Since the coronavirus arrived on the scene, legislation after legislation has popped up left and right to ensure Canadians and small business owners are taken care of as best as possible. But there are still many grey areas, leaving small business owners scratching their heads and wondering what each government relief effort entails, whether they qualify and how to apply to it.
We teamed up with Wagepoint-certified CPAs Natasha McLaren-Doerr and Cecilia Gordillo from Flow CPA to help small business owners overcome the confusion surrounding the ever-changing Canadian relief efforts and move beyond the coronavirus.
Temporary Wage Subsidy (TWS)
The TWS is a 10% subsidy on wages paid to employees of up to $1,375 per employee and to a maximum of $25,000 per employer.
- Must be an eligible employer (Individuals, Canadian-controlled private corporations (CCPCs) that are eligible for small business deductions, partnerships whose members are eligible CCPCs and charities.)
- Must have an existing payroll account with CRA as of March 18, 2020.
- Must pay salary, wages and bonuses to employees between March 18 and June 20, 2020.
How to calculate your subsidy amount.
“It's fairly easy. You have to reduce the amount which will be 10% of your gross payroll from the deductions that you are remitted to the CRA.”
— Cecilia Gordillo, CPA & Partner, Flow CPA
Wagepoint customers can enjoy the luxury of not worrying about doing any calculations as this is automatically built into our app.
How to see the exact details of the in-app TWS calculations: Open the app > Company > Company info tab in the “Payroll Details” section. To apply the 10% subsidy, set the toggle to "Yes." From there, you can go to your Payroll Invoice report to view the exact details of how the 10% subsidy was allocated.
Canadian Emergency Wage Subsidy (CEWS)
Note: Not long after the webinar, the CEWS was extended from June 5 to August 29, 2020. We weren't kidding when we say COVID-19-related legislation is ever-changing!
The CEWS is a 75% subsidy on remuneration paid to employees of up to $847 per employee per week ($3,338 per month.) Unlike the TWS, there is no limit to how much an employer can receive.
“It's basically[...]a free salary for you to hold your employees so [that] when [your] company is ready to open up, you [will still] have [your] key staff with you.”
— Cecilia Gordillo
- Must be an eligible employer — compared to the TWS, this list is much broader. It includes individuals (including trusts), taxable corporations that are eligible for the small business deduction, registered charities, non-farm payrolls, agricultural organizations, board trades, chambers of commerce, labour organizations, benevolent or fraternal benefit societies, and partnerships consisting of eligible employers.)
- Must have experienced a reduction of 15% in revenue in March or 30% in April or May 2020.
- Must have had a CRA payroll account on March 15, 2020.
The eligibility claim periods are:
How to apply for CEWS.
For the purpose of this calculation, your revenue is the revenue you are making in Canada and must be calculated by your normal accounting method — which is either accrual or cash, but not a combination of both.
Small business owners can apply to the program by accessing CRA's “My Business Account” portal.
Keep in mind that as long as you are eligible for one claim period, then by default, you will be eligible for the next.
“If you’re eligible [for March], it automatically makes you eligible for [April]. If you are not eligible for March but [are] eligible for April, then [by default], you will be eligible for [May.]”
— Cecilia Gordillo
Based on their clients' experience, Cecilia and Natasha have noted that the CRA will ask a few verification questions including:
- Business account.
- The last two digits of your social insurance number.
- The last four digits of your bank account.
Additionally, Cecilia and Natasha encourage small business owners to be prepared to show proof of how they calculated their wage subsidy.
“If you're going to apply for [the CEWS], just make sure that your compliance part is ready and is bulletproof [...] have proof of how you did your calculations.”
— Cecilia Gordillo
Interaction between the TWS and the CEWS.
Small business owners can claim both the TWS and the CEWS, but cannot receive 10% plus 75%.
If you are claiming the 10% through the Wagepoint app, then you must deduct that subsidy from your attestation for the 75% wage subsidy.
Canada Emergency Business Account (CEBA).
The CEBA loan is an interest-free loan from the bank of up to $40,000 for small businesses and not-for-profits with the possibility of up to 25% ($10,000) non-repayable portion.
It is also a loan that Cecilia and Natasha highly recommend small business owners apply to.
“If you qualify for it, we [certainly] recommend applying for it [...] What it represents is cash flow to fill in gaps through [COVID] but also into the next period when we reopen.”
— Natasha McLaren-Doerr, CPA & Partner, Flow CPA
- Must be an organization or individual that can demonstrate that they paid between $20,000 to $1.5M in payroll in 2019.
How to apply for CEBA.
Small business owners can only apply through a bank or credit union.
In the case that small business owners are having trouble, they are encouraged to reach out to their bank manager to guide them with the online application.
Business Credit Availability Program (BCAP).
BCAP is a loan that is provided to small business owners in the form of a line of credit or a loan (this will depend on each business.) Similar to CEBA, the BCAP is a bank loan but works in tandem with the Business Development of Canada (BDC).
BDC covers 80% of the loan, while the bank covers 20%.
- Canadian businesses that are creditworthy before the COVID crisis.
How to apply for BCAP.
Small business owners can apply through the bank and are encouraged to reach out to their bank manager if they are unsure if they qualify or need some help with their application.
Cecilia and Natasha noted that on top of personal information, the BDC will ask for three years' worth of tax returns so small business owners are encouraged to ensure all their taxes are up to date.
“[Make sure] to have all your ducks in order before you contact the bank. If you haven't got all your taxes caught up, make sure you make that a priority.”
— Natasha McLaren-Doerr
Commercial Rent Assistance Program (CECRA).
While the full details of the CECRA program have yet to be announced, here's what we know so far:
- Canada Mortgage and Housing Corporation (CMHC) will be administering the program.
- The assistance is available for rent covering April, May and June 2020.
- The deadline to apply is August 31, 2020.
- There is a forgivable loan covering 50% of gross rent.
- Both landlord and tenant are responsible for no less than 25% of the rent value.
Eligibility requirements for landlords.
- Must have a mortgage loan secured on the commercial property.
- The property occupied has to have one or more small business tenants.
- Must have rental income from 2018 and/or 2019.
If the property was vacant in 2019, landlords may still be eligible so long as they have rental income from 2018.
“If [the property was] vacant in 2019, that's okay. [CMHC] will look back onto 2018. They just want to make sure that it was occupied at some point in those two periods.”
— Natasha McLaren-Doerr
Eligibility requirements for tenants.
- Must have paid less than $50,000 in monthly gross rent.
- Must have generated less than $20 million in gross revenues.
- Must have had to temporarily cease operations or indicated a 70% revenue decline.
Five steps to being “re-open ready.”
According to Cecilia and Natasha, here are five crucial steps small business owners should take to set themselves up for success during the post-COVID era.
- Follow provincial safety guidelines.
- Join or create an industry mastermind group.
- Consider budget forecasting.
- Stay positive, keep focused.
“Nothing is going to be like it used to be...we have to focus on the now and [think about] how we can get all our businesses up and running in a way that they're still profitable.”
— Cecilia Gordillo
Catch the webinar replay.
Prefer to get information straight from the original source? You can still catch the replay.
Thank you Flow CPA for working with us to crack the code on Canadian business subsidies, loans and assistance for small business owners.
The advice we share on our blog is intended to be informational. It does not replace the expertise of accredited business professionals.
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