As a business owner, one of your challenges is learning how to balance between reinvesting into the business and setting money aside for personal savings. Since there are no longer employer-sponsored pension plans and the knowledge that retirement will come eventually, it’s important to have a retirement plan in place.
We’ve put together an infographic checklist that can help you get started on this. We know this can be a difficult conversation so we’re here to help and provide guidance to help you achieve your retirement dreams.
Determine how much income you will need in retirement.
Make sure you account for inflation in your calculations.
You should try to pay off your debts as soon as you can; preferably before you retire.
As you age, your insurance needs change. Review your insurance needs, in particular your medical and dental insurance because a lot of plans do not provide health plans to retirees.
Review your life insurance coverage because you may not necessarily need as much life insurance as when you had dependents and a mortgage, but you may still need to review your estate and final expense needs.
Prepare for the unexpected such as a critical illness or a need for long-term care.
Check what benefits are available for you upon retirement.
Canada Pension Plan- decide when would be the ideal time to apply and receive CPP payments. Business owners are in a unique position to control how much can be contributed to CPP by deciding to pay salary or dividends. (Dividends don’t trigger CPP contributions.)
Old Age Security- check pension amounts and see if there’s a possibility of clawback.
Guaranteed Income Supplement- if your income is low enough, you could apply for GIS.
Are you a candidate for an individual pension plan (IPP)? IPPs can provide higher contributions than typically permitted to an RRSP and the ability to create a lifelong pension.
Check if your business is a candidate for a group RRSP or company pension plan. This is a great way for you to build retirement savings and provide benefits for your employees and business too.
Make sure you are saving on a regular basis towards retirement- in an RRSP, TFSA, or non-registered. Since you can control how you get paid, salary or dividends, dividends are not considered eligible income to create RRSP room, therefore you should make sure you have the optimal mix of both to achieve your financial goals.
Ensure your investment mix makes sense for your situation.
Don’t forget to check if there are any other income sources. (ex. rental income, side hustle income, etc.)
The sale of your business can be part of your retirement nest egg. Therefore, you should make sure you know the valuation of your business and your plan to sell the business to your family, employees, partners or a third party. You should also know when you decide to sell your business too.
Are you planning to use the sale of your home or other assets to fund your retirement?
Will you be receiving an inheritance?
One other consideration that’s not included in the checklist is divorce. This can be an uncomfortable question, however divorce amongst adults ages 50 and over is on the rise and this can be financially devastating for both parties.
Contact Us about helping you get your retirement planning in order so your retirement dreams can be achieved.
Starting a new business venture can be both exciting and nerve-racking at the same time. The hopes and dreams of success, financial freedom and being your own boss are accompanied by many uncertainties and risks. To add to some of the anxiety, comes the facts: about half of all new businesses will not be around within the next 5, and only about one third will survive 10+ years. The situation often becomes more complex when there are multiple owners and the future success of a business is at risk if proper planning is not done. The unexpected ‘exit’ of a partner due to death, disability, illness, retirement or just simply that ‘it’s not working out’ can create a very difficult situation for the remaining business owner(s) and the business itself. Many businesses operate under a ‘handshake’ sort of agreement, but those rarely are upheld when the situation starts to get challenging. In order to protect against all of these pitfalls, it is always advised to have the right structure in place to address any potential challenges that may arise. This is done through incorporating a Buy-Sell Agreement between the owners.
What is a Buy‐Sell Agreement?
A buy-sell agreement is a legally binding contract designed to establish a set of rules or actions for the remaining business owner(s) to carry on the business, in the event one of them is no longer involved in the business – this can be due to death, illness, injury, retirement or a simple desire to ‘get out’. In other words, this document dictates how the remaining owner(s) will interact with each other and how the business will operate when certain situations occur. This agreement creates certainty and a ‘game plan’ in case one or more of the partners are no longer able or willing to commit to the business.
