefits, and
- agree to reduce their normal working hours by the same percentage and to share the available work.
Employee eligibility was also extended to employees considered essential to the recovery and viability of the business, which would include, for example:
- technical employees engaged in product development;
- outside sales agents; and
- marketing agents.
The employer pays the wages to employees for the hours they worked, as per normal, and then notifies the government through a utilization report of the work hours that employees missed. The employees are paid directly from EI for the percentage of their benefit rate that corresponds with the percentage of the work hours they missed. For example, if the employee missed 50% of their normal weekly hours due to work-sharing, they would receive 50% of their benefit rate from EI. Their benefit rate will not be equivalent to their normal wages, as it is generally 55% of their average weekly earnings to a maximum of $573 per week (for 2020). Also, the employer must maintain all existing employee benefits.
A simplified process and set of forms have been introduced. Employers must complete these forms:
- EMP5100 - Application for a Work-Sharing Agreement
- EMP5101 - Attachment A: Work-Sharing Unit Attachment
Previously, a recovery plan was required, however, it was replaced by a single line of text within the application. Also, the requirement that the application be submitted at least 30 days prior to the commencement of the program has been eliminated. Finally, weekly utilization reports must be submitted to ensure the appropriate EI benefits are calculated and paid. Full details on the program and application process.
Each of these programs assists employers to keep employees. This can be very useful in facilitating a quick restart or gearing-up of the business. Factors to consider when determining which program should be used, if any:
- the need to have staff ready when the business is ready to re-start or gear-up;
- the magnitude of revenue decline;
- whether the business will be permanently closed;
- the programs for which the employer is eligible;
- whether there is any work available for the employee to do;
- how much payroll needs to be reduced;
- employment agreement conditions, restrictions, and costs of termination; and
- staff and client morale.
In some situations, even the support provided may not be sufficient to avoid partial or complete layoffs. In such cases, terminated employees may be eligible for the Canada Emergency Response Benefit, discussed in the next section. Note that employees can be retained with no working hours and still be eligible for this benefit. This would afford an additional option for maintaining workers to be reactivated when the economy recovers.
- On March 27, 2020, details of the Business Credit Availability Program were announced. It provides support through the Business Development Bank of Canada (BDC) and Export Development Canada (EDC). Both organizations will work with private lenders to extend credit for businesses. In many cases, financial institutions will reach out to their clients with details and the specific application process. In general, three programs are available:
- Canada Emergency Business Account (CEBA) – this provides interest-free loans of up to $40,000 to small businesses and not-for-profits to help cover operating costs during a period where revenues have been temporarily reduced. To qualify, organizations will need to demonstrate they paid between $50,000 and $1 million in total payroll in 2019. 25% of the loan will be forgiven where the loan is repaid by December 31, 2022. Applications through the borrower’s financial institution should be available on April 9, 2020.
- Loan guarantee for small and medium-sized enterprises – EDC is working with financial institutions to issue new operating credit and cash flow term loans of up to $6.25 million to small and medium enterprises.
- Co-lending program for small and medium-sized enterprises – BDC is working with financial institutions to co-lend term loans to small and medium enterprises for their operational cash flow requirements. Eligible businesses may obtain incremental credit amounts of up to $6.25 million through the program.
- Interested businesses should work with their current financial institutions.
Deferral of tax payment and filings
Income tax Deadlines for payment of corporate income tax payable under Part I of the Income Tax Act that become due on or after March 18, 2020 (also including installments) and before September 2020 are deferred to September 1, 2020. No interest will accumulate on these amounts during this period.
Taxpayers may defer a number of other administrative tax actions required under the Income Tax Act that are due after
March 18, 2020, until June 1, 2020. These include filing of income tax returns, forms, elections, designations, and responses to information requests. This includes corporate income tax returns.
Payroll and scientific research and experimental development (SR&ED)
Payroll deductions and all related activities must continue to be done on time. As well, the extension does not apply to SR&ED prescribed forms and investment tax credits including the apprenticeship job creation tax credit. These claims cannot be accepted if they are submitted later than 12 months after the due date of the related income tax return. CRA has no discretion in this regard.
