What has the Government of Canada reported as far as support for Individuals with the effects of COVID-19. The total package thus far will be $82 billion response for Canadians.
Consider these areas as part of your plan to get through this time we are all facing economic and personal effects from COVID-19. We will continue to update this information as released. It's important at this time to review all monthly expenses and commitments and formulate a plan for the next 6 months as well as the months following a return to work. The plan following a return to work is just as important as getting through this difficult time now. Although these measures will help, there will some additional pressure on Canadian`s finances later on.
Below are some programs and support to assist you. It is important to consult your Financial Advisors for specific advice regarding your situation.
Increasing Canada Child Benefit
The Government of Canada has stated they plan to increase the Canada Child Benefit. The monthly payment of Canada Child Amount is normally adjusted every July and is dependant on your previous year`s family income.
The maximum will now be increased by $300 per child. This will remain for 2019/2020 years. This means the increase will be received from May to June 2020 and then it will be adjusted in July 2020 based on your 2019 income.
If you were a higher income earner in 2019, this program will not apply to you right now.
However, if your income drastically suffers in 2020, you might just be seeing an implementation of the Canada Child Benefit to your monthly cash flow in July 2021.
Employment Insurance
Within the first week of the Government of Canada asking businesses to shut their doors, schools closing and asking people to stay home about 500,000 Canadians were applying for EI.
The criteria for EI Sickness Benefits is that you are unable to work due to an injury, illness or quarantine.
You must have lost more than 40% of income and have accumulated 600 insurable hours (amounting to 15 weeks of work if you worked an 8 hour day for example). To make the application for Canadians easier, the government has waived the 1st week EI waiting period for those who are quarantined and they are not requiring a medical letter with your application to help take the pressure off the medical system.
The payment will be paid for up to 15 weeks. If you were laid off March 20th, your EI income will continue until July 3, 2020, if you are not able to return to your job before that time.
The monthly payment will depend on your situation however the maximum received is 55% of your average insurable weekly earnings up to a maximum of $573 per week. To apply for benefits go to the Government of Canada website: https://www.canada.ca/en/services/benefits/ei/ei-sickness.html
Some of the biggest financial hit will be to Canadian workers who are commission and self-employed.
Consider the Blog for Business Owner for additional support programs relating to those who are not employed and do not qualify for Employment Insurance.
Canada Emergency Response Benefit
The Canada Emergency Response Benefit application will be available Monday April 6, 2020. Government of Canada is asking however that Canadians apply on a certain date according to when your birthday month is.
The application will be available online Monday April 6, 2020 and through a toll free number as well.
For employees, Employment insurance is a way to have income for 15 weeks because you have been let go from your employment due to no fault and COVID-19. But for those workers who are not eligible for Employment Insurance, the Canada Emergency Response Benefit is the benefit you want to apply for.
Who is Eligible
The criteria to be eligible for the Canada Emergency Response Benefit is that you must be:
- 15 years of age
- Resident of Canada
- Had a total income of at least $5,000 in 2019 or in the previous 12 months before an application is made
- Who have stopped working because of COVID-19 and have not voluntarily quit their job
- And lastly the worker or self-employed individual must expect to be without income due to COVID-19 for at least 14 consecutive days within the initial 4 week period. Also, for the subsequent benefit periods, it is expected that you will have no income
What is classified as ``Stopped Working``
Some of the examples of stopped working include some of the following however is not fully limited to these examples.
- Your hours have been reduced to zero but you have not yet been let go or laid off
- In quarantine or sick due to COVID-19
- Away from work to care other who are sick or in quarantine
- Away from work to care for children or other dependents whose childcare facility is closed
What`s the Benefit Amount
The benefit amount is a taxable benefit of $500 week for up to 16 weeks and Canadians can expect to receive their income within 10 days of application. The benefit is eligible to be paid from March 15, 2020 until October 3, 2020. The benefit amount is paid in blocks of four week periods.
What's the Benefit Amount
The benefit amount is $2,000 per month for 4 months and Canadians can expect to receive their income within 10 days of application. The benefit is eligible to be paid from March 15, 2020, until October 3, 2020
How to Apply
- Online in early April
- Automated Telephone Line
- Toll-Free Number
If you are still able to perform your work from home and earn an income this benefit will not be available. It is there for those self-employed business owners who cannot go to work and cannot earn an income.
Single Parents and GST Payments
Also of note is the Increasing of the GST Credit for low income families and individuals.
You can now see on your CRA Account online what your GST payment will be for this quarter along with the enhanced amount. The Regular GST payments will be received April 3, 2020 and the enhanced payment should be paid April 9 according to what we see.
On average the extra GST payment will be close to $400 month for an individual and close to $600 for couples.
Canada Student Loans
Student loan payments will be paused until September 2020 but the good news is there will be no accrual of interest. From what we see this will be a pause for ALL Student Loan holders. If COVID-19 has not affected you and your income and you wish to continue with your Student Loan payments, it would be recommended you hold onto the payment that you were previously making if financial hardship does occur. When you are ready, make a lump sum payment to your loan at a later date.
Tax Deferral
The tax filing deadline for the individual has been delayed until June 1, 2020.
Great news however before you get excited about not filing your taxes under the usual timeframes of April 30th, consider the other benefits that are paid based on your taxes. These programs include Canada Child Benefit and GST. If you decide to delay your filing the payments for the 2020/2021 year could also be delayed
The good news for Canadians is that CRA is allowing personal taxes that are normally due now and up until September 2020 to be delayed being paid until August 31, 2020.
This is another expense that can be delayed for individuals and is usually one of the biggest expenses Canadians have. CRA is allowing for an August 31, 2020 deadline for taxes due effective now and before September 2020. No interest or penalties will be due. This is great news for people who find themselves in a cash crunch. It would be recommended to have the tax money that you normally remit or were planning to pay in April set aside just in the event of a cash emergency. Thinking that that is a free pass could just get those already in some financial difficulty into even more trouble come August 2020 when the time comes to pay up those taxes.
Mortgage Deferral
If paying one of your biggest expenses you have is difficult at this time, be in touch with your financial institution to apply for a Mortgage Payment deferral. Most institutions are offering up to 6 months deferral. This will be applicable for both non-insured and insured mortgages such as through CMHC.
The banks are not forgiving these loans. Each institution will work with you and your situation, however with most, when you choose to take a mortgage deferral, the interest will still accrue. This means the loan will grow over the next 6 months and then when your payment starts up again, it will reflective of an increased mortgage amount. So you might be faced with an increased mortgage payment in the future. Be sure to fully understand what you will be facing later on.
When applying most institutions will want proof of financial hardship however a loss of a job or a substantial loss of income should do just that. The phone lines are busy but if you search for your financial institution online you will see most have a special COVID-19 phone line designated to address concerns.
Loans and Credit Payments
Each bank and lender is going to be different, however, I have seen from my bank offering up to 3 months no payments required on Personal and Auto Loans. Interest will still accrue, and payments will be added to the end of the current payment schedule.
As far as Lines of Credit and Credit Cards loans, most institutions will allow you to also apply for up to 3 months deferral on payments. Again, interest will still accrue and will be payable once the 3 months are over.
If you are also having difficulty making your vehicle payments, we have seen some Auto Financing companies also allowing for payment relief. There aren`t clear details on each financing company but it would be recommended to call the credit company you deal with. The US seems to be a few steps ahead in this area and it`s expected that Canada will follow as well.
Insurance Premiums
There are talks with all the CALU and the Senior Executive of the insurance companies regarding relief on insurance payments. I have to admit I did not expect this to be a consideration. I am not certain what this may look like however it is recommended that you budge to keep these premiums going during this time if possible
RRIF Minimums
CALU who helps to promote the financial health of Canadians and in partnership ADVOCIS (an advisor Association) has written to the Department of Finance to request for consideration of the RRIF minimum withdrawal amount. It was announced that the minimum will be reduced by 25% for 2020 income for retirees.
What's the big benefit to doing so. If retirees are finding their portfolios down and then are forced to sell to generate minimum income they could be locking in a loss that is not necessary.
What to do now?
- Get a clear picture of your monthly expenses for the next 6 months (cash flow exercise below)
- Determine what Fixed Expenses should remain and which could be suspended or cancelled
- Host a Family Meeting and Suspend all Variable spending
- Contact all your financial institutions to apply for their relief programs
- Make an application for Employment Insurance
- Prepare your taxes as soon as possible and get your tax refund
Below is an example of a Family is spending $13,955 month on personal expenses before COVID-19 and a plan to get the expenses down to $3,655 month. Although not perfect and not without many hours on the phone it can be done. There is a lot of anxious individuals out there wondering how they will survive. It is possible and we will all get through this.
For a dual working family who has been recently being laid off from their jobs and was earning the maximum insurable income of $53,100 per year, you should receive the maximum EI Sickness Benefit. The maximum weekly EI benefit is $573 per week. For a family in this situation, this could amount to $4,584 taxable over 4 weeks.
You will be ok if you cut your variable spending now. Things won't be the easiest come September when all these payments start up again and interest has accumulated however we will all get through this with some extra careful budgeting over the next 12 month period.
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