On November 30, 2020, Finance Minister Chrystia Freeland delivered the government’s 2020 Fall Economic Update. The Update expects a deficit of $381.6 billion for fiscal 2020-21 and forecasts deficits of $121.2 billion for 2021-22 and $50.7 billion for fiscal 2022-23. Although there aren’t any personal or corporate tax rate changes, the Update includes several measures affecting corporate and personal taxpayers. Among other
notable changes, the budget provides additional details on a $200,000 annual cap on employee stock option grants eligible for the stock option deduction, and new changes to require many non-resident businesses and platform operators to register and collect GST/HST effective July 1, 2021, among other changes. In addition, the Update extends COVID-19 relief measures for employers and businesses, including the Canada Emergency Wage Subsidy Extension, the Canada Emergency Rent Subsidy Extension and the Lockdown Support subsidy.
Here are the highlights, we dive deeper below:
- 2020/2021 deficit projected to be $381.6 Billion.
- CEWS: detailed periods 11 through 13, and the government will propose details of the wage subsidy for periods beyond March 13, 2021, at a later date.
- CERS: extends the current rate structure for the Canada Emergency Rent Subsidy until March 13, 2021, using the same reference periods as under the Canada Emergency Wage Subsidy – this is also including the Lockdown Support of 25% to eligible organizations.
- Home Office Deduction: Employees working from home can claim up to $400 in-home office expenses based on the amount of time working from home. No detailed tracking of expenses required and generally no T2200 to be provided (awaiting more details).
- Additional Child Care Benefits payments: A temporary increase in the CCB to provide four additional payments in 2021 for eligible families. The following quarterly payments will be provided in January, April, July or October 2021:
- Eligible families with family net income equal to or less than $120,000 — $300 per
child under the age of six. - Eligible families with family net income above $120,000— $150 per child under the
age of six.
- Eligible families with family net income equal to or less than $120,000 — $300 per
- GST Updates:
- Airbnb type rentals – the property owner or digital platform will be required to collect and remit GST on short-term accommodations.
- The federal government will remove GST/HST from face masks and face shields.
Family Support
- Middle and low-income families will get up to $1,200 for each child under the age of six in 2021.
- Families that qualify for the Canada Child Benefit and earn a net income of $120,000 or less will get the money in four tax-free payments of $300 each.
- The first $300 payment will come shortly after the enabling legislation is passed, with the remaining payments coming in April, July and October.
- Families that earn a net income above $120,000 would be entitled to half the payment lower-income families get and would receive it along with the same schedule.
- Child care agencies in the provinces and territories and in First Nations will also get quarterly $300 payments for every child they care for under the age of six.
Support for Youth
- The federal government will spend $447.5 million to create an additional 40,000 summer job placements.
- Changes are also being made to the program to allow employers to hire youth outside of the summer period.
- The plan allows employers to claim up to 100% of the value of the minimum wage for each youth hired.
- The new supports include measures to allow employers to hire part-time workers more easily.
- An investment of $575.3 million is being made in its Youth Employment and Skills Strategy over the next two years to create 45,300 job placements for young people who lost jobs or are unable to participate in the workforce because of the pandemic.
- Graduates of post-secondary institutions or apprenticeship programs will also see interest in the federal portion of their student or apprenticeship loans eliminated for 2021-2022.
A Green(er) Economy
- Canadians will be able to qualify for grants of up to $5,000 for work to improve the energy efficiency of their homes!
- The Home Energy Retrofit program will cover the cost of providing one million free EnerGuide efficiency assessments and pay for the recruiting and training of auditors to perform the work.
- Details of the plan have yet to be announced but the grants will be retroactive to Dec. 1, 2020.
- $150 million over three years is being allocated to help Natural Resources Canada increase the number of recharging stations that support zero-emission vehicles.
GST/HST Relief
The federal government will remove GST/HST from face masks and face shields.
Safer Communities
- Front line RCMP officers will be getting body cameras.
- The federal government is also giving municipalities and community-led initiatives $250 million over five years, starting in 2021-22, to support anti-gang programs.
Fiscal Stabilization Program
- This program provides financial assistance to a province facing a year-over-year decline in non-resource revenues greater than five percent. Up to now, the maximum a province could receive under the program was $60 per person.
- The federal government announced that the cap will nearly triple, to $170 per person in 2019-2020 and 2020-2021, and will grow over time.
Long Term Care
- The update promises a $1 billion fund to help provinces and territories improve COVID-19 infection control in long-term care facilities over the next three years.
- The federal government said the funding will be allocated to the provinces on a per-capita basis but will be contingent on the provinces and territories providing detailed spending plans and demonstrating that investments have been made according to those plans.
Digital Giants
- Foreign-based companies selling digital products or services in Canada will be required to register for, collect and remit the GST/HST on their taxable sales.
- The update says the federal government will implement a digital tax directly on corporations providing digital services and that the tax will take effect on Jan. 1, 2022.
“Out of Office”
- As so many Canadians are now working from home, the Canada Revenue Agency will allow Canadians “with modest expenses” to claim up to $400 as a tax deduction for working from home without having to keep a detailed account of their expenses.
New Revenue Streams
- The federal government will start applying GST/HST to digital platform-based short-term rentals in July of 2021. Companies such as Airbnb and other vacation rental websites will be affected.
- The government is placing a new $200,000 annual limit on employee stock option grants that can qualify for the employee stock option deduction. The limit will be based on the fair market value of the shares underlying the options, at the time the options are granted.
- The federal government says it will also take steps in the coming year to implement a tax that targets housing units owned by non-resident non-Canadians.
- The government also says it will spend $606 million over the next five years to fight international tax evasion.