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Key federal aid programs for business

Two key federal programs for business in COVID-19 crisis are tax deferral and wage top-up
Businesses can defer corporate tax payments to CRA until the end of August. | Shutterstock

Help is on the way for Canadian businesses slammed by the COVID-19 virus pandemic.

The federal government on Wednesday announced $82 billion worth of aid and stimulus. But accountants with small businesses and non-profits may be wondering just how the programs will work and how to tap into them.

Kin Lo, accounting professor at the Sauder School of Business at the University of BC, said the two key programs for small and medium-sized businesses are a tax deferral program and a wage top-up for employees.

"The tax deferral part is extremely important, just in terms of liquidity," Lo said. "Many of these businesses are temporarily closed, and so they're not earning any money. So being able to retain whatever precious cash they have and not have to pay that to the government, I think that's a fairly important measure."

Businesses typically pay corporate income taxes quarterly. If a business has a tax payment due in April, they can now defer it until the end of August. The move will keep $55 billion in the hands of business in Canada for the next five months.

“What they’re saying is, ‘everybody is going to owe that much in taxes to the government," said Tara Benham, national tax leader for Grant Thornton. "'We’re going to defer that and leave it within the economy.’” 

For employers struggling to keep employees on their payrolls, they will get help in the form of a wage top-up, which covers 10% of an employee’s wages, and is intended to help business retain employees throughout a period when business revenues are dropping.

It covers up to $1,375 per employee, and $25,000 per employer and applies to businesses and non-profits.

But the federal government isn’t cutting cheques. Rather, it is telling business to just keep the money it would normally be sending to the Canada Revenue Agency (CRA) through employee income tax remittances.

Employers estimate how much income tax each employee should pay, takes it off their paycheques and remits it to the CRA every month or every two weeks. They can now hold back some of that money.

For example, if your employee’s salary is $2,000 for a two-week pay period, 10% of that is $200. If the income tax on that salary was $300, you would remit $100 and keep $200 back every month until it reaches $1,375 per employee.

For most business, their two key concerns is their employees and cash flow. If they have to lay employees off temporarily, the federal government has relaxed employment insurance to make it easier for laid off employees to apply for EI.

Employees who have to be laid off due to illness can file for sick benefits here.

Employees laid off due to business closures or cutbacks can apply for employment insurance benefits here.

The usual one-week waiting period to apply for EI has been waived so they can apply as soon as they are laid off.

To address cash flow crunches, the federal government is launching the business credit availability program worth $10 billion.

It's not clear yet how businesses will access that program.

"We're on getting details on that and what that looks like," Benham said.

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