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COVID-19 (April 30, 2020)

There following government programs are available to assist individuals and businesses:

1. 10% Wage Subsidy

2. 75% Canadian Emergency Wage Subsidy (CEWS)

3. $40K Interest Free Loan – Canada Emergency Business Account (CEBA)

4. Canada Emergency Response Benefit (CERB)

 

10% Wage Subsidy

All companies qualify for a wage subsidy for the period March 18th to June 19th equal to 10% * Gross Pay.
The maximum for the entire period is $1,375 * the number of employees or $25,000, whichever is less.
This subsidy is claimed by reducing payroll source deduction payments to CRA.

Additional Information:
https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/frequently-asked-questions-wage-subsidy-small-businesses.html

75% Wage Subsidy (CEWS)

The 75% wage subsidy is available if:

  • March revenue is down 15%.
  • April revenue is down 30%.
  • May revenue is down 30%.

Option 1 is to compare revenue to the same month last year. Option 2 is to compare revenue to the average of January & February 2020. The same option must be used for all periods.
If you qualify for March, you automatically qualify for April. If you qualify for April, you automatically qualify for May.

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 calculated using the accrual or cash method, and would exclude revenues from extraordinary items.

The subsidy is 75% of the employee’s average pre-crisis earnings (maximum $847 per employee per week).

The subsidy is reduced by the 10% wage subsidy noted above, whether or not claimed. In other words, you can only claim the 10% by reducing source deduction payments.

Application Guide:
https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy.html

Download Calculation Spreadsheet:
https://www.canada.ca/content/dam/cra-arc/serv-info/tax/business/topics/cews/cews-calculation.xlsx

 

 

$40K Interest Free Loan – Canada Emergency Business Account (CEBA)

To assist companies with their cash flow, companies will be eligible to apply for a $40,000 interest free loan if:
1) their 2019 annual payroll was between $20,000 and $1.5 million
2) the funds are used for non-deferrable operating expenses (eg. rent, payroll, utilities)

You apply for this loan via your financial institution.

 

Canada Emergency Response Benefit (CERB)

This benefit is available to individuals who have stopped working due to COVID-19 for at least 14 consecutive days.

The payment is $500 per week for up to 16 weeks. The program runs from March 15th to October 3rd, 2020.

You must have earned more than $5,000 over the last year (salary or dividends).

You are not eligible in a period where you receive any income from employment or self-employment.

Applications can be made via CRA’s My Account secure portal. Taxpayers will need to attest that they meet the eligibility requirements.

https://www.canada.ca/en/services/benefits/ei/cerb-application/questions.html

How to Register for CRA’s My Business Account

https://www.canada.ca/en/revenue-agency/news/cra-multimedia-library/businesses-video-gallery/register-mybusiness-account.html

If you sign-in via a partner, use your personal, not business, bank card.

Salary vs Dividends (February 2019)

Companies have the option of paying their shareholders a salary, a dividend or a combination of both.
 
The shareholder pays all the income tax on a salary. If a dividend is paid, some of the tax is paid by the company and some by the shareholder. In theory, the total tax paid under either option is supposed to be the same. In practice, however, dividends used to have a lower tax rate.
 
Changes to the income tax act have now eliminated the advantage of dividends over salary. In many cases we are now recommending that you receive a salary instead of a dividend.
 
If a salary is paid, source deductions (CPP & income tax) must be remitted to CRA monthly. As there are significant penalties if a payment is late, we recommend using a payroll service.
 
A salary increases your RRSP room.
 A salary entitles you to future Canada Pension Plan (CPP) benefits (at a cost of $5,500 per year).
 A salary reduces the company’s income tax installments, as a salary is an expense deductible by the company.
 A salary also reduces personal income tax installments, as tax deductions are now remitted monthly.

 

Corporate Tax Changes (January 2019)

Here is a summary of three major changes to the income tax act that will affect some corporations and their shareholders.
 
1) If your company pays a dividend to a family member who does not work more than 20 hours per week in the business, the dividend will be taxed at the top personal tax rate.
 
2) If your company earns more than $50,000 in investment income (interest, dividends, capital gains) AND your company (or a related company) sells products or provides services, the corporate tax rate on the product and service income will increase by up to 13% (from 13.5% to 26.5%)
 
3) If your operating company pays dividends to your holding company, the dividend may be treated as a capital gain subject to 25% tax.