A GST/HST remittance deferral is offered which would extend until June 30, 2020 the time for:
- monthly filers to remit amounts collected for the February, March and April 2020 reporting periods;
- quarterly filers to remit amounts collected for the January 1, 2020 through March 31, 2020 reporting period; and
- annual filers, whose GST/HST return or installment are due in March, April or May 2020, to remit amounts collected and owing for their previous fiscal year and installments of GST/HST in respect of the filer’s current fiscal year.
- In other words, any GST/HST which would otherwise become payable at the end of March, April or May will instead be payable by June 30, 2020. Finally, in respect of customs duty and sales tax for importers, the payment deadlines for statements of accounts for March, April, and May are being deferred to June 30, 2020.
See Appendix 2 below for a summary of deadlines and due dates.
A number of measures have been offered to individuals based on the number of individuals in their family, employment/business status, and income levels. These can be divided into the following categories: one-time payments, tax deferrals, employment insurance sickness benefits, the Canada Emergency Response Benefit and other supports.
Special GST Credit payment - A one-time special payment through the Goods and Services Tax Credit (GSTC) was to be made on April 9, 2020. This will double the maximum annual GSTC and result in an average payment for those benefiting by close to $400 for single individuals and close to $600 for couples. Some individuals or families whose “adjusted income” was too high to qualify for any quarterly GSTC payments will be eligible for this one-time payment. No application was required to receive the benefit.
Special Canada Child Benefit (CCB) payment - An additional Canada Child Benefit payment amount of $300 per child will be added to the May 2020 benefit cheque. Some families with children under age 18 who do not receive monthly benefits will be eligible for a one-time benefit in May.
Payment deadlines for income tax amounts that become due on or after March 18, 2020 and before September 2020 are deferred to September 1, 2020. This includes the June 15, 2020 instalment. No interest will accumulate on these amounts during this period.
Employment insurance - (EI) sickness benefit EI sickness benefits provide up to 15 weeks of income replacement and is available to eligible claimants who are unable to work because of illness, injury or quarantine. The government has enhanced access to this benefit by:
- waiving the one-week waiting period for new claimants who are quarantined that claim EI sickness benefits, effective March 15, 2020; and
- waiving the requirement to provide a medical certificate.
Note that sickness and regular EI benefits will be rolled into the Canada Emergency Response Benefit discussed below.
Canada Emergency Response Benefit (CERB) - The CERB will provide a taxable benefit for up to four months for workers who lose their income as a result of the COVID-19 pandemic but are not eligible for traditional EI. It will also cover sickness and regular EI claims made for periods commencing on or after March 15, 2020.
These income support payments can be made for a maximum of 16 weeks. $2,000 would be provided per 4-week period. The first 4-week period goes from March 15 to April 11, 2020. The CERB is taxable although tax will not be deducted at source. It must be reported as income for the 2020 tax year. CRA has indicated an information slip will be issued.
To receive the CERB, the applicant must be an “eligible
worker”, meaning they must:
- be at least 15 years of age;
- be resident in Canada;
- have stopped working because of COVID-19 or be
eligible for EI regular or sickness benefits;
- be or expect to be without employment or self-employment
income for at least 14 consecutive days in the four-week
- for 2019 or in the 12-month period preceding the day on
which they make an application, have had a total
income of at least $5,000 from:
- certain EI benefits (maternity and parental
- allowances, money or other benefits paid to the
person under a provincial plan because of
pregnancy or in respect of the care by the person
of one or more of their new-born children or one
or more children placed with them for the purpose
On April 6, 2020, the date applications for the CERB commenced, the government announced that non-eligible dividends would also count towards the $5,000 prior income eligibility requirement. Therefore, owner-managers or their family members compensated only by non-eligible dividends may be eligible for the CERB provided that the other requirements are met. Further, the minimum $5,000 income does not have to be earned in Canada, but the taxpayer needs to reside in Canada.