Types of Buy‐Sell Agreements
Buy-sell agreements are generally structured as a cross purchase agreement, promissory note agreement, or a share redemption agreement.With a cross-purchase agreement, each shareholder within the agreement agrees to purchase a specified percentage of the shares owned by the departing shareholder, and if it’s due to death, the deceased shareholder’s estate is obligated to sell the shares to the remaining shareholder(s). A shareholder will generally purchase insurance on the life of the other shareholder(s) and on death, will use the proceeds from the insurance to buy out the remaining shares from the deceased shareholder’s estate.With a promissory note agreement, corporate owned life insurance is placed on the life of each shareholder, with the corporation named as the payor and beneficiary. In the event that a shareholder dies, the surviving shareholder(s) purchases the deceased’s shares from their estate using a promissory note. Once the remaining shareholder(s) owns the deceased shareholder’s shares, the company collects the death benefit on the insurance policy with the excess amount above the adjusted cost basis of the policy in the capital dividend account. The company then provides the surviving shareholder(s) a capital dividend which provides the remaining shareholder(s) the necessary funds to pay off the promissory note.Under the share redemption arrangement corporate owned life insurance is placed on the life of each shareholder with the corporation named as the payor and beneficiary. In the event that a shareholder dies, the company collects the insurance proceeds and places the excess amount above the adjusted cost basis of the policy in the capital dividend account. The company uses the proceeds in the capital dividend account to redeem the shares held by the deceased shareholder’s estate. Once that is done, the remaining shareholder(s) takes over the ownership of those purchased shares.Each structure has their advantages and disadvantages and should be reviewed with a legal professional, tax professional as well as a knowledgeable Financial Advisor.
Why the business needs a buy‐sell agreement
A buy-sell agreement is a crucial component of a business that should be incorporated to protect the shareholders as well as the business itself. It is designed to ensure important things are taken care of if someone leaves the business for whatever reason, so that the business can continue to grow and run successfully. A buy-sell agreement offers several key benefits to your business:
It maintains the continuity of your business by ensuring members get to decide what happens to the business before any problems arise.
It protects company ownership by laying out a succession plan for departing members. This keeps remaining shareholders from being burdened by untested and unproven successors (like the widow or children of the departing co-owner).
It minimizes dispute between remaining co-owners and the family of the departing owner by having a strategy in place ahead of time to govern business operations.
It alleviates co-owner stress and uncertainty by specifically identifying which events would trigger a buyout.
It protects business assets and liquidity by providing a financial (and tax) plan for each of the different triggers addressed in the agreement.
It protects the interest of, not just the business entity itself, but also that of the business owners to ensure members (and their families, in the event of death or disability) are handled with respect, courtesy and the utmost fairness.
What to include in the buy‐sell agreement
Since a buy-sell agreement is a legally binding document, it generally should be drafted with a knowledgeable and experienced Legal Professional. Most agreements are started through a generic template, but then are customized for the needs of each business/partner and can be a fairly thorough and comprehensive document. There are several different components of a buy-sell agreement and several different aspects need to be addressed, such as the valuation of the company, ownership interests, buy-out clauses, and terms of payment. The agreement should generally be drafted at the very start of the business, so as to avoid any issues or misunderstandings later on. The agreement will also address certain ‘triggering events’, which are listed below.
Conflict between owners of a business in regards to the direction or management of the business can sometimes occur, and can even push the most successful business off-course. In a situation where no agreement or mediation can be reached, it may make sense to allow for one or more of the partners to be bought out. This would allow the business to continue moving forward and is often referred to as a ‘shot-gun clause’. Sometimes a situation where one owner offers to buy-out the other would also offer to be bought-out for the same value, thus ensuring fair treatment and value of the shares.
An owner who is in the midst of a divorce may be bought-out by other partners, to protect the company ownership. A divorce settlement will generally depend on the partner’s share of the business. It’s not uncommon for a family law judge to order a business owner to split his or her interest in a company with the former spouse. To protect the business from this event, a clause should require the shares held by the former spouse of a partner to be acquired by the company or one of the other owners.
The value of the business comprises a significant component for the retirement of many business owners. Allowing the remaining partners to reclaim the interest in the business keeps the business intact and provides the retiring partner with a market to liquidate their ownership, thus providing the retiring partner with a cash infusion to enjoy their retirement. There may also be some distinction in the agreement between early retirement and regular retirement and how the shares of the departing owner are to be valued.
