2021 Economic and Fiscal Update - Summary

On December 14, 2021, Economic and Fiscal Update 2021 and the related Notice of Ways and Means Motion were released along with the following backgrounders:

• Backgrounder: Protecting Our Recovery by Finishing the Fight Against COVID-19

• Backgrounder: Supporting Canadians through the Recovery

• Backgrounder: A Canada-wide Early Learning and Child Care Plan

Tax and related items provided for in the Update include:

• Eligible Educator School Supply Tax Credit: This refundable tax credit is proposed to increase from 15% to 25%, effective for 2021. Some durable goods and electronic devices would be added as eligible supplies.

• Small Business Air Quality Improvement Tax Credit: The credit is proposed at 25% of an eligible entity’s qualifying expenditures (to a maximum of $10,000 in expenditures per qualifying location and a maximum of $50,000 across all qualifying locations).  Qualifying expenditures would include expenses directly attributable to the purchase, installation, upgrade, or conversion of mechanical heating, ventilation and air conditioning (HVAC) systems, as well as the purchase of devices designed to filter air using high-efficiency particulate air (HEPA) filters, the primary purpose of which is to increase outdoor air intake or to improve air cleaning or air filtration.  This would apply to expenditures incurred between September 1, 2021 and December 31, 2022.

• Underused Housing Tax: This tax is proposed to be effective for the 2022 calendar year. Expanded exemptions for significant use by the owner’s family and rural vacation/recreational properties personally used by the owner for at least 4 weeks were also proposed.

• Simplified home office deduction method: It is proposed that the simplified rules for deducting home office expenses would be extended and the temporary flat rate method would be increased to $500 annually. This would apply to the 2021 and 2022 tax years.

• GIS support: It is proposed that one-time payments will be made to alleviate the financial hardship of GIS and Allowance recipients who received the CERB or CRB in 2020. The amount of payment was not provided.

• Student relief: The government proposed to provide debt relief to students who, although ineligible, received the CERB, by allowing their CERB-related debt to be offset by the amount they would have received from the CESB.

• Expanded access to the Northern Residents’ Deduction (NRD): The government reiterated their intention to bring forward legislation to extend the NRD so eligible individuals can claim up to $1,200 in eligible travel expenses starting “next month.”

• Pollution pricing – payments to farmers: It is proposed that fuel charge proceeds will be directly returned to farming businesses in backstop jurisdictions (Ontario, Manitoba, Saskatchewan, and Alberta) via a refundable tax credit, starting for the 2021-22 fuel charge year.

• CEBA repayment: It is proposed that legislation would be brought forward to extend small businesses’ deadline for the repayment of Canada Emergency Business Account loans.

• Highly Affected Sectors Credit Availability Program: This program is proposed to be extended to March 31, 2022 (it was set to expire on December 31, 2021).

• EI Seasonal Workers Pilot Project: The government intends to ensure that seasonal workers who received pandemic benefits can still qualify for the EI Seasonal Workers Pilot Project.

• Luxury Tax: Budget 2021 proposed to introduce a tax on the sale of select luxury goods (new cars and aircraft with a retail sale price over $100,000 and to new boats over $250,000). Draft legislation, including details on coming into force, will be released in early 2022.

CERB - Retroactive Applications

Even though the CERB has ended, the CRA is continuing to accept and process retroactive applications until December 2, 2020.

• Periods 5 to 7: You can apply through the CRA’s My Account or automated toll-free phone line at 1-800-959-2019 or 1-800-959-2041.

• Periods 1 to 4: You can apply by speaking to one of our agents at 1-800-232-1966. Please note that you may be required to provide additional documentation to the CRA prior to your application being approved.

CERB application site

Speech from the Throne

On September 23, 2020, the Honourable Governor General, Julie Payette delivered the Speech from the Throne. This fall, the government will release an update to Canada’s COVID-19 Economic Response Plan. This will outline the government’s economic and fiscal position, provide fiscal projections, and set out new measures to implement this Throne Speech.

The 4 foundations of the speech were:

• Protecting Canadians from COVID-19 (fight the pandemic and save lives)

• Helping Canadians Through the Pandemic (support people and businesses through the crisis as long as it lasts)

• Building Back Better (a resiliency agenda for the middle class)

• Stand Up for Who We Are (defending Canadian values and ensuring they are lived experiences for everyone)

Businesses/Employers

• Launch a campaign to create 1 million jobs.  Direct investment.  Immediate training.  Incentives for employers to hire. 

• CEWS will be extended right through the next summer.