The worker, whether employed or self-employed, must cease to work for reasons related to COVID-19 for at least 14 consecutive days within the four-week period (required to commence on a Sunday) in respect of which they apply for the payment. Specific examples of people who would be eligible were:
- workers who must stop working due to COVID-19 and do not have access to paid leave or other income support;
- workers who are sick, quarantined, or taking care of someone who is sick with COVID-19;
- working parents who must stay home without pay to care for children that are sick or need additional care because of school and daycare closures;
- workers who are still employed but are not being paid because there is currently not sufficient work and their employer has asked them not to come to work; and
- wage earners and self-employed individuals, including contract workers, who would not otherwise be eligible for EI.
For the period of work cessation, the applicant cannot receive income from the sources listed above and cannot receive any other EI benefits. Further, workers that quit voluntarily are not eligible.
On April 7, 2020, the Prime Minister acknowledged that access to the CERB needed to be fine-tuned, including consideration of eligibility to those whose income was markedly reduced, but not eliminated.
Workers who are not Canadian citizens or permanent residents – including temporary foreign workers and international students – may be eligible to receive CERB if they meet the other eligibility requirements.
Interaction with the EI system
If an individual became eligible for EI prior to March 15th, the claim will be processed under the pre-existing EI rules. If the individual applied for EI regular or sickness benefits on March 15, 2020 or later, the claim will be automatically processed through the CERB. The CERB will pay $500 per week, regardless of what the individual may have been eligible to receive through EI. If still eligible for EI after the completion of CERB payments, individuals can receive normal EI benefits.
If the individual was eligible for EI benefits that started before March 15, 2020, and these benefits end before October 3, 2020, the individual may then apply for the CERB if they meet the eligibility requirements, including having stopped work because of reasons related to COVID-19. EI benefits and the CERB cannot be paid for the same period.
Applications commenced on April 6, 2020, and can be made through My Account or by using a dedicated automated phone line (1-800-959-2019 or 1-800-959-2041). Applicants need to provide their contact information and Social Insurance Number, and confirm that they meet the eligibility requirements. Individuals who have never filed a Canadian tax return must apply through CRA’s General Enquiries Line, 1-800- 959-8281. Additional documentation to verify eligibility may be required at a future date. Payments by direct deposit can be expected within three business days after application.
For the first week of applications, CRA requested that applications be made on specific days of the week, based on month of birth, in order to minimize delays.
The government has stated that Canada’s large banks have confirmed that support will include up to a 6-month payment deferral for mortgages and the opportunity for relief on other credit products. Banks have affirmed their commitment to working with customers to provide flexible solutions, on a case-by-case basis, for managing through hardships caused by recent developments. This may include situations such as pay disruption, childcare disruption, or illness. Further, some banks have begun to offer reduced credit card interest rates.
Emergency Loan Program for Canadians Abroad
This provides the option of an emergency loan to Canadians in need of immediate financial assistance (of up to $5,000) to return home or to temporarily cover their life-sustaining needs while they work toward their return. Each application will be assessed according to their specific situation and needs. Eligible Canadians currently outside Canada and needing help to return home can contact:
- your nearest Government of Canada office
- Global Affairs Canada’s 24/7 Emergency Watch and Response Centre in Ottawa at +1 613-996-8885 (collect calls are accepted where available)
A six-month interest-free moratorium, from March 30, 2020 to September 30, 2020, has been provided on the repayment of loans under the Canada Student Act, Canada Student Financial Assistance Act, and Apprentice Loans Act for all individuals currently in the process of repaying these loans.
Minimum RRIF withdrawal
In recognition of the substantial recent value declines in the investment markets, the minimum withdrawal from a RRIF or a money purchase pension plan for 2020 (computed as a percentage of its value on January 1, 2020) has been reduced by 25%. No similar reduction is available for defined benefit individual pension plans.
This reduction will not be considered in determining whether withdrawals from a spousal RRIF attribute back to the other spouse or for purposes of certain benefits available to nonresidents of Canada under income tax treaties.
