On March 18, 2020, the Canadian government announced a $27B plan to reduce the economic impact of the COVID-19 outbreak for both individuals and businesses via the Economic Response Plan (“ERP”). An update to the plan was announced on March 27, 2020. Details of the ERP continue to be updated and available on the government’s portal. For our personal tax clients, important measures are summarized below.
For those eligible for the Canada Child Benefit (“CCB”) the government is increasing the payment amount by $300 per child for the 2019-20 benefit year. The payment will be made in May to those families eligible for receipt. No application or action is required.
Furthermore, the government has imposed a six-month deferral of Canada Student Loan payments for all student loan borrowers. During this time, no payments will be required and interest will not be charged on any outstanding balance. The measure is in effect starting March 30th and there is no application required for the pause in repayments.
For those individuals that are: self-employed but not eligible for EI, parents with children that require supervision and not able to earn employment income as a result, workers who are still employed but are not being paid because there is insufficient work available, and anyone taking care of a family member with COVID-19, may be eligible for a monthly $2,000 Canada Emergency Response Benefit not to exceed four months. This benefit will be available starting April 2020 and require individuals to apply directly with the CRA via an automated telephone line or by calling the main CRA line directly.
The filing deadlines have been deferred to June 1, 2020, for individuals (formerly April 30, 2020). The CRA cautions taxpayers eligible to receive the GST Tax Credit (now enhanced to $400 per individual or $600 per couple for 2020) or the CCB that they should not defer filing their tax returns to ensure benefits for 2020-21 are properly determined.
Any income taxes currently owing and those still to be incurred (i.e. required installments) are deferred until August 31, 2020 (from April 30, 2020). During this time, no interest or penalties will accumulate on these amounts. The CRA requests individuals to work with advisors to electronically prepare their tax returns and limit face-to-face interaction considering the current environment.
The government has communicated its support to lenders in negotiating revised terms for individuals hit by the economic downturn. This includes additional measures such as deferring mortgage payments, capitalizing interest, and special payment arrangements, on a case-by-case basis. Individuals interested in applying for such relief are encouraged to contact their lender directly and determine what supports are available in their situation.
Added flexibility has been introduced into the Employment Insurance (“EI”) system to allow for improved response to COVID-19 consequences. These measures include: waiving one-week waiting periods for individuals in imposed quarantine, providing an emergency support benefit for those that have lost their jobs or have reduced hours but are not otherwise eligible for EI, and waiving the requirement to provide medical certification when applying for the sickness benefit.
The successful application of the ERP requires awareness of eligibility criteria and careful consideration of your personal circumstances in order to ensure compliance. We’re happy to work with you on ensuring you get the support needed to weather the downturn.