• CEBA will be expanded.

• The Business Credit Availability Program (BCAP) will be improved.

• Special sectors such as travel and tourism, hospitality, and cultural industries like the performing artswill be supported.

• The government will be addressing corporate tax avoidance by digital giants. “Web giants are taking Canadians’ money while imposing their own priorities.”

• The government will launch a new fund to attract investments in making zero-emissions products and cut the corporate tax rate in half for these companies to create jobs. 

Individuals

• The government will also identify additional ways to tax extreme wealth inequality, including by concluding work to limit the stock option deduction for wealthy individuals at large, established corporations.

• A “resiliency agenda” will be created for the middle class.

• The First-Time Home Buyer Incentive will be enhanced.

• OAS will be increased once individuals reach the age of 75. Higher CPP survivor benefits will also be available.

• Free, automatic tax filing for simple returns to be developed.

• The EI system will become the sole delivery mechanism for employment benefits, including for Canadians who did not qualify for EI before the pandemic. Also, it was noted that the EI system needs to be updated for the 21st century, including for the self-employed and those in the gig economy.

• A Disability Inclusion Plan will be introduced, which will have:

  • a new Canadian Disability Benefit modelled after the Guaranteed Income Supplement for seniors;

  • a robust employment strategy for Canadians with disabilities; and

  • a better process to determine eligibility for government disability programs and benefits.

• Targeted measures for personal support workers, who do an essential service helping the most vulnerable in our communities will be provided.

Other

• The government will continue developing a national universal pharmacare plan.

• There will be large capital investments in environmentally-friendly renovations, affordable housing, high-speed Internet accessibility, and transit.

• A commitment to eliminating chronic homelessness in Canada.

• The Carbon Tax will continue.

• Single use plastics will be banned in 2021.

• Environmental Protection Act will be updated.

• A new Canada Water Agency will be created.

• Increased civilian oversight on major components of the criminal system.

• The government will make a significant, long-term, sustained investment to create a Canada-wide early learning and childcare system.

As the Speech from the Throne outlines the government's broad priorities for the coming session of Parliament, details in respect of these initiatives were not provided.

Text of the speech

COVID-Related T4 Requirements

On August 25, 2020 CRA updated their T4 requirements in respect of COVID-Related T4 reporting requirements:

How to report employment income during COVID-19 pay periods

Additional reporting requirements will apply to all employers, and will help the CRA validate payments under the Canada Emergency Wage Subsidy (CEWS), the Canada Emergency Response Benefit (CERB), and the Canada Emergency Student Benefit (CESB).

For the tax year 2020, in addition to reporting employment income in Box 14 or Code 71, use new other information codes when reporting employment income and retroactive payments in* the following periods:

• Code 57: Employment income – March 15 to May 9

• Code 58: Employment income – May 10 to July 4

• Code 59: Employment income – July 5 to August 29

• Code 60: Employment income – August 30 to September 26

Eligibility criteria for the CERB, CEWS, and CESB is based on employment income for a defined period. The new requirement means employers should report income and any retroactive payments made during these periods.

Example

If you are reporting employment income for the period of April 25 to May 8, payable on May 14, use code 58.

* Originally the word “for” was used. It was updated to “in” on August 26, 2020.

New T4 Reporting Requirements

CERB Transition to EI - Details!

Special VTN Report from Hugh Neilson -

On August 20, 2020 Deputy Prime Minister and Minister of Finance Chrystia Freeland, and Minister of Employment, Workforce Development and Disability Inclusion Carla Qualtrough, announced new measures to support Canadian workers through the next phase of the recovery.

CRA and ESDC hosted an embargoed media technical briefing leading up to the press conference, which Editorial Board Member Hugh Neilson attended.  These comments are derived largely from that session, and could not be released prior to 2:45 Pm Eastern Standard Time in accordance with the embargo terms.

First Step – CERB Extension

The CERB was originally limited to four periods of four weeks each, then extended to six such periods.  In order to bridge the gap until the new benefits announced today, CERB will be available for seven periods.  This will allow Canadians who have been receiving CERB since it commenced in March, 2020 to retain access until the end of CERB on September 26.

