January Tax Update

COVID-19 – Canadian Tax and Business News, release #30

Our COVID-19 Canadian Tax and Business News updates are our way of informing our clients, friends and business associates with recent information that may help businesses and individuals while coping with the outcomes from the COVID-19 pandemic.  

Our goal is to monitor the news and release relevant information as it becomes available.

The summary below is based on our understanding and interpretation of the announcements made by the government. The information below is in summary form and subject to change until the proposals are passed as legislation. Contact one of our professionals to discuss these matters in the context of your situation before acting upon such information.

Ontario Business Support Grant

On December 21, 2020, the government of Ontario announced it will provide a minimum of $10,000 and up to a maximum of $20,000 in support to help small business owners during the pandemic. The grant will provide businesses with dollar for dollar funding to help cover decreased revenue expected as a result of the Ontario wide shutdown. 

Eligible businesses include those that:

• Are required to close or significantly restrict services due to the Province wide Shutdown being imposed across the province effective 12:01 a.m. on December 26
• Have fewer than 100 employees at the enterprise level
• Have experienced a minimum of 20% revenue decline in April 2020 compared to April 2019

Non-eligible businesses include:

• Businesses that were already required to close prior to the introduction of the modified Stage 2 measures
• Essential businesses permitted to operate with capacity restrictions (e.g., discount and big box stores selling groceries, supermarkets, grocery stores, convenience stores, pharmacies, and beer, wine and liquor stores).

For small businesses that were not in operation in April 2019 or April 2020, the Ontario government will announce specific eligibility criteria in the near future.

Details on how to apply and when the application portal will open have not been released. We will provide future updates when information becomes available.

CEWS and CERS Deadline Reminder

The deadline for filing Canada Emergency Wage Subsidy (CEWS) and Canada Emergency Rent Subsidy (CERS) applications is the later of January 31, 2021 and 180 days after the end of the claim period. As a result, claims for Periods 1 through 5 must be filed by January 31, 2021. These periods cover March 15, 2020 to August 1, 2020.  The deadlines per claim period are summarized below:

• Claim Period 1 (March 15, 2020 to April 11, 2020) – January 31, 2021
• Claim Period 2 (April 12, 2020 to May 9, 2020) – January 31, 2021
• Claim Period 3 (May 10, 2020 to June 6, 2020) – January 31, 2021
• Claim Period 4 (June 7, 2020 to July 4, 2020) – January 31, 2021
• Claim Period 5 (July 5, 2020 to August 1, 2020) – January 31, 2021
• Claim Period 6 (August 2, 2020 to August 29, 2020) – February 25, 2021 
• Claim Period 7 (August 30, 2020 to September 26, 2020) – March 25, 2021 
• Claim Period 8 (September 27, 2020 to October 24, 2020) – April 22, 2021 
• Claim Period 9 (October 25, 2020 to November 21, 2020) – May 20, 2021 
• Claim Period 10 (November 22, 2020 to December 19, 2020) – June 17, 2021
• Claim Period 11 (December 20, 2020 to January 16, 2021) – July 15, 2021
• Claim Period 12 (January 17, 2021 to February 13, 2021) – August 12, 2021
• Claim Period 13 (February 14, 2021 to March 13, 2021) – September 9, 2021

Eligible employers should ensure they do not miss any of the filing deadlines. The deadline also applies for filing and amending any CEWS and CERS related elections.

Canada Pension Plan (CPP) limit increases in 2021

The 2021 maximum pensionable earnings have increased to $61,600 for 2021. In addition, the employee and employer contribution rates have increased to 5.45% which is up from 5.25% in 2020. The maximum annual employee contribution is $3,166.45.

The self-employed contribution rate will increase to 10.9% from 10.5%. The maximum annual self-employed contribution is $6,332.90.

Automobile Deduction Limits and Expense Benefit Rates

On December 21, 2020, the Department of Finance announced automobile income tax deduction limits and expense benefit rates that will apply in 2021:

• The prescribed rate kilometre tax-exempt allowance limit for 2021 will remain at 59 cents for the first 5,000 kilometres driven and 53 cents for each additional kilometre. 
• The prescribed rate used to determine the taxable benefit to employees related to the personal use of an employer’s vehicle has been reduced to 27 cents per kilometre for 2021.
• The ceiling for passenger vehicles will remain at $30,000 before tax for passenger vehicles and $55,000 for eligible zero-emission passenger vehicles. These ceilings restrict the cost of the vehicle for claiming tax deprecation (Capital Cost Allowance).
• Maximum allowable interest deduction on vehicle finance loans remains at $300 per month
• The limit on deductible leasing costs for passenger vehicles remains at $800 per month before tax. Note automobiles valued over $30,000 are subject to a separate restriction which prorates the eligible leasing deduction.

Employees are also subject to a taxable benefit for the use of an employer’s vehicle. The taxable benefit can be reduced if the employee’s personal use is below specific thresholds. Finance has proposed that for the purposes of determining an employee’s standby charge (one element of the vehicle taxable benefit), employees will be able to utilize their 2019 automobile usage to determine eligibility for the reduced standby charge. Finance has released a backgrounder that provides in depth details. If approved, the relieving provision will apply for 2020 and 2021.

Commuting Costs

Finance has also issued an additional backgrounder that addresses commuting costs (including parking) taxable benefits. The backgrounder states:

• For employees continuing to perform their employment duties at their regular place of employment, a taxable benefit will not be assessed where the employee is reimbursed or provided a reasonable allowance for additional commuting costs incurred by the employee that are over and above their normal commuting costs.
• For employees working from home because their regular place of employment is closed, a taxable benefit will not be assessed where an employer reimburses or provides a reasonable allowance to an employee for normal or additional commuting costs incurred by the employee to travel to their regular place of employment (i.e. to pick up equipment, files, etc.).

In either case, employers and employees are expected to maintain records to demonstrate amounts received are reasonable for the commuting costs.

Important 2021 Tax Dates for Individuals

• January 1, 2021 – additional $6,000 of TFSA contribution room available
• January 31, 2021 – Deadline to pay interest on prescribed rate loans to family members
• March 1, 2021 – Deadline to contribute to RRSP for 2020 (max for 2020 is $27,230 and $27,830 for 2021)
• March 15, 2021 – First quarter personal tax instalments due for 2021 tax year
• March 31, 2021 – Deadline for individuals to file 2020 T1-OVP Returns for excess RRSP contributions
• April 30, 2021 
  • 2020 tax year income tax payment due date for individuals and self-employed (including GST/HST owing for self-employed individuals)
  • 2020 income tax filing deadline for personal income tax returns 
• June 15, 2021
  • Second quarter personal tax instalments due for 2021 tax year
  • 2020 income tax and GST/HST filing deadlines for self-employed individuals
• September 15, 2021 – Third quarter personal tax instalments due for 2021 tax year
• December 15, 2021 – Fourth quarter personal tax instalments due for 2021 tax year
• December 29, 2021 – Last day to settle trades for calendar 2021
• December 31, 2021 – Deadline to make charitable donations for the 2021 tax year

As we all try to stay safe, we need to remind ourselves business will get back to normal but in the meantime lets all do our part to get to normal as soon as we can.   If you have any questions or require further information, don’t hesitate to reach out to us.