The 2021 Federal Budget - What You Need To Know
The Liberal government of Canada tabled their first budget in over two years. There was a lot in it and here are the highlights as they may pertain to you.
If you are receiving any of the CERB Benefits:
Extension of COVID-19 Recovery Benefits and Employment Insurance General Benefits
Under COVID-19 government support measures for individuals, namely:
- Canada Emergency Response Benefit (CERB)
- Canada Recovery Benefit (CRB)
- Canada Recovery Caregiving Benefit (CRCB)
- Canada Recovery Sickness Benefit (CRSB)
which were launched in March 2020, there have been extensions of qualified benefits. In February 2021, the number of weeks available for benefits was extended by 12 weeks to a total of 38 weeks for the CRB and CRCB. The CRSB was extended from 2 weeks to 4, and the number of regular Employment Insurance Benefits were extended from 24 weeks to a maximum of 50.
Budget 2021 proposes to extend CRB benefits by an additional 12 weeks to 50 from 38. The first 4 weeks will provide a benefit of $500 per week. The remaining 8 weeks will provide a lower benefit of $300 per week. All new CRB claimants after July 17, 2021 will receive $300 per week until September 25, 2021.
Budget 2021 also proposes to extend the CRCB an additional 4 weeks to a maximum of 42 weeks. The benefit will remain at $500 per week. In addition, Budget 2021 proposes legislative amendments to provide extensions to these benefit programs and to regular EI benefits until no later than November 20, 2021, if they are required.
If you are 75 years old or over:
Budget 2021 proposes a one-time payment of $500 in August 2021 for seniors age 75 and older as of June 2022. In addition, Budget 2021 proposes to introduce legislation to increase regular Old Age Security Benefits for pensioners age 75 and older by 10% on an ongoing basis, beginning July 2022. This is expected to provide additional benefits of $766 annually to full OAS pensioners in the first year and be indexed to inflation thereafter.
If you are a student/recent student:
Those Students receiving Grants and Interest-Free Loans; Budget 2021 proposes to extend the increased student grant for students ($3,000 to $6,000 for full-time students; $1,800 to $3,600 for part-time students; and $2,000 to $4,000 for students with disabilities, among others) for another two years, to 2023.
In addition, Budget 2021 proposes to increase the waiver of interest accrual on Canada Student Loans and Canada Apprentice Loans until March 31, 2023. The repayment assistance thresholds, where students living alone do not have to make payments on their loans, is proposed to rise from students earning $25,000 in income to $40,000.
If you need to repay your COVID benefits:
Budget 2021 proposes to allow an election for individuals who received COVID-19 benefits but were not qualified and repay the benefits before 2023 can either backdate the repayment as a deduction from income in the year they received the benefit, by using a T1-Adjustment, or deduct the repayment in the year repaid, whichever is in their best interests.
If you think the government uses too much paper:
Budget 2021 proposes to improve the administration of, and compliance with the tax system by operating more digitally to provide Canadians with faster and more convenient services. Some of the notable changes include:
- Certain Notice of Assessments (NOA) will be sent electronically without taxpayer authorization if their tax returns have been filed electronically
- Businesses that use CRAs My Business Account will have communication electronically as the default option
- Issuers of T4A & T5s may submit information returns electronically without taxpayer authorization
- Tax preparers are required to file electronically if they submit 5 or more tax, individual or corporate returns (reduced from 10)
- Tax preparers can only submit a maximum of 5 paper returns, individual or corporate (reduced from 10)
- Handwritten signatures would no longer be required for T183’s (individual and corporate), T2200, and other prescribed CRA forms
If you are going to renovate to improve energy efficiency:
Starting in 2021/2022, the federal government will provide interest free loans of up to $40,000 through Canada Mortgage Housing Corporation (CMHC) to assist homeowners and landlords in undertaking energy efficient retrofits, including:
- Replacing oil furnaces with high efficiency furnaces
- Better wall or basement insulation
- Installing high efficiency water heater
- Replacing drafty windows and doors
If you are in the market for a luxury car, boat or plane:
The introduction of a tax on the retail sale of luxury cars, boats and personal aircrafts was proposed. The tax on luxury cars and aircraft priced over $100,000 would be the lesser of 10% of the full value of the car or aircraft or 20% of the value above $100,000. The tax on boats priced over $250,000, the tax would be the lesser of 10% of the full value of the boat or 20% of the value above $250,000. Luxury cars include coupe, sedans, station wagons, sports cars, passenger vans and mini vans (that accommodate 10 passengers), SUVs as well as passenger pick-up trucks. There are exceptions to this list.
If you are a business owner/corporation:
Emergency Support Measures for Businesses
The Canada Emergency Wage Subsidy (CEWS), Canada Emergency Rent Subsidy (CERS) and the related Lockdown Support for businesses that are subject to a lockdown or significant restrictions under a public health order is currently set to expire in June 2021. The government has proposed for these measures to be extended until September 25, 2021, (with further extension possible to November 20, 2021). Under the proposed extension, the support available through these measures will be gradually phased out starting July 4, 2021. The government has also proposed a requirement for corporations to repay the CEWS received for periods beginning after June 5, 2021, where the aggregate compensation for specified executives during 2021 calendar year exceeds the compensation during the 2019 calendar year.
New Canada Recovery Hiring Program
The budget proposes to introduce a new Canada Recovery Hiring Program to provide certain eligible employers with a subsidy of up to 50% on incremental remuneration paid to eligible employees between June 6, 2021 to November 20, 2021. This subsidy would not be available if the employer has claimed CEWS for the same qualifying period.
Employers that are eligible for CEWS (such as individuals, non-profit organizations, certain partnerships) would generally also be eligible for this hiring subsidy. For-profit corporations would only qualify if they are a Canadian-controlled private corporation (CCPC). The employer must have experienced a decline in revenues to qualify for this subsidy.
This subsidy would not be available for furloughed employees (employees that are on leave with pay but not performing any work for the employer) other than employees that are on vacation leave, sick leave, or a sabbatical. To be eligible, the employee must be employed primarily in Canada during the qualifying period.
Eligible remuneration that would qualify for this subsidy includes salary, wages and other amounts paid to employees that are subject to income tax withholdings by the employer and paid during the qualification period subject to a maximum of $1,129 per week for each eligible employee. Amounts paid for severance pay, stock option benefits or benefits relating to personal use of a corporate vehicle would not be eligible for this subsidy.
The subsidy amount will be calculated based on the incremental remuneration which is the difference between the total eligible remuneration paid in the qualifying period and total eligible remuneration paid for the baseline period of March 14 to April 10, 2021.
The above outline is a summary of the major points that may affect you and your financial situation. The budget still has to pass into law and there may be modifications to what is outlined. Always talk to your trusted financial professionals before making any major decisions.