Second Step – Simplify the EI Program

Commencing September 27, 2020, the EI rules will be revised for a period of one year to facilitate access, and enhance benefits, under the EI program.  These revisions will apply uniformly across Canada.  These changes will effectively:

• Reduce required insurable hours to 120 hours in the 52 weeks prior to EI application.  For example, assume an individual lost their job in early March, 2020 due to COVID-19.  They then collected CERB for all seven periods, to September 26, 2020.  They would look back to September 29, 2019 for insurable hours to determine whether they are eligible for EI when CERB ends on September 26, and would require 120 insurable hours (3 weeks at 40 hours per week, less than four weeks at 35 hours a week, or 10 hours a week for 12 weeks).  Under the normal rules, the minimum hours required range from 420 to 700.  Special rules will also facilitate EI eligibility for individuals transitioning from CERB to EI special benefits (maternity, parental, compassionate care, family caregiver and sickness).

• Increase minimum weekly benefits to $400.  Normally, the weekly benefit is 55% of average weekly earnings for a period between 14 and 22 weeks, to a maximum weekly benefit of $573.  If the normal rules would result in a higher benefit, that higher benefit will be paid.  Due to the minimum unemployment rate being set at 13.1% across Canada, as announced on August 10, 2020, the best 14 weeks will apply to all claims under the normal rules.  Individuals receiving extended parental benefits will receive a minimum of $240 per week, as these benefits are 60% of normal benefits to offset the additional weeks for which benefits are received.

• Increase minimum weeks eligible for EI to 26 weeks (that is, about six months).  Under the normal rules, EI is available for 14 to 45 weeks.  If the normal rules would result in access to more weeks of benefits, benefits will be available over that longer period.

The usual rules for working while on claim will apply, meaning that the worker can earn income while receiving benefits, with their EI benefits reduced by 50 cents for every dollar of other earnings, up to 90% of their prior earnings.

Third Step – New Benefit Programs

For the same one-year period commencing September 27, 2020, three new benefits will be implemented to extend benefits to individuals who would otherwise be ineligible for EI under the normal rules, as follows:

The Canada Recovery Benefit will be available to self-employed individuals and other workers who are not eligible for EI but still require support due to an inability to return to work.  This will be a benefit of $400 per week for up to 26 weeks.  Eligibility criteria will be similar to CERB – the individual ceased working, or has had their income reduced, due to COVID-19.  However, they must be available and looking for work.  They may continue to earn income while receiving benefits. However, they will be subject to a clawback of 50% of net income, up to the total benefit received in the calendar year.  The Canada Recovery Benefit will be excluded from net income for this purpose, but all other forms of income will count, including CERB, CESB and investment income.

The Canada Recovery Sickness Benefit will be paid to workers who are ill or must self-isolate for reasons related to COVID-19.  This was noted as meeting the government’s Safe Restart Agreement commitment to make every Canadian worker eligible for at least ten days of paid sick leave.  It will provide $500 per week for up to two weeks for individuals who cannot work due to illness or self-isolation related to COVID-19.  It is not available in combination with other paid sick leave or benefits.  Eligibility conditions will be similar to CERB, including the requirement for $5,000 of earned income in 2019, or the twelve months prior to claim.

The Canada Recovery Caregiving Benefit will be paid to workers who are unable to work because they must care for a child under the age of 12, dependant or family member because schools, daycares or care facilities are closed due to COVID-19.  It will provide $500 per week for up to 26 weeks per household.  It can be shared, but only one member of the household may receive it at any one time.  The benefit will not be available where the schools or care facilities have reopened.  In the media briefing, government officials responded to a question and confirmed that, if medical advice indicates the person would be at risk (for example, they are immunocompromised) by returning to school or daycare, the benefit would remain available.

All three benefits will be available for one year, commencing September 27, 2020, and will be administered by CRA.  Applications will be required, and will be based on the applicant’s attestation that they qualify, subject to possible verification at a later date.  The benefits will be paid in arrears, so the first relevant two week period will end on October 10, 2020.  A web page will be established by mid-September.  These benefits will be taxable, with source deductions withheld.  Potential applicants were recommended to sign up to My Account, if they have not already done so.

Application Details – Transition from CERB

Most individuals who received CERB through Service Canada, and whose regular reports indicate a continued need for financial assistance, will automatically transition to EI once they have received their full CERB entitlements.  However, some will have to apply for EI benefits.  Details of these situations were not provided.

However, individuals who received CERB through CRA will be required to apply for EI through the usual EI online application process.

All EI recipients must submit bi-weekly reports showing their continued eligibility, including their availability to work.

EI benefits are taxable, as normal, and taxes will be withheld from the payments.

EI Premium Rates

With more Canadians claiming EI benefits, the EI premium rate would normally be expected to increase in 2021.  However, these proposals include a commitment to freeze the EI premium rate for two years, so there will be no increases for 2021 or 2022.

CBC Stream

Press Release

Backgrounder