Borrowing money to expand or grow the company, or to purchase equipment or goods, is common for many companies. However, lending institutions often require personal guarantees from the owners/shareholders of the business. Having one or more owners that are not able to provide this guarantee can lead to higher fees and impact the overall financial well-being and growth of the business. Therefore, a provision should be considered to allow the other shareholders the opportunity to acquire shares of the defaulting shareholder(s).
An owner who has become disabled and unable to perform their duties can impact the overall well-being of the business. The agreement should address several situations and questions, such as whether the partner will continue to receive a salary, and for how long, or whether they will continue in the day-to-day management of the company.The buy-sell agreement also needs to clearly define what is considered a disability and should include a timeline for which the disabled partner would be given the opportunity to return. Often the business will purchase disability buy-sell insurance and link the definitions to the plan. This has the added benefit of providing an independent third party to determine when the criteria for the buy-out are satisfied.
The death of a partner is an unfortunate and difficult situation for both the family and business partners alike. To deal with the stress of continuing the business, establishing the rules of business continuity upon death provides peace of mind to both the surviving partners and the family of the deceased. The surviving partners benefit from the assurance of not having to deal with an unwanted partner and the family is assured that they will be treated fairly.Generally, all partners/co-owners will be covered by a ‘key person’ life insurance policy, which can be paid by either the company or the other partners, where the death benefit would be used to buy out the deceased owner’s shares (as mentioned above).
Funding the buy‐sell agreement
Without sufficient resources to fund a potential buy-out, the agreement itself can fall apart. The partners need to decide where the money will come from to complete the buy-out – whether it will be the responsibility of individual owners or from the company itself. While not all events can be protected, two can: the death and disability of a shareholder. By using an insurance policy, funds can be made available at the time they are needed, thus minimizing potential liquidity issues, protecting the business and the impacted shareholders, as well as the family of the deceased shareholder. Using insurance provides the protection needed at a fraction of the cost to the alternatives and can provide immediate capital and significant tax benefits.
Working as a partnership between 2 or more individuals is never an easy task, and the situation only gets more complicated when one or more of them exits the business. Protecting not only the business, but your personal interests, as well as your family’s future are very important objectives for any business owner, and should not be overlooked. Although no business can be certain of success, there are strategies and structures that can help protect the business from failure in the future. Working with a knowledgeable and experienced Financial Advisor, Legal Professional and Tax Professional, you can be assured that you can have the proper Buy-Sell Agreement in place so that all parties involved benefit.
For the 2020 tax year, the Government of Canada introduced a temporary flat rate method to allow Canadians working from home this year due to Covid-19 to claim expenses of up to $400. Taxpayers will still be able to claim under the existing rules if they choose using the detailed method.
Each employee working from home who meets the eligibility criteria can use the temporary flat rate method to calculate their deduction for home office expenses.
To use this method to claim the home office expenses you paid, you must meet all of the following conditions:
You worked from home in 2020 due to the COVID-19 pandemic
You worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020
You are only claiming home office expenses and are not claiming any other employment expenses
Your employer did not reimburse you for all of your home office expensesWhat if your employer has reimbursed you for some of your home office expenses
You need to meet all of the above conditions to be eligible to use the Temporary flat rate method.
New eligible expenses
For the detailed method, the CRA has expanded the list of eligible expenses that can be claimed as work-space-in-the-home expenses to include reasonable home internet access fees. A comprehensive list of eligible home office expenses has also been created.
It’s a great time to review your business finances now that we are nearing year-end. Your business may be affected by recent tax changes or new measures to help with financial losses due to COVID-19. Figuring out the tax ramifications of these new measures can be complicated, so please don’t hesitate to consult your accountant and us to determine how this may affect your business finances.
We’re assuming that your corporate year-end is December 31. If it’s not, then this information will be useful when your business year-end comes up.
