News Release -October 16, 2020
October 22, 2020
The Canada United Small Business Relief Fund is offering $5,000 grants to help cover PPE, physical modifications for health and safety, and enhancing digital or e-commerce capabilities. Applications re-start on October 26, 2020.Available for businesses across Canada that have up to 75 employees, and between $150,000 and $3 million in annual sales.Nice work on this Ontario Chamber of Commerce, RBC, Government of Canada, and the many other that have contributed!
October 15, 2020
#CEWS periods 8, 9 and 10 details released:
- max base subsidy rate is 40%.
October 12, 2020
A Caution When Dealing with Government Red Tape
If you have qualified for and received the $40,000 CEBA, you are probably expecting to get $10,000 in debt forgiveness, provided of course you pay the $30,000 back before December 31, 2022.
On CRA's website it states that "Once you will have completed your application, the Government of Canada will assess the application and inform your financial institution of the approval or decline of the loan. If approved, your Financial Institution will provide the funds into your business chequing / operating account."
Some banks have followed this approach and dumped the funds directly into their client's operating account, and set up an offsetting $40,000 loan. Thereby the client has automatically drawn $40,000 from the loan.
However, some have not followed this approach, and instead set up access to a Line of Credit for $40,000. Whereby if you do not transfer funds from the LOC to your operating account you are not considered to have received the loan and therefore are not eligible for the debt forgiveness.
A recent letter from a major Canadian bank to one of my clients included the following warning (bank name removed)
• The CEBA loan forgiveness amount is based on the maximum balance on your CreditLine for Small Business at any time between the date of account open and December 31, 2020.
• To qualify for the maximum forgiveness of $10,000, your maximum balance on the CreditLine for Small Business must have been $40,000 at any time between date of account open and December 31, 2020.
• To qualify for forgiveness you must repay 75% of the maximum balance of your CEBA loan by December 31, 2022.
Apparently, the bank has chosen this path so that the loan does not necessarily affect the lending room of their client. However, some small business owners who qualify for the loan and have received the loan, but do not have an immediate need to draw on it, are holding it in reserve. Makes sense even though it is interest free. But they may unwittingly be loosing their qualification for $10,000 in debt forgiveness.
Thus, you must totally advance the funds to your business account off the credit line before you repay the loan to the government. All this confusion caused by lack of clear rules from the government to the banks and then splitting hairs on these advances to small business.
The original article was by Kirk Wormley, CPA, CA and has been edited.
October 9, 2020
The program will be extended until June 2021.
The subsidy would remain at the current (Period 8) subsidy rate of up to a maximum of 65% of eligible wages until December 19, 2020. The maximum was previously set to decline to 45% for period 9 (based on November wages).
An additional interest-free loan of up to $20,000 will be available (in addition to the original CEBA loan of $40,000). Half of this additional financing would be forgivable if repaid by December 31, 2022.
Additionally, the application deadline for CEBA is being extended to December 31, 2020.
Further details, including the launch date and application process will be announced in the coming days. An attestation of the impact of COVID-19 on the business will be required to access the additional financing.
Canada Emergency Rent Support (CERS)
The new Canada Emergency Rent Subsidy (CECRA has ended), provides rent and mortgage support until June 2021.
The rent subsidy would be provided directly to tenants, while also providing support to property owners.
The new rent subsidy would support businesses, charities, and non-profits that have suffered a revenue drop, by subsidizing a percentage of their expenses, on a sliding scale, up to a maximum of 65 per cent of eligible expenses until December 19, 2020.
Organizations would be able to make claims retroactively for the period that began September 27 and ends October 24, 2020.
A top-up Canada Emergency Rent Subsidy of 25 per cent for organizations temporarily shut down by a mandatory public health order issued by a qualifying public health authority, in addition to the 65 per cent subsidy.
October 7, 2020
It's getting close to the end of the year and here are some items to consider for tax planning that may make alot of sense. This was recently written by a member Tim Cestnick, FCPA, FCA, CPA(IL), CFP, TEP, is an author, and co-founder and CEO of Our Family Office Inc.
COVID-19 has been the catalyst for so much spending, of course, and should also be a catalyst for a review of tax planning you should consider – particularly with tax increases on the horizon. Let’s take a look at a few opportunities today.
Prescribed rate loans. It’s possible to save tax as a family by splitting income with your spouse. An easy way to do this is to lend money to your spouse to invest. The catch is that you’ll need to charge the prescribed rate of interest on that loan to avoid rules in our tax law that will otherwise attribute back to you any income earned on those funds. The good news? The prescribed rate dropped to just 1 per cent on July 1, and will remain at that level until at least Dec. 31. This rate can be locked in indefinitely on any loan to your spouse.
Estate freeze or re-freeze. An estate freeze is the concept of taking assets you own today and freezing them at today’s value in your hands. The future growth of those assets can accrue to your children, or others. This will “cap” the tax bill that you’ll pay personally on those assets and will pass the tax bill on future growth to someone else. Certain assets you own today may have declined in value (shares of a private business come to mind) and so it may be an optimal time to undertake a freeze, or re-freeze, of those assets. (A “re-freeze” involves lowering the frozen value when you’ve done a freeze in the past.)
Capital losses. It may be the case that you have assets that have declined in value during the pandemic. There may be an opportunity to realize those capital losses to offset capital gains this year, or in the three prior years (recovering taxes paid in the past). It’s also possible to transfer unrealized capital losses to your spouse if he or she can use those losses, which I’ve written about before. Finally, if you own a company with capital losses, it may be possible to transfer (without triggering tax today) appreciated assets to the corporation to realize capital gains inside the company and use up the losses.
Capital gains. Today, just one half of capital gains are taxable. A betting person might hold the view that changes to the capital gains inclusion rate are likely, from its current 50 per cent, to probably 75 per cent (where it was throughout the 1990s). If you believe this change is probable, deliberately realizing capital gains today at the current inclusion rate could mean paying less tax on those gains. For example, a $1,000 capital gain today will result in a tax bill of $268 for someone in the highest tax bracket in Ontario, but a change to the inclusion rate to 75 per cent would mean a tax bill of $401 on that same capital gain later.
Discretionary deductions. Some tax deductions are discretionary, meaning that you can choose to claim them or not, or defer them to a future year. Examples include registered retirement savings plan (RRSP) deductions, capital cost allowance (CCA), capital gains reserves (a deduction available if you’ve realized a gain but didn’t collect your full sale proceeds in 2020), and a few others. If your income is very low this year, it may make sense to defer deductions to next year, or later. Alternatively, you may want to claim these deductions now if this creates a loss in 2020 that can be carried back up to three years to recover taxes paid in the past.
Emigration. I’ve met very few people who have left Canada for tax reasons. Nevertheless, if you’ve been contemplating a departure, now may be the time. You see, Canada is one of very few countries that levies a “departure tax” by deeming you to have sold much of what you own when you leave (with some exceptions). This can trigger a tax bill on capital gains when you leave. Because of COVID-19, some assets may have declined in value, which would reduce the departure tax – and potentially allow you to avoid tax increases in Canada down the road. I hope you choose to stay – but I’d be remiss if I didn’t mention this.
Also, I would like to add that tax loss selling, low interest loans, estate freezes, and transferring business from parent to child have been hot topics and things clients have been busy doing in my practice. Remember the old saying is 'you can't avoid death and taxes", but we sure can minimize taxes, just not avoid them!
Give me a call at 905-898-3355 or email at firstname.lastname@example.org and let's keep more of your hard earned money.