What the COVID-19 Economic Response Plan means for you – March 18, 2020
What a crazy few weeks it has been! As the effects of the coronavirus continue to sweep the world, we want to let you know we are here to help navigate the changes this virus causes you, your team, your family and your business. We understand that your family and your team are the most important priority, and the same goes for our staff. If you’d like to move to online meetings like Zoom or Skype, or conduct our catch-ups via phone call instead of in-person, we are happy to assist.
The government recently announced an Economic Response Plan which is aimed at reducing the anticipated economic downturn from COVID-19. The package includes a number of economic stimulus measures, to the tune of $27 billion dollars. We have included a recap of what’s included in the package below, but please get in touch if you have any questions.
Support for Businesses
Wage subsidies to help businesses keep their employees
To help businesses that are facing revenue losses and prevent lay-offs, the government is providing some small employers a temporary wage subsidy for three months. The subsidy will be equal to 10% of remuneration paid during that period, with maximum subsidies per employee and employer.
Flexibility for Businesses Filing Taxes
The Canada Revenue Agency will allow all businesses to defer, until after August 31 2020, the payment of any income tax amounts that become owing on or after March 18 2020 and before September 2020.
Also, for the vast majority of businesses, the Canada Revenue Agency will temporarily suspend audit interaction with taxpayers and representatives.
Ensuring Businesses Have Access to Credit
The Business Credit Availability Program (BCAP) will provide more than $10 billion of additional support, largely targeted to small and medium-sized businesses.
The goal is to help viable Canadian businesses remain resilient during these uncertain and challenging times.
The Office of the Superintendent of Financial Institutions (OSFI) announced it is lowering the Domestic Stability Buffer by 1.25% of risk-weighted assets, effective immediately. This action will allow Canada’s large banks to inject $300 billion of additional lending in to the economy.
The Bank of Canada also took a series of actions to support the Canadian economy including cutting the interest rate to 0.75% as a proactive measure in light of the negative shocks to Canada’s economy.
The Canada Account
The Canada Account is changing. The Minister of Finance would now be able to determine the limit of the Canada Account in order to deal with exceptional circumstances. It’s used by the government to support exporters. It allows the government to provide additional support to Canadian businesses through loans, guarantees or insurance policies during these challenging times.
Supporting Financial Market Liquidity
As a further measure to bolster the financial system and the Canadian economy, the government announced on March 16 that it is launching an Insured Mortgage Purchase Program. Under this program, the government will purchase up to $50 billion of insured mortgage pools through the Canada Mortgage and Housing Corporation. This action will provide long-term stable funding to banks and mortgage lenders, help facilitate continued lending to Canadian consumers and businesses, and add liquidity to Canada’s mortgage market.
Support for Canadians
Income support for those who need it most
For over 12 million low income families, who may require additional help with their finances, the Government may provide a one-time special payment by early May 2020 through the Goods and Services Tax credit (GSTC). The average boost to income for those benefiting from this measure will be close to $400 for single individuals and close to $600 for couples. This measure will inject $5.5 billion into the economy.
For over 3.5 million families with children, who may also require additional support, the Government is proposing to increase the maximum annual Canada Child Benefit (CCB) payment amounts, only for the 2019-20 benefit year, by $300 per child.
Together, the proposed enhancements give a parents who have children and low-to-modest income, financial support to get them through this tough time.
There is additional help to other people in need including:
- Placing a six-month interest-free moratorium on the repayment of Canada Student Loans for all individuals currently in the process of repaying these loans.
- Reducing required minimum withdrawals from Registered Retirement Income Funds (RRIFs) by 25% for 2020, in recognition of volatile market conditions and their impact on many seniors’ retirement savings.
- Providing the Reaching Home initiative with $157.5 million to continue to support people experiencing homelessness during the COVID-19 outbreak.
- Providing $305 million for a new distinctions-based Indigenous Community Support Fund
- Supporting women and children fleeing violence
Increased flexibility for taxpayers
In order to provide greater flexibility to Canadians who may be experiencing hardships during the COVID-19 outbreak, the Canada Revenue Agency will defer the filing due date for the 2019 tax returns of individuals, including certain trusts.
For individuals (other than trusts), the return filing due date will be deferred until June 1, 2020. The Agency encourages individuals who expect to receive benefits not to delay the filing of their return to ensure their entitlements are properly determined.
For trusts having a taxation year ending on December 31, 2019, the return filing due date will be deferred until May 1, 2020.
The CRA will allow all taxpayers to defer, until after August 31 2020, the payment of any income tax amounts that become owing on or after today (18 March 2020) and before September 2020. No interest or penalties will accumulate on these amounts during this period.
Mortgage Default Management Tools
The Canada Mortgage and Housing Corporation (CMHC) and other mortgage insurers offer tools to lenders that can assist homeowners who may be experiencing financial difficulty. These include payment deferral, loan re-amortization, capitalization of outstanding interest arrears and other eligible expenses, and special payment arrangements.
Role of Financial Institutions
Banks in Canada have affirmed their commitment to working with customers to provide flexible solutions, on a case-by-case basis, for managing through hardships caused by recent developments. This may include situations such as pay disruption, childcare disruption, or illness. Canada’s large banks have confirmed that this support will include up to a 6-month payment deferral for mortgages, and the opportunity for relief on other credit products. These targeted measures respond to immediate challenges being faced across the country and will help stabilize the Canadian economy.
You can find more information here.
If you have any questions or concerns, please feel free to reach out to us directly. Please stay safe and we wish you all good health in the months to come.