Below, we have listed some of the critical areas to consider and provide you with some helpful guidelines to make sure that you cover all the essentials. We have divided our tax planning tips into four sections:
Year-end tax checklist
Business Year-End Tax Checklist
Accruing your salary/bonus
Stock option plan
Paying family members
COVID-19 wage subsidy measures for employers
Claiming the small business deduction
Passive investment income including eligible and ineligible dividends
Lifetime capital gains exemption
What is your salary and dividend mix?
Individuals who own incorporated businesses can elect to receive their income as either salary or as dividends. Your choice will depend on your situation. Consider the following factors:
Your current and future cash flow needs
Your personal income level
The corporation’s income level
Tax on income splitting (TOSI) rules. When TOSI rules apply, be aware that dividends are taxed at the highest marginal tax rate.
Passive investment income rules
Also consider the difference between salary and dividends:
Can be used for RRSP contribution
Reduces corporate tax bill
Subject to payroll tax
Subject to CPP contribution
Subject to EI contribution
Does not provide RRSP contribution
Does not reduce a corporate tax bill
No tax withholdings
No CPP contribution
No EI Insurance contribution
Depending on the province¹, receive up to $50,000 of eligible dividends at a low tax rate provided you have no other sources of income
¹The amount and tax rate will vary based on province/territory you live in.
It’s worth considering ensuring that you receive a salary high enough to take full advantage of the maximum RRSP annual contribution that you can make. For 2020, salaries of $154,611 will provide the maximum RRSP room of $27,830 for 2021.
Is it worth accruing your salary or bonus this year?
You could consider accruing your salary or bonus in the current year but delaying payment of it until the following year. If your company’s year-end is December 31, your corporation will benefit from a deduction for the year 2020. The source deductions are not required to be remitted until actual salary or bonus payment in 2021.
Stock Option Plan
If your compensation includes stock options, check if you will be affected by the stock option rules that went into effect on January 1, 2020. These new rules cap the amount of specific employee stock options eligible for the stock option deduction at $200,000 as of January 1, 2020. These rules will not affect you if a Canadian controlled private corporation grants your stock options.
If you own your corporation, pay yourself tax-free amounts if you can. Here are some ways to do so:
Pay yourself rent if the company occupies space in your home.
Pay yourself capital dividends if your company has a balance in its capital dividend account.
Return “paid-up capital” that you have invested in your company
Do you employ members of your family?
Employing and paying a salary to family members who work for your incorporated business is worth considering. You could receive a tax deduction against the salary you pay them, providing that the salary is “reasonable” with the work done. In 2020, the individual can earn up to $13,229 (increased for 2020 from $12,298) and pay no federal tax. This also provides the individual with RRSP contribution room, CPP and allows for child-care deductions. Bear in mind there are additional costs incurred when employing someone, such as payroll taxes and contributions to CPP.
COVID-19 wage subsidy measures for employers
To deal with the financial hardships introduced by COVID-19, the federal government introduced two wage subsidy measures:
The Canada Emergency Wage Subsidy (CEWS) program. With this, you can receive a subsidy of up to 85% of eligible remuneration that you paid between March 15 and December 19, 2020, if you had a decrease in revenue over this period. You must submit your application for the CEWS no later than January 31, 2021.
The Temporary Wage Subsidy (TWS) program. With this program, which reduces the amount of payroll deductions you needed to remit to the CRA, you can qualify for a subsidy equal to 10% of any remuneration that you paid between March 18, 2020, and June 19, 2020. You can claim up to a maximum of $1,375 per employee and $25,000 in total.
You can apply for both programs if you are eligible. If you qualify for the TWS but did not reduce your payroll remittances, you can still apply. The CRA will then either pay the subsidy amount to you or transfer it over to your next year’s remittance.
Claiming the Small Business Deduction
Are you able to claim a small business deduction? The federal small business tax rate decreased to 9% in 2019. It did not increase in 2020, nor is it expected to increase in 2021. From a provincial level, there will be changes in the following provinces:
Therefore, a small business deduction in 2020 is worth more than in 2021 for these provinces.
Should you repay any shareholder loans?
