Canadian 100's

Free Government Money during Covid-19

SRED funding isn’t the only source of free government money during COVID-19.

Imagine. We may look back at today, and our 53.53% marginal tax rate in ON, and think, “Those were the good old days!”  And yet Finance Minister Bill Morneau flew back from Kenya, or possibly it was France or Ecuador, and tells us that we are on track in 2020 for a $340B deficit. Yikes.  As a side comment, it has always struck me as a bit of a mugs game that we put retirement money into an RRSP because “tax rates will be lower X years from now when we retire”.  Hmm, maybe, maybe not.

So, a wise squirrel should probably be putting aside extra nuts for winter.  There are two free money federal  programs arising from COVID-19 you will want to check out.

First up is CEBA.  Receive $40 K as an interest-free loan until Dec 31, 2022.  Repay the loan by that date and $10K is forgiven automatically.  Free government money.

CEBA is simple to apply for.  You apply through your business bank account and you do not have to deal directly with the government.  The app to apply is entirely online, it takes only about 40 minutes to complete.

One of the few criteria for qualifying is that the company must have incurred between $20K and $1.5M in T4 payroll for 2019.  A company’s 2019 payroll amount is shown on Box 14 of the T4 summary which was filed by the company and/or its accountant by Feb 28, 2020

How can smart Canadian businesses leverage their $40,000 CEBA money?   Put the money toward qualifying SRED payroll.   You will receive your $10K free CEBA money and you will also receive $28K in SRED funding.   $40K worth of work for a net cost to you of only $2K.  Wow.  Click here to learn how to calculate SR&ED credits.

Second up is CEWS.  This is a wage subsidy of up to 75% for your eligible staff.  CEWS is not as straightforward as CEBA.  The catch with CEWS is that you must be able to demonstrate a significant reduction in your company revenue during COVID timeframes.  This would be easy if you are an airline, but who wants to be an airline today?! On the plus side, CEWS has no cap on the subsidy amount you can receive. If you have a large staff, CEWS could be very lucrative for you.

For completeness, I will mention two personal subsidy programs related to the pandemic that are available to help people.  CERB is a $2000 per month wage replacement program for people who have lost their job due to COVID.  The program has been extended now until October 2020.  It is a mammoth program, projected to account for $65B of the federal government’s deficit this year.  There is also a program for students who cannot find work this summer, CESB.  It is straightforward and can pay eligible students $1250 per month for up to four months.