The Ever-Evolving CEBA

Author: Andrew Gordon, CFP® – Certified Financial Planner®

As you may know, in March 2020 the Government of Canada introduced the Covid-19 Economic Response Plan. The ultimate purpose behind this plan was to assist individuals and businesses that were affected by the Covid-19 outbreak. If you were an individual affected, you likely participated in the Canada Emergency Response Benefit (CERB). However, if you were a business, then perhaps you participated in CEBA (Canada Emergency Business Account), or CEWS (Canada Emergency Wage Subsidy), or CERS (Canada Emergency Rent Subsidy). Our focus today will be on CEBA, but we are happy to talk with you about the impact that any of the programs that the government has implemented may have on your financial plan.

When CEBA was first introduced in March 2020, its goal was to support incorporated businesses with non-deferrable expenses. The program evolved in the months ahead and soon allowed unincorporated businesses to participate so long as they met various requirements (e.g. they were an active business operating in Canada on March 1, 2020) . CEBA was then broken down even further to provide support for one of two streams:

  • Payroll Stream
    • Applicants with employment income (payroll) paid to employees in the 2019 calendar year between $20K and $1.5M
  • Non-Deferrable Expense Stream
    • Applicants with $20K or less in total employment income (payroll) paid in the 2019 calendar year

At the end of the day, the loan terms allowed a business owner to borrow $40,000 from their financial institution in Canada at 0% interest until December 31, 2022. When that final date rolls around, a business owner has one of two options:

  • Pay back $30,000
    • The Government of Canada will forgive 25% ($10,000) of the loan if paid in full
  • Create a business loan if not paid
    • Your financial institution will automatically enter you into a 3 year term loan at 5%

As the Covid-19 outbreak continued to unleash itself, the Government of Canada introduced an expansion program to CEBA. They enhanced the loan amount and forgiveness in December 2020 to a total of $60,000 with $20,000 forgiven if paid by December 31, 2022. If you initially applied for the CEBA loan prior to December 2020, you can also apply for the expansion if needed, with financial underwriting.

Over the last 18 months, the economic response plan has evolved, and although this primarily focuses on CEBA, please do not hesitate to reach out to us for assistance regarding anything from what you’ve read or heard regarding this program.

At Connect Wealth, it’s important to us as Financial Planners that our Business Owner clients fully understand their options. Covid-19 has introduced many struggles to businesses over the last year and a half and we have found that many individuals do not fully understand what options they have at their disposal. Our goal is to ensure that our clientele can look to us to seek the right advice that suits them best in whatever financial position they are in or going through.

Connect Wealth is an independent financial planning firm that offers holistic advice to clients based on their current goals and future aspirations. We use well-established workflows and cutting edge technology to maximize planning efficiencies while simplifying the process for clients. Learn how you can maximize your financial opportunities at www.connectwealth.ca

canada 2018 budget

The income sprinkling rules outlined in July 2017 held strong and the rules pertaining to passive investment income weren’t as harsh as predicted. Specifically, Budget 2018 has implemented two simple measures as it pertains to passive investment income:

  1. Limiting Access to Small Business Tax Rate

Budget 2018 proposed to provide for an alternative reduction to the small business tax rate where a Canadian Controlled Private Corporation (CCPC) and its associated corporations have investment income in the year exceeding $50,000. The amount of the reduction is $5 for every $1 of investment income exceeding $50,000. In effect, the small business tax rate reduction disappears if passive income in a related business exceeds $150,000 in a fiscal year.

  1. Refundable Taxes on Investment Income

Currently, private corporations are entitled to claim a tax refund equal to $38.33 for every $100 of taxable dividend Where the corporation has a combination of regular business income (taxed at the regular business rate which does not include a refundable tax element) and investment income (taxed at the corporate investment rate which includes a refundable tax component), planning was commonly implemented to have the business income distributed by way of eligible dividend (taxed at a lower rate) while still being able to claim the tax refund.Budget 2018 proposes to modify the refundable tax regime to eliminate this planning and ensure that, in general, the private corporation is entitled to a dividend refund only when non-eligible dividends are paid.

There are ways to reduce the impact the business tax changes outlined within Budget 2018 through other financial strategies. These strategies may include Individual Pension Plans, Cash Value Insurance, as well as the strategic use of prescribed loans. We highly recommend contacting your financial advisor to determine which of these strategies will best suit your financial situation.

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If you have any questions on this taxes, or the different kind of impact it could have on you, please, do not hesitate to contact us!

Connect Wealth is an independent financial planning firm that offers holistic advice to clients based on their current goals and future aspirations. We use well-established workflows and cutting edge technology to maximize financial efficiencies while simplifying the process for clients. Learn how you can maximize your financial opportunities at connectwealthp.wpengine.com

BC Budget 2018

 

BC’s 2018 budget was announced on February 20th. Its focus was to provide lower income households with tax relief. It provides some parents with reduced child care fees while also reassuring parents that spaces in child care and in schools would become more adequate.

There are numerous articles that focus on the many highlights (some are listed below) that will work to assist the many varied interests of middle and lower income households in BC. Less reported however is that in order to provide the tax relief outlined within the budget, the BC Government will undertake a record-breaking capital spend and increase overall taxes to the tune of $4.4 billion over three years.
Read more

mortgae-life-insurance

If you have ever purchased a home or applied for a loan, you may be familiar with Mortgage Insurance. This is the insurance the bank is obligated to encourage you to take in the event you die or become disabled. It is intended to protect your loved ones from being stuck with the mortgage in the event life takes a wrong turn ie. death.   Sounds like a no brainer right? Wrong! There are MANY pitfalls with Mortgage Insurance that put the bank’s best interest ahead of yours for a price that’s not worth it. Read more