Pandemic Benefit Extensions May Come Soon

Evelyn Jacks & Beth Graddon

The Budget Implementation Act 2021, No. 1 passed first reading on April 30 and is progressing through the second reading phase.  A number of provisions proposed in the April 19, 2021 federal budget have dates set to come into play soon – including extensions to some of the COVID-19 benefit programs and other relief Canadians affected by the pandemic are hoping for immediately.  Here is a synopsis to review with your clients:

• Extensions to COVID-19 benefits for the unemployed.  There are three provisions to watch:
  • Canada Recovery Benefit. The Canada Recovery Benefit (CRB) will be extended for an additional 12 weeks, making the maximum benefit period 50 weeks.  The first four weeks of the extended period will be paid at the current level of $500 per week, and the final eight weeks of the extended period will be paid at $300 per week. New CRB claims after July 17, 2021 will be paid at $300 per week.  The program will end on September 25, 2021.
  • Canada Recovery Caregiver Benefit. The Canada Recovery Caregiver Benefit will be extended for an additional four weeks to a maximum of 42 weeks (paid at $500 per week).
  • EI Sickness Benefits. Employment Insurance Sickness benefits will be extended from the current 15-week duration to a maximum of 26 weeks.
• Repayment of Covid-19 Benefits - Repayments of CERB, CESB, CRB, CRSB and CRCB, which are made after the year in which the benefits were received, would normally be deducted in the year of repayment.  The budget proposed that taxpayers may elect instead to claim the deduction in the year that the benefits were received.  This will apply to 2020 as well as 2021.  Now is a good time to consider which of your clients would be candidates for adjustments to 2020 tax returns for a better net after-tax result for your clients, in preparation for the bill passing into law.
• Increase in OAS for seniors - A one-time payment of $500 will be made in August 2021 to OAS recipients who are 75 years or older as of June 2022.  Also, starting in July 2022, OAS payments will be increased by 10% for OAS recipients who are over age 75.  It’s important for seniors who have not yet filed their 2020 tax returns to do so to maximize these benefits.  Also, those who are not taking advantage of income splitting optimization for CPP, RPPs or RRSP annuities should review these opportunities.  It may be possible in some cases to reduce clawbacks and maximize these new benefits once the Bill is passed into law.
• Defined Benefit Pension Plan Errors - The rules are being relaxed to allow pension administrators to correct errors in over or under-contributions to defined benefit plans. Some of these adjustments will affect RRSP contribution room; pre-retirement planning for these changes can help clients maximize both RPPs and RRSPs.
• Income from postdoctoral fellowships - Income from postdoctoral fellowships will be considered to be earned income for RRSP purposes for 2021. This change will also apply to income received in tax years from 2011 to 2020 if the taxpayer requests an adjustment to their RRSP earned income for those years.  Again, be sure to make those adjustments based on the passage of the Bill into law.
• Enhanced Canada Workers Benefit (CWB) was enhanced in several ways for tax year 2021 included increases to both the phase-in rate and the phase-out threshold, increasing the available benefits and the amount of income Canadian families can earn. These changes will apply to 2021. Thresholds will be indexed for subsequent years.
• Northern Residents Deductions - The travel deduction is enhanced for 2021 by adding a new flat-rate option for claiming the deduction for travel.  Northern Residents may still be well advised to save actual receipts for better results.
• Streamlined process for Disability Amount applications – It is expected that more will qualify with some amended guidelines for the amount of required therapy time, and an updated list of mental afflictions that markedly affect everyday life.
• News for homeowners - Interest-free loans of up to $40,000 for retrofitting existing homes to be more energy efficient are expected to come available to home owners and landlords once the Bill passes.
• Increased focus on electronic filing and electronic notices issued by CRA  – In the news for tax filing professionals, the default method for issuing Notices of Assessment will be electronic for those individuals who file that way, and this will also be the case for businesses unless they elect to receive them by paper. New limits on the number of paper filed returns will also be in place for professional tax preparers, and remittances over $10,000 will need to be made electronically.

Knowledge Bureau Report will keep you posted as further details of the implementation of all proposed provisions from the April 19, 2021 federal budget are available.

Additional educational resources: For a guided update of the federal budget, the Advanced Retirement & Estate Planning course as featured in the May 20 Virtual CE Summit is still available. Enrol today!

This will also be part of the discussion as the speakers at the 2021 Distinguished Advisor Conference share their world class thought leadership for tax and financial professionals virtually from October 17-19. Enrol by June 30 to take advantage of early-bird pricing.