Other Filings and Administration
The following summarize administrative changes aimed at easing or delaying filing obligations and other CRA related activities. A summary of filing and payment deadlines is included in Appendix 2.
In order to reduce the necessity for taxpayers and tax preparers to meet in person, CRA will recognize electronic signatures as a temporary administrative measure. This provision applies to authorization forms T183 and T183CORP.
CRA audit and verification activity
On March 18, 2020, CRA stated that they will not contact any small or medium businesses to initiate any post-assessment GST/HST or income tax audits for the next four weeks. For the vast majority of businesses, CRA will temporarily suspend audit interaction with taxpayers and representatives. Interaction with taxpayers will be limited to high risk and exceptional cases, or cases of high-risk GST/HST refund claims which require some contact before they can be paid out. Other audits are temporarily suspended.
Collection activities on new receivables have been suspended until further notice, and flexible payment arrangements will be offered. As well, CRA has noted that, where payments or other tax obligations have been missed due to COVID-19, the usual process of requesting penalties and/or interest be waived is available. CRA has also temporarily suspended requirements to pay (RTP) sent to employers to require they withhold amounts for unpaid taxes from employees’ remuneration.
CRA objections and appeals
Any objections related to Canadians' entitlement to benefits and credits have been identified as a critical service which will continue to be delivered. As a result, there should not be any delays associated with the processing of these objections.
With respect to objections related to other tax matters filed by individuals and businesses, CRA is currently holding these accounts in abeyance. No collection action will be taken with respect to these accounts during this period of time.
On March 27, 2020, CRA stated that for any objection request due March 18 or later, the deadline is effectively extended until June 30, 2020.
CRA Call Centres
The individual and benefit CRA call centres will continue to be open from 8 a.m. to 11 p.m. Monday to Friday and 9 a.m. to 5 p.m. on Saturdays (local time). Hours will be reduced for April 10-13 due to the holidays.
As fewer agents are available, assistance will only be provided for calls from those having issues filing their 2019 income tax and benefit return, getting their benefit payments, or those looking to register for My Account. Similarly, fewer staff will be available on the other call centre lines. Further, the call centres for debt management, charities, and national leads have been closed indefinitely.
In many situations, the legislation behind these programs have been constructed in ways that allow the government to make quick modifications to criteria, amounts and timing. Further, over the next days and weeks, the specifics on some programs will be released.
Most of the details for these initiatives will be released on one of these four government webpages:
This information was originally shared by Green Leaves Bookkeeping and summarizes selected government comments up to April 8, 2020. This information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a further review should be done by a qualified professional. No individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
Green Leaves Bookkeeping offers full service bookkeeping, payroll, personal tax preparation in Acton, personal tax preparation in Milton, and consulting services in Acton, Ontario and surrounding areas. Have a bookkeeping mess? We can help! Whether you need a full time bookkeeping service, a once a month tune up, a software consultation, or someone to prepare your taxes we are available to assist you.
Written By: Lisa Trencs CB, CPB | Certified Bookkeeper, Certified Professional Bookkeeper WEBSITE
Cheat sheet: Canadian govenment support for individuals during the pandemic
Canadians in all corners of the country have been partially or severely impacted by the COVID-19 pandemic. If you are trying to find out what resources are available to you to help you, here is a summary of resources from the Canadian government as of June 2, 2020.
Avoiding layoffs, rehiring employees & creating new jobs
Canada Emergency Wage Subsidy (CEWS) - The Canada Emergency Wage Subsidy (CEWS) supports employers that are hardest hit by the pandemic, and protect the jobs Canadians depend on. The subsidy generally covers 75% of an employee's wages – up to $847 per week - for employers of all sizes and across all sectors who have suffered a drop in gross revenues of at least 15% in March, and 30% in April and May. The program will be in place for a 12-week period, from March 15 to June 6, 2020.
Increased Canada Child Benefit - An extra $300 per child was delivered through the Canada Child Benefit (CCB) for 2019-20. This benefit was delivered as part of the scheduled CCB payment on May 20.