Borrowing funds from your corporation at a low or zero interest rate means that you are considered to have received a taxable benefit at the CRA’s 1% prescribed interest rate, less actual interest that you pay during the year or thirty days after the end of the year. You need to include the loan in your income tax return unless it is repaid within one year after the end of your corporation’s taxation year.
For example, if your company has a December 31 year-end and loaned you funds on November 1, 2020, you must repay the loan by December 31, 2021; otherwise, you will need to include the loan as taxable income on your 2020 personal tax return.
Passive investment income
If your corporation has a December year-end, then 2020 will be the second taxation year that the current passive investment income rules may apply to your company.
New measures were introduced in the 2018 federal budget relating to private businesses, which earn passive investment income in a corporation that also operates an active business.
There are two key parts to this:
Limiting access to dividend refunds. Essentially, a private company will be required to pay ineligible dividends to receive dividend refunds on some taxes. In the past, these could have been refunded when an eligible dividend was paid.
Limiting the small business deduction. This means that, for impacted companies, the small business deduction will be reduced at a rate of $5 for every $1 of investment income over $50,000. It is eliminated if investment income exceeds $150,000. Ontario and New Brunswick are not following these federal rules. Therefore, the provincial small business deduction is still available for income up to $500,000 annually.
Suppose your corporation earns both active business and passive investment income. In that case, you should contact your accountant and us directly to determine if there are any planning opportunities to minimize the new passive investment income rules’ impact. For example, you can consider a “buy and hold” strategy to help defer capital gains.
Think about when to pay dividends and dividend type
When choosing to pay dividends in 2020 or 2021, you should consider the following:
Difference between the yearly tax rate
Impact of tax on split income
Impact of passive investment income rules
Except for two provinces, Quebec and Alberta, the combined top marginal tax rates will not change from 2020 to 2021 at a provincial level. Therefore, it will not make a difference for most locations if you choose to pay in 2020 or 2021.
In Quebec and Alberta, as there will be increases in the combined marginal tax rate, you will have potential tax savings available if you choose to pay dividends in 2020 rather than 2021.
When deciding to pay a dividend, you will need to decide whether to pay out eligible or ineligible dividends. Consider the following:
Dividend refund claim limits: Eligible refundable dividend tax on hand (ERDTOH) vs Ineligible Refundable dividend tax on hand (NRDTOH)
Personal marginal tax rate of eligible vs. ineligible dividends (see chart below)
Given the passive investment income rules, typically, it makes sense to pay eligible dividends to deplete the ERDTOH balance before paying ineligible dividends. (Please note that ineligible dividends can also trigger a refund from the ERDTOH account.)
Eligible dividends are taxed at a lower personal tax rate than ineligible dividends (based on top combined marginal tax rate). However, keep in mind that when ineligible dividends are paid out, they are subject to the small business deduction; therefore, the dividend gross-up is 15% while eligible dividends are subject to the general corporate tax rate, a dividend gross-up is 38%. It’s important to talk to a professional to determine what makes the most sense when selecting the type of dividend to pay out of your corporation.
It might be time to revisit your corporate structure, given recent changes to private corporation rules on income splitting and passive investment income to provide more control on dividend income distribution.
Before you issue dividends to other shareholders in your private company (this includes your spouse, children, or other relatives), review the TOSI rules’ impact with us or your tax and legal advisors.
Another reason to reassess your structure is to segregate investment assets from your operating company for asset protection. You don’t want to trigger TOSI, so make sure you structure this properly. If you are considering succession planning, this is the time to evaluate your corporate structure as well.
Another aspect of corporate reorganization can be loss consolidation – where you consolidate losses from within related corporate groups.
Ensure your will is up to date
If your estate plan includes an intention for your family members to inherit your business using a trust, ensure that this plan is still tax-effective; income tax changes from January 1, 2016 eliminated the taxation at graduated rates in testamentary trusts and now taxes these trusts at the top marginal personal income tax rate. Review your will to ensure that any private company shares that you intend to leave won’t be affected by the most recent TOSI rules.
Consider a succession plan to ensure your business is transferred to your children, key employees or outside party in a tax-efficient manner.