CRA Audits (February 2018)

Did you know that when CRA audits a business, they have the right to request business and personal bank statements going back several years? Would you be able to provide supporting documents for all your business expenses if requested?
 
For example, CRA has recently been auditing travel and professional fee expenses for the years 2014 to 2017. They have been disallowing expenses if the supporting documentation is not provided. 
 
Here is a list of what you need to keep. We recommend saving these documents on your computer in PDF format.
  • Business bank statements
  • Personal bank statements
  • Credit card statements and supporting receipts
  • Supporting documents for expenses (supplier invoices / emails)
  • Investment statements
  • Payroll registers

Ontario Employment Law (January 2018)

Ontario has now passed into law the significant changes that are effective January 1, 2018:
  • Increasing the minimum wage to $14.00 per hour (the proposed increase to $15.00 per hour effective January 2019 has been cancelled)
  • Allowing employees personal emergency leave up to  three days for personal illness, two for bereavement and three for family responsibilities (unpaid).
  • Increasing vacation for employees with at least 5 years’ service to 3 weeks.

Corporate Tax Changes (December 2017)

Both the federal and Ontario governments have decreased the small business tax rate effective January 1, 2018.
  • The federal small business tax rate has decreased to 10.0% (from 10.5%)
  • The Ontario small business tax rate has decreased to 3.5% (from 4.5%)

Medical Expenses (July 2017)

You may be able to reduce your medical costs by setting up a medical benefits plan. If you meet the conditions below, your company can reimburse you for 100% of your medical expenses (these include drugs, dental, glasses, therapy).

Conditions:

  • You own a corporation
  • Your family medical expenses are usually over $1,000 per year
  • You do not belong to a group plan
  • You have no employees (except family members)

Olympia Benefits Inc has set up a plan that is popular with small business owners. Here is a link to additional information: http://www.olympiabenefits.com/health-and-dental-plans-for-small-business

We recommend the Olympia HSA Plus plan.

Federal Budget (2016)

Individuals
  • a new Canada Child Benefit replaces the Universal Child Care Benefit and Canada Child Tax Benefit in July 2016. This benefit is not taxable.
  • the fitness and art tax credits are reduced by 50% in 2016 and eliminated in 2017
  • the education/textbook tax credit is eliminated in 2017 (the tuition tax credit is still available)
  • the family tax cut is eliminated in 2016
  • the sale of a principal residence must now be reported in order to be tax-free (sales in 2016 +)
  • Home Accessibility Tax Credit – a 15% non-refundable credit on up to $10,000 of home renovation expenses that allow a qualifying individual to gain access or to be more mobile/functional within the dwelling. You must be 65 or older, or are eligible for the Disability Tax Credit. The credit may be claimed by the qualifying individual as well as individuals who may claim such qualifying individuals as dependents. An eligible dwelling is the principal residence of the qualifying individual.
  • Child care deduction limits – for children under 7, the limit will be $8,000 per year. For children 7 to 16, the limit will be $5,000 (effective 2015 +). The deduction is limited to 2/3 of the salary of the lower income parent.
Corporations
  • the small business tax rate will stay at 10.5% for 2016 and subsequent years
  • access to the $500,000 small business rate will be restricted when a company bills another company / partnership for their services and there is common ownership
  • the eligible capital property rules are being replaced effective January 1, 2017. Existing balances will be transferred to CCA class 14.1

Federal Budget (2015)

Minimum RRIF Withdrawals – the amount that an individual must withdraw from their RRIF is being reduced.

Age at beginning of year          New Factor (%)          Old Factor (%)
71                                                        5.28                           7.38
75                                                        5.82                            7.85
80                                                        6.82                            8.75

Foreign Asset Reporting (T1135) – a simplified report will be available to taxpayers if their specified foreign property is between $100,000 and $250,000 throughout the year

Repeated Failure to Report Income Penalty – where a taxpayer fails to report an amount of income in a taxation year and had failed to report an amount of income in any of the three preceding taxation years, the taxpayer is liable to a penalty equal to 10 per cent of the unreported income. The penalty will only be applied if a taxpayer fails to report at least $500 of income.