Extra time to file income tax returns - The due date for filing individual 2019 income tax returns has been deferred until June 1, 2020. Any new income tax balances due, or installments, are also being deferred until after August 31, 2020 without incurring interest or penalties.
Mortgage payment deferral - Homeowners facing financial hardship may be eligible for a mortgage payment deferral of up to six months. The deferral is an agreement between you and your lender. Typically, the agreement indicates that you and your lender have agreed to pause or suspend your mortgage payments for a certain amount of time. After the agreement ends, your mortgage payments return to normal and the deferred payments—including principal and accumulated interest–are added to the outstanding principal balance and subsequently repaid throughout the life of the mortgage. To know if you are eligible for a mortgage payment deferral or to learn what options are available, contact your lender.
Temporary 10% wage top-up for low-income essential workers - All provinces and territories have confirmed, or are in the process of confirming, plans to provide wage top-ups for essential workers. This government funding includes up to $3 billion in federal support to increase the wages of low-income essential workers. Each province or territory will determine which workers would be eligible for support, and how much support they will receive.
Special goods & services tax credit payment - A one-time special payment through the Goods and Services Tax credit for low and modest-income families. The average additional benefit will be close to $400 for single individuals and close to $600 for couples.
Extending the Work-Sharing program - The maximum duration of the Work-Sharing program has been extended from 38 weeks to 76 weeks for employers affected by COVID-19. This measure will provide income support to employees eligible for Employment Insurance who agree to reduce their normal working hours because of developments beyond the control of their employers.
There are also over a dozen support initiatives for students, recent graduates, seniors, and indigenous peoples. These can be found on the Canadian government website.
Personal loans vs. second mortgages: Weighing your options
If like many Canadians, you find yourself in need of money from time to time, there are a few options out there you can consider. Some homeowners take out a second mortgage—essentially a lump sum paid in fixed installments that uses home equity as collateral—while others consider a personal loan, an allotment that may be secured with collateral or unsecured. Read on to learn more about each and determine which is right for you.
What's a personal loan? What's a second mortgage?
Before you choose your product, it’s crucial that you understand the parameters of each. A personal loan comes in a lump sum and you agree to pay it back in installments over a certain period of time. With an iCapital loan, the term ranges from nine months to five years. Personal loans can be secured or unsecured, a term that refers to whether or not you put up collateral against the loan. With a secured loan, the collateral mitigates some of the lending institution’s risk so you can expect to get a lower interest rate.
A second mortgage is a loan you take out against the value of your home. Canadian homeowners can borrow up to 80% of the appraised value of their home, minus any balance on their first mortgage. A second mortgage is, by definition, a secured loan.
Which is better for you?
These two lending options share some of the same benefits. With both a personal loan and a second mortgage:
- You receive the money in a lump sum
- You can use your home equity as collateral
- You can pay back the balance in installments
The similarities, however, end there. Consider the following:
Very little paperwork is required to apply for a personal loan—usually just basic documents to verify identity and income. In fact, the process takes around 10 minutes and is fully online. In contrast, the process and paperwork to apply for a second mortgage are nearly as daunting as getting the mortgage in the first place. Applicants should expect to gather at least two years of financial documents.
If you apply for a second mortgage, you can expect to wait several weeks for an answer. With a personal loan, you’ll get an answer within 24 hours.
With a second mortgage, you’re borrowing against your home equity. Unless your home is paid off in full, you’ll need to continue to pay both mortgages simultaneously, and if you default you could lose your home. If you don’t want to involve your home in the debt, you can apply for an unsecured personal loan or, alternately, a secured personal loan with something else as collateral.
With a second mortgage, you might have to pay for costs like a title search, title insurance, appraisal, and other legal fees. There are no such costs associated with applying for a personal loan.
If you decide to take out a second mortgage you may be eligible to borrow up to 80% of the value of your home. Personal loans are generally $45,000 or less.
When choosing between a second mortgage and a personal loan, consider all your requirements. The best option for you might be determined by how much you need and how quickly. If you’re looking at borrowing more than $45,000, a second mortgage may be the best way forward. But if you’re on a tight timeline and seeking less than $45,000, it’s hard to beat a personal loan.
Ready to re-open: Best practices for restaurants
As the number of COVID-19 infections declines across Canada, provincial governments are beginning to implement phased reopening. This hopeful step has restaurants across the nation beginning to prepare, be it mentally or physically. Given that this is new territory for everyone, what should the preparations entail? Read on for the best practices you should follow to ensure everyone’s health and safety as you reopen your restaurant.
1. Document a reopening plan and train your staff
A safe and seamless re-opening depends on communicating and implementing the very best safety measures across your entire operation. Lessening restrictions depends on tightening precautions and that will require the participation of all management and staff. Don’t leave things to chance. Even “obvious” measures might be overlooked in the chaos of a relaunch. Write down your plan in detail, including all safety precautions, and communicate your expectations to everyone in your organization. Revise and brief your staff as required.
- Write down your plan
- Train all staff on safety measures
- Revise and re-train as necessary
2. Make a physical distancing clear and easy
If you had an incorrect idea of what six feet (or two metres) was before COVID-19, you’re not alone. People don’t typically measure their personal space this way and it can be hard to gauge distance on-the-fly. Before you welcome customers back into your restaurant, use tape to mark six-foot intervals on your floor and indicate the flow of traffic with arrows. If possible, move furniture like booths or table apart and install physical barriers or close off those areas that are too close together. Post signage at the door and inside reminding people of physical distancing requirements and restrict the number of people allowed inside at once.
- Post signs
- Mark floors and traffic flow
- Move or block off seating areas
Most kitchens are fairly tight quarters to begin with. Minimize physical interaction by setting up staggered task stations as possibly creating additional shifts to reduce the need for so many people in the kitchen at one time. Mark intervals on the floor as a reminder, and make sure customers and delivery drivers are kept separate from the cooking areas.
- Mark floors
- Create staggered stations
- Restrict access
3. Go minimalist
Once customers return, there are a few adjustments you can make to enhance safety. If possible, prop open exterior doors for fresh air and interior doors to reduce surfaces that require touch. Remove menus, flowers, condiments, and cutlery from the tables and instead provide them once customers are seated. Use technology for remote ordering and table selection, and reduce person-to-person contact with electronic payment.
- Prop open doors
- Remove table-top items and provide on an as-needed basis
- Use technology
4. Keep it clean
Those in the restaurant business should already be familiar with sanitation protocols but during COVID-19 these protections will have to be intensified. Here’s a step-by-step checklist that should help you establish and maintain a spotless restaurant.
- Do a deep and complete clean of the entire establishment prior to re-opening
- Clean the credit card machines, cash register, headsets, or other shared equipment
- Establish and record an updated cleaning schedule especially for high-traffic areas like the washrooms, counters, and door handles
- Clean tables between every seating
- Remove and sanitize condiment containers, menus, or other tabletop items between customers
- Make hand sanitizer available at the door, on tables, and at the cash
- Use only approved disinfectants
5. Health and hygiene
Alongside the signs about physical distancing, post a notice explaining that customers showing signs of COVID-19 (fever, runny nose, or cough) may be refused entry to your establishment.
Your employees will need to maintain extremely high health and hygiene standards. These best practices will help your day-to-day operations:
- Stagger start times
- Implement health check screening at the start of every shift and send sick employees home
- Fully train all staff on how and when to wash hands, how to maintain physical distancing, and to avoid touching their faces
- Provide lockers or sealed bags for personal items
- Provide PPE and gloves when applicable
- Make hand sanitizer available at the door, on tables, and at the cash
- Establish a point person for every shift to ensure all protocols are being followed
Restaurants and other businesses across Canada are starting the slow process of re-opening. Check this Restaurants Canada Reopening Tracker to determine the rules for your region and then proceed following these best practices for a successful and safe transition.