Lifetime Capital Gains Exemption
If you sell your qualified small business corporation shares, you can qualify for the lifetime capital gains exemption (In 2020, the exemption is $883,384), where the gain is entirely exempt from tax. The exemption is a cumulative lifetime exemption; therefore, you don’t have to claim the entire amount at once.
The issues we discussed above can be complicated. Contact your accountant and us if you have any questions. We can help.
For business owners, making sure your business is financially protected can be overwhelming. Business owners face a unique set of challenges when it comes to managing risk. Insurance can play an important role when it comes to reducing the financial impact on your business in the case of uncontrollable events such as disability, critical illness or loss of a key shareholder or employee.
This infographic addresses the importance of corporate insurance.
The 4 areas of insurance a business owner should take care of are:
Health: We are fortunate in Canada, where the healthcare system pays for basic healthcare services for Canadian citizens and permanent residents. However, not everything healthcare related is covered, in reality, 30% of our health costs* are paid for out of pocket or through private insurance such as prescription medication, dental, prescription glasses, physiotherapy, etc.
For business owners, offering employee health benefits make smart business sense because health benefits can form part of a compensation package and can help retain key employees and attract new talent.
For business owners that are looking to provide alternative health plans in a cost effective manner, you may want to consider a health spending account.
Consider the financial impact this would have on your business if you, a key employee or shareholder were to suffer from an injury or illness. Disability insurance can provide a monthly income to help keep your business running.
Business overhead expense insurance can provide monthly reimbursement of expenses during total disability such as rent for commercial space, utilities, employee salaries and benefits, equipment leasing costs, accounting fees, insurance premiums for property and liability, etc.
Key person disability insurance can be used to provide monthly funds for the key employee while they’re disabled and protect the business from lost revenue while your business finds and trains an appropriate replacement.
Buy sell disability insurance can provide you with a lump sum payment if your business partner were to become totally disabled. These funds can be used to purchase the shares of the disabled partner, fund a buy sell agreement and reassure creditors and suppliers.
Key person critical illness insurance can be used to provide funds to the company so it can supplement income during time away, cover debt repayment, salary for key employees or fixed overhead expenses.
Buy sell critical illness insurance can provide you with a lump sum payment if your business partner or shareholder were to suffer from a critical illness. These funds can be used to purchase the shares of the partner, fund a buy sell agreement and reassure creditors and suppliers.
Life: For a business owner, not only do your employees depend on you for financial support but your loved ones do too. Life insurance is important because it can protect your business and also be another form of investment for excess company funds.
Key person life insurance can be used to provide a lump sum payment to the company on death of the insured so it can keep the business going until you an appropriate replacement is found. It can also be used to retain loyal employees by supplying a retirement fund inside the insurance policy.
Buy sell life insurance can provide you with a lump sum payment if your business partner or shareholder were to pass away. These funds can be used to purchase the shares of the deceased partner, fund a buy sell agreement and reassure creditors and suppliers.
Loan coverage life insurance can help cover off any outstanding business loans and debts.
Reduce taxes & diversify your portfolio, often life insurance is viewed only as protection, however with permanent life insurance, there is an option to deposit excess company funds not needed for operations to provide for tax-free growth (within government limits) to diversify your portfolio and reduce taxes on passive investments.
Talk to us about helping making sure you and your business are protected.
As a business owner, you have the ability to pay yourself a salary or dividend or a combination of both. In this article and infographic, we will examine the difference between salary and dividends and review the advantages and disadvantages of each.
When deciding to pay yourself as a business owner, please review these factors:
How much do you need?
How much tax?
Other considerations including retirement and employment insurance.
How much do you need?
Determine your cash flow on a personal and corporate level.
What’s your personal after-tax cash flow need?
What’s your corporate cash flow need?
How much tax?
Figure out how much you will pay in tax. Business owners understand that tax is a sizeable expense.
What’s your personal income tax rate?
Depending on the province you reside in and your income, make sure you also include income from other sources to determine your tax rate. (Example: old age security, pension, rental, investment income etc.)
