COVID-19 Relief Measures

COVID-19 Relief Measures

Bonny Koabel CPA, CGA, AKR Consulting

As a result of COVID-19 the Government has introduced financial measures to compensate businesses. While most companies are aware of the 75% Wage Subsidy and the $2,000 monthly Canadian Emergency Relief Benefit we will take a further look into additional COVID Relief Measures.

$40,000 Canadian Emergency Business Account (CEBA) CEBA is available through all major banks and provides interest free loans of $40,000 until December 31, 2021. After introducing the program the Government increased the scope of companies that could be funded. Currently in order to be eligible a Business must have 2019 T4 Salaries of between $20,000 and $1,500,000. Businesses that are able to repay the loan in full by December 31, 2022 will receive an incentive of $10,000 in loan forgiveness.

Employer Health Tax Deferrals The Provincial Government is providing assistance with Employer Health Taxes. Beginning April 1, 2020 and for a period of five months, up until August 31, 2020, the Province will not apply any penalties or interest on any late-filed returns or incomplete or late tax payments. Therefore EHT payments from April, May, June and July will not be due until August 31, 2020.

In addition Employers with annual payrolls of up to $5 million will be exempt from EHT on the first $1 million of total Ontario T4 Payroll 2020. This increased EHT tax exemption limit will increase company savings from $9,945 to $19,500 in 2020. The EHT exemption limit will return to $490,000 on January 1, 2021.

Workplace Safety and Insurance Board (WSIB) Businesses covered by the WSIB’s workplace insurance are automatically eligible for the following relief package: • Schedule 1 employers with premiums owed to the WSIB will be allowed to defer reporting and payments until

August 31, 2020. • The deferral will also apply to Schedule 2 businesses that pay WSIB for the cost related to their workplace injury and illness claims.

In addition, no interest will be accrued on outstanding premium payments and no penalties will be charged during the six-month deferral period.

10% Wage Subsidy All employees and businesses that do not qualify for the 75% Wage Subsidy may qualify for the 10% Wage Subsidy. The 10% Wage Subsidy covers the period of March 18, 2020 to June 19, 2020. Businesses that do not experience a drop in sales of 15% in March or 30% in April, May, and June may qualify for this subsidy for that specific month. Also any Employees who do not qualify for the 75% Wage Subsidy because they began employment with their current Employer after March 18th, 2020 may qualify for the 10% Wage Subsidy.

Eligible Businesses

In order for a Business to be eligible for the 10% Wage Subsidy they must have a business limit for their last taxation year that ended prior to March 18, 2020, greater than nil. Companies will need to consult your Accountant and see your T2 Corporate Tax Return to confirm the Business Limit amount.

Eligible Employees

The 10% Wage Subsidy applies to all T4 employees that are paid salaries, wages, bonuses, or other remuneration. The Wage Subsidy does not apply to workers from Employment Agencies. If an Employee goes from Employment Agency payroll to Company payroll the Employee will then qualify for the Wage Subsidy.

How much is the subsidy?

The Wage Subsidy is 10% of the wages paid to Employees from March 18, 2020 to June 19, 2020. Companies may claim up to a $1,375 Wage Subsidy for each eligible employee to a maximum of $25,000 total per employer.

In addition Associated CCPCs will not be required to share the maximum subsidy of $25,000 per employer.

How do I calculate the subsidy?

The Wage Subsidy is be calculated manually and deducted from a company’s Payroll Tax Remittance that is made at least one a month to the Federal Government. Payroll Tax Remittances are made up of CPP, EI and Tax Payments. The Wage Subsidy can only be deducted from the Tax portion of the Payroll Tax Remittance.

If your company has not claimed their 10% Wage Subsidy they can do so any time. Just remember to keep you calculations in case there is a Government audit in the future.

Example

Company A has 5 employees with monthly salaries of $4,100 for a total monthly payroll of $20,500.The wage subsidy for the month is 10% of $20,500, or $2,050. In April, there are 7 employees with monthly salaries of $4,100 for a total monthly payroll of $28,700. The wage subsidy is 10% of $28,700, or $2,870. In May 7 there are 5 employees with monthly salaries of $4,100 for a total monthly payroll of $28,700. The wage subsidy is 10% of $28,700, or $2,870. For the three-month period total payroll is $77,900 and 10% is $7,790.

Since this amount is below the maximum allowable subsidy amount of $9,625 ($1,375 x 7 employees), the total wage subsidy for the three-month period will be $7,790.

Bonny Koabel CPA, CGA is President of AKR Consulting Canada, a Mississauga firm specializing in Government Grants, Subsidies, Tax Credits, Refunds and Rebates since 2003.

AKR Consulting Canada Inc.

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