How Canadian businesses are reinventing themselves during the pandemic
With limits on travel and social interaction, and the evolving needs and desires of customers, virtually every business is experiencing some sort of disruption to everyday operations. There’s no shortage of stories about struggling small businesses but it’s not all bad news. There are many stories of resilience, adaptability, and creative thinking that have allowed some to pivot and thrive. Read on to learn about small business successes from coast to coast.
While online retailers may have seen a spike in sales, brick-and-mortar stores have had to adjust—and fast. For Toronto home goods store, Spruce, this has meant providing free local deliveries. “We chose to close the storefront for the safety of my employees and the community,” says owner Kim Alke, “but I take orders through my website and do contactless deliveries twice per week.” Glass Bookshop in Edmonton has taken a similar tack with free deliveries in the community and has seen sales shoot up, partly because reading is one of a dwindling group of safe activities but also likely due to the fact that co-owner Matthew Stepanic brings along his corgi, Bob, on book runs.
If pivoting to deliveries isn’t the right answer, maybe changing the product is. After initially shutting down, Toronto’s Bathing Belle designer swimwear shop reopened to sell cloth masks under a buy one-donate one model where each purchase triggers a donation to a long-term care facility in the city.
Gyms and fitness Studios
For gym and fitness facilities, going online is the only answer for safe classes. A quick response to the pandemic is what saved 3rd Degree Training in Stratford, Prince Edwards Island; within 24 hours of closing their physical location, the company began offering new daily workouts broadcast from the instructors’ garage to Facebook Live.
Toronto’s SAOR Studio made the same immediate shift to digital training and nutrition support—and went a step further. “We made our six-week training plan free to everyone and have had 1,500 people download it so far,” says founder Nathania Harrison. “We also lent all of our equipment like weights, tension bands, gliders, and yoga blocks to members so they could build their own studio at home.” They also expanded their merchandise and set up a simple ordering page on their website to boost their revenue stream.
You might expect manufacturers to face fewer COVID-related challenges but that wasn’t the case for Stonex, a seller of natural stone that had previously used a traditional showroom to display and sell their products. Unable to invite customers into their showroom like before, they innovated, building stone sample boxes similar to the fabric swatches used by tailors and dropping them off curbside. Alongside toilet paper and non-perishable food items, hand sanitizer quickly became a scarce resource across Canada. Some alcohol producers, like Victoria Distillers from Sidney, British Columbia began using a by-product from their process to produce sanitizer for their community.
Even retrofit hand sanitizers need labelling and as soon as the COVID-19 epidemic hit, Lorpon Labels stepped up with free design and packaging. However, they quickly realized that their equipment—which could cut acetate—could be used to manufacture personal protection equipment. In cooperation with a foam injection company, the label company temporarily retrofit their operations to produce protective equipment.
Although home delivery options have long existed for restaurants, restrictions on sit-down traffic and the sudden surge of home cooks have taken their toll on this industry. Most establishments can’t survive on take-out and delivery alone. Luckily, there are some very creative thinkers in the biz.
Chaeban Ice Cream, a popular artisanal and all-natural ice cream shop in Winnipeg, was forced to close due to the COVID-19 restrictions. Undeterred, owners Joseph Chaeban and Zainab Ali used their time off to come up with an all-new business model: The Chaeban Ice Cream Club. Their subscription service offers no-contact monthly ice cream deliveries to their customers’ door.
Ordering delivery is a good occasional treat but you can’t beat the freshness and taste of a just-cooked meal. This—and a desire to share Thai culture and cuisine—was behind Kasorn “Mo” Meepan’s COVID strategy. In response to the restrictions on dine-in eating, the owner of Sala Modern Thai Kitchen & Bar made the bulk of her menu available of ready-to-cook meal kits, bringing her customers food and the new skill of Thai cooking.
The plight of Canada’s restaurants has received massive amounts of attention, with many places worried that they won’t survive this period of economic instability. In a bid to support favourite establishments, we can all participate in the national #takoutday campaign which encourages purchasing a take-out meal each Wednesday (or purchase any day of the week).
For Canadian small businesses, the stakes of this pandemic are high but with some creative thinking and the willingness to support each other, we can make it through together.