If you decide to pay out in dividends, check if you will be paying out eligible or ineligible dividends. The taxation of eligible dividends is more favorable than ineligible dividends from an individual income tax standpoint.
What’s your corporation’s income tax rate?
For taxation year 2020, the small business federal tax rate is 9% . Please also remember, if you pay out salary, salary is considered a tax-deductible expense, therefore this will lower the corporation’s taxable income versus paying out dividends will not lower the corporation’s taxable income.
If you pay yourself a salary, these options are available.
Do you need RRSP contribution room?
As part of this, it’s worth considering ensuring that you receive a salary high enough to take full advantage of the maximum RRSP annual contribution that you can make.
Are you interested in contributing to the Canada Pension Plan?
This is unique to your circumstances and a cost-benefit analysis to determine the amount of contributions makes sense.
Do you need employment insurance (EI)?
For shareholders owning more than 40% of voting shares, EI is optional. There are situations worth careful thought such as maternity benefit, parental benefit, sickness benefit, compassionate care benefit, family caregiver benefit for children or family caregiver benefit for adults.
The infographic below summarizes the difference between Salary vs. Dividend.
We would also advise that you get in touch with your accountant to help you determine the best mix for your unique situation.
On July 17th, Finance Minister Bill Morneau announced proposed changes to the Canada Emergency Wage Subsidy (CEWS) that will expand the number of businesses that qualify for the program.
The major changes he announced were:
“First, we’re proposing to extend this program through until December 19th.”
“Secondly, we know that it’s also critical that we have the businesses able to continue to hire people even as they get into the restart and we know that the requirements in businesses have a 30% reduction in revenue is not helpful in that regard.”
“businesses will get the wage subsidy if they’ve had any reduction in revenue so it’s going to go all the way down to businesses who even have a small amount of revenue reduction they’ll get the subsidy and it will be in proportion to the amount of the revenue reduction that they will get a subsidy.”
“Third, we’ve tailored the program so that it helps those organizations that are particularly hard hit. So for organizations with over a 50% reduction of revenue over the last few months they’ll actually get a top up, they’ll get up to 25% additional subsidy so that they can deal with this really challenging time for their businesses.”
“What that means for businesses, those that were already in the program that have that 30% revenue decline that will continue to be the case for July and August. For those businesses as I said that are particularly hard hit it will be even more. It will go up to 85% wage subsidy or $960 per person.”
“For those businesses less hard hit but still hit they will be able to get into the program. The program will continue but as we restart, the program will be tailored to help businesses appropriately in that restart.”
The new rules will be retroactive to July 5th but require parliamentary approval.
Great news for Canadians out of work and looking for work. The CERB will be extended another 8 weeks for a total of up to 24 weeks.
As the country begins to restart the economy, the Federal government will be making changes to the program to encourage Canadians receiving the benefit to get people back on the job. From Prime Minister Justin Trudeau’s website:
“The Government of Canada introduced the CERB to immediately help workers affected by the COVID-19 pandemic, so they could continue to put food on the table and pay their bills during this challenging time. As we begin to restart the economy and get people back on the job, Canadians receiving the benefit should be actively seekingwork opportunities or planning to return to work, provided they are able and it is reasonable to do so.
That is why the government will also make changes to the CERB attestation, which will encourage Canadians receiving the benefit to find employment and consult Job Bank, Canada’s national employment service that offers tools to help with job searches.”
More small businesses can apply for CEBA $40,000 no-interest loans
Applications for the expanded Canada Emergency Business Account (CEBA) will be accepted as of Friday, June 19th, 2020. Small businesses that are:
“… owner-operated small businesses that had been ineligible for the program due to their lack of payroll, sole proprietors receiving business income directly, as well as family-owned corporations remunerating in the form of dividends rather than payroll will become eligible this week.”
“The funds from this loan shall only be used by the Borrower to pay non-deferrable operating expenses of the Borrower including, without limitation, payroll, rent, utilities, insurance, property tax and regularly scheduled debt service, and may not be used to fund any payments or expenses such as prepayment/refinancing of existing indebtedness, payments of dividends, distributions and increases in management compensation.”