What’s taxed and what’s not – Canadian Government Assistance Programs

by Godfrey Yu, Certified Financial Planner, posted on
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What’s taxed and what’s not – Canadian Government Assistance Programs

INTEGRIS Pension Management Corp. has developed many business relationships with firms in the Canadian financial services industry over the past 8 years. Some are large investment management firms, insurance companies or accounting firms. Sometimes we come across niche service providers that fill a particular need for our clients outside of our core area of expertise.

We are pleased to reproduce an article from JCIC Asset Management, an employee-owned boutique firm that provides investment management services to individuals, families, estates, trusts, personal corporations and private foundations for the last 27 years. What we like most about this firm is that their employees and partners invest their own money in the same portfolio models as their clients. We can't think of a better way for building client trust and interest alignment.

Readers of the guest article below are encouraged to ask questions by emailing either Steve MacCulloch, President and CEO smacculloch@jcic.ca or Douglas Jones, Chairman djones@jcic.ca.

Alternatively, you may visit www.jcic.ca to learn more about JCIC services.

The views expressed by the guest writer below are those of the author and do not necessarily represent those of INTEGRIS Pension Management Corp.

Amid the COVID-19 outbreak, many Canadians are being impacted financially. While the government has provided some relief with different assistance packages, I would like to take this chance to review some of these measures and the relevant tax treatment.

Income replacement and supplements

There are two wage subsidies:

  1. Temporary Wage Subsidy for Employers
  2. Canada Emergency Wage Subsidy (CEWS)

These subsidies provide employers with help to keep eligible employees on their payrolls. The subsidies are available for up to 3 months and 12 weeks.

Canada Emergency Response Benefit (CERB)

CERB replaces the short-lived emergency Support Benefit and Emergency Care Benefit and provides $2,000 every 4 weeks, for up to 16 weeks, to those who lost their income due to the COVID-19 pandemic.

Both wage subsidies and CERB are taxable. The wage subsidies are taxable to the employer. Under the wage subsidies, employees continue to collect pay from their employers with source deductions (income tax, CPP, EI, etc.). On the other hand, the CERB benefit will be paid directly to the recipient by the government and won’t have source deductions.

It is important to note that individuals receiving pay from their employers who are receiving the CEWS cannot collect payment from the CERB program. This is intended to prevent duplication of benefits received.

Tax-Free Benefits

Two sources of one time, tax-free payments are:

  1. GST/HST credit:

The GST/HST credit is a quarterly payment that helps low- and modest-income households offset some or all their GST/HST. A one-time special payment, starting on April 9, will be paid to eligible recipients. This payment will provide an average increase of roughly $400 for individuals and $600 for couples.

  1. Canada child benefit (CCB):

Recipients will receive an extra $300 for each child on their May 2020 payment.

Support for seniors:

OAS and GIS: 
The government has announced one-time, tax-free top ups to old age security (OAS) and guaranteed income supplement (GIS) recipients. OAS recipients will receive $300 and GIS recipients will receive $200.

RRIF Payments:
The minimum withdrawal rate for those who are receiving RRIF payment has dropped by 25% for 2020. It’s important to note that the taxation of RRIF income hasn’t changed. The required withholding tax at source won’t apply until RRIF payments exceed the original RRIF minimum.

Individual who has withdrawn RRIF payment amounts exceeding the reduced minimum will not be allowed to recontribute the excess amount withdrawn. 

Support for Students:

Canada Emergency Student Benefit (CESB)
The federal government has announced a program that will give monthly payments of $1,250 to post-secondary students whose education and job prospects are disrupted by COVID-19.

These payments will run from May through August.

The benefit can increase to $2,000 for people with disabilities or who care for others.
Canada Student Service Grant (CSSG)

If you’re a student who chooses to serve your community, the CSSG will provide up to $5,000 for your education in the fall. 

Where these benefits are taxable, many students won’t face tax since they have the federal basic personal tax credit to offset tax on the first $13,229 (in 2020) of income, plus tuition tax credits.

For students who have student loans, there’ll be an interest-free moratorium on repayment for all student loan borrowers until September 30, 2020. This includes those received under the Canada Student Loans Act, Canada Student Financial Assistance Act, and the Apprentice Loans Act. During this time, no payments are required and interest won’t accrue. On such loans, interest paid in the current year or previous five years can be claimed as a tax credit. Since no interest will be paid during this period, the tax credit won’t be increased.

The deadline to file your personal tax return for the 2019 tax year was June 1, 2020. Tax owed is due by September 1, 2020. Keep in mind that you can file your tax return and pay any tax balance owing separately and at different times.

Bigger not always better

JCIC Asset Management is an employee-owned boutique firm established in 1993 to provide investment management services to individuals, families, estates, trusts, personal corporations, and private foundations. Strong client relationships are the focal point around which all activities take place. JCIC believes that only by knowing clients well can we truly appreciate client needs, concerns and aspirations. This understanding forms the foundation of a long-term relationship based on trust. To build further alignment on this foundation of trust, employees and partners invest their own money in the same portfolio models as their clients.

JCIC offers both balanced and equity portfolios with an emphasis on protecting and growing wealth to help our clients achieve their goals. As an independent firm, JCIC offers objectivity and the ability to deliver customized service to their clients. Personal Financial Planning is available for clients at no charge.

Unique Value Proposition

Boutique Investment Firm: JCIC’s boutique size allows for tailored service and the ability to be nimble in market positioning. With two Certified Financial Planners on board, we offer free assessments of a client’s unique investment objectives and goals. Every relationship is important to the firm. Clients can expect a high level of service from dedicated relationship managers.

Global Perspective: JCIC complements its personalized service with a global investment reach. Its experienced portfolio management team has specialists in Canadian, U.S., and international equities which lets it invest in the best regional opportunities from around the globe. JCIC’s investment professionals take a holistic view of the entire portfolio to deliver strategic exposure to different industry sectors and global regions, providing diversification that helps its clients grow and protect their wealth.

Research-Focused with Active Asset Allocation: JCIC pairs the best qualities of top-down and bottom-up investment approaches by combining deep individual company research with active asset allocation. The firm believes that capital preservation and strong risk-adjusted returns are generated by managing asset allocation and choosing high quality securities at attractive valuations. JCIC’s core objective is to deliver superior results for clients by holding high quality securities over the long term and creating well-balanced portfolios that can help build and preserve wealth throughout different market cycles.

Our quarterly newsletter is available on our website www.jcic.ca under Ideas.

Should you have any questions, please do not hesitate to reach out to: