Tax Planning – Prescribed Rate Loans

On July 1, 2020 the government’s prescribed interest rate will decrease from its current two percent to one percent. In some cases, this can provide a tax planning opportunity to split income with a spouse or common-law partner, children, grandchildren or other family members.

Income splitting results when income from a higher-income family member is transferred to a lower-income family member. Due to Canada’s tax system of graduated tax rates, having the income tax paid by the lower income earner can reduce the overall tax to the family unit.

The income attribution rules contained in the Income Tax Act (the Act) are intended to prevent certain types of income from being split by “attributing” income or gains earned on money transferred or gifted to a family member back to the original transferor. However, the Act does provide an exception to this rule if the funds are loaned at the prescribed interest rate in effect at the time the loan was made and the interest is paid annually by January 30th of the following year.

For example, if the loan was made when the prescribed interest rate is one percent, any realized investment return above that rate will be taxed in the hands of the particular lower income family member. Although the prescribed rate can vary by quarter, it is the prescribed rate in effect at the time the loan was made that is used in the calculation.

If an individual entered into a loan with a family member or family trust when the prescribed interest rate was higher than one percent, the family member or family trust should consider selling its investments and repaying the loan. A new loan agreement can then be entered into using the new one percent prescribed interest rate. With respect to the loan repayment required to put this into place, any accrued capital gains or losses on the borrower’s existing investments must also be considered.

For further information, please contact your Lipton advisor.

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Canada Emergency Wage Subsidy – Important Update

Finance Minister Bill Morneau today announced that the Government of Canada will extend the CEWS by an additional 12 weeks to August 29, 2020. Extending the program will give workers greater confidence that they will continue to get the support they need during these difficult times. The Government will consult with key business and labour representatives over the next month on potential adjustments to the program to encourage jobs and growth, including the 30 per cent revenue decline threshold. Any potential changes following the consultation will have as key objectives to maximize employment, ensure the CEWS reflects the immediate needs of businesses, and support the post-crisis economic recovery.

For more information, please click here:


If you have any questions, please contact your Lipton advisor.

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COVID-19 and Business Interruption Insurance

As the COVID-19 pandemic continues, it is having a significant impact on many businesses, including operating losses as a result of closures, reduced operations and other unforeseen expenses.

These businesses should consider reviewing their insurance policies, particularly the “business interruption” clause to determine whether they are covered for these losses due to COVID-19.

Potential causes of business interruption may include:

  • The contamination of the premises caused by the virus
  • Employee absenteeism
  • Event cancellation
  • Supply chain disruption, or
  • Forced closure by civil authority

Business Interruption Insurance:

The general purpose of business interruption insurance is to make the insured “whole” from the damaging event and is typically included in two types of policies:

  • Perils Coverage relates to property damage from named risks that are specifically noted in the policy including fire, flood and vandalism
  • All Risks coverage relates to losses arising from any fortuitous cause except those that are specifically excluded

Next Steps:

  • Obtain a copy of your insurance policy and review the policy for potential coverage
  • Review the definition section of the policy to see if property damage as a term is defined since property damage from named risks is typically covered through business interruption and COVID-19 losses may not be considered property damage
  • Contact your insurance broker and place them and the insurer on notice of the potential claim
  • Supporting documents must be available to support a claim

Lipton Polisuk is available to assist with claims preparation and review. Many business interruption policies cover the cost of professional fees incurred to prepare and review your claim.

Please contact us with any questions that you may have.

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Applying for the Canada Emergency Wage Subsidy (CEWS)

Beginning April 27th, applications will be open for the Canada Emergency Wage Subsidy.  For those who are eligible, most businesses may apply using My Business Account. If you represent a business, you may apply using Represent a Client. Alternatively, on April 27th you may apply using a separate online application.

Please click this link to learn how to apply for and receive your subsidy, if eligible. This link also includes the following sections:

  • Who is an eligible employer
  • Determine your eligible employees
  • Calculate your subsidy amount

If you have any questions, please contact your Lipton advisor.

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Changes to the Canada Emergency Business Account & Introduction of Commercial Rent Assistance Program

On April 16, 2020 the Government of Canada announced changes to the Canada Emergency Business Account and introduced the Canada Emergency Commercial Rent Assistance program.

Canada Emergency Business Account (CEBA)

The CEBA allows banks and credit unions to lend up to $40,000 to qualifying small businesses and non-profit organizations. These loans are interest free until December 31, 2022. If fully repaid before this date, 25% of the loan (up to $10,000) will be forgiven.

To qualify, businesses now need to demonstrate that they paid between $20,000 and $1,500,000 in total payroll in 2019 as reported on the 2019 T4 Summary filed with CRA. Previously, the range was $40,000 to $1,000,000.

Canada Emergency Commercial Rent Assistance (CECRA)

On April 16, 2020 the Government also announced the new CECRA in order to assist small businesses in paying commercial rent for April, May and June. No specific details were released but are expected soon.

If you have any questions, please contact your Lipton advisor.

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Canada Emergency Wage Subsidy Legislation Receives Royal Assent

On April 11, 2020, the Federal government’s $73 billion wage subsidy legislation received Royal Assent and was passed into law.

What It Means for Canadian Employers

The new Canada Emergency Wage Subsidy (CEWS) provides a 75% wage subsidy to eligible employers for up to 12 weeks, retroactive to March 15, 2020.

The CEWS is intended to prevent further job losses, encourage employers to re-hire workers previously laid off as a result of COVID-19, and help better position Canadian companies and other employers to more easily resume normal operations following the crisis.

Please click on this link to see the full details.

If you have any questions, please contact your Lipton advisor. If you would like to read our previous client communications on this subject, please refer to our blog.

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Canada Emergency Wage Subsidy – Update

On April 8, 2020, changes were announced to the eligibility criteria for employers to claim the Canada Emergency Wage Subsidy (the Subsidy).

In summary, the proposed changes include the following:

  • When measuring revenue loss, eligible employers can either compare their revenue of March, April and May 2020 to that of the same month in 2019 or to the average of their revenue earned in January and February 2020. Once chosen, the approach must remain consistent for all months.
  • For March only, employers will need a minimum 15 percent reduction in revenue to be eligible.  This change reflects the fact that many businesses did not begin to experience a revenue reduction until partway through the month.  Employers will still need a minimum 30 percent reduction in revenue in April and May to be eligible.
  • It is proposed that employers be allowed to measure revenues on either an accrual basis or on a cash basis. Once chosen, the approach must remain consistent.
  • It is proposed that eligible employers will now be entitled to a 100 percent refund for employer-paid contributions to Employment Insurance, Canada Pension Plan, Quebec Pension Plan and Quebec Parental Insurance Plan contributions.
  • Registered charities and not-for-profit organizations are also eligible to receive the wage subsidy. It is proposed that these organizations can choose to include or exclude government funding in their revenues for the purposes of applying the above-mentioned revenue reduction tests.

Additional announcements are expected to address corporate groups, non-arms’ length entities and joint ventures.

Please click on this link to see the announcement.

If you have any questions, please contact your Lipton advisor.

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GST/HST Update – Payment & Filing Deadlines

GST/HST Update – Payment & Filing Deadlines

The CRA has now released additional details on GST/HST relief for businesses. While the GST/HST remittances and payments due on or after March 27, 2020 and before June 2020 may now be deferred to the end of June 2020, the CRA has advised that businesses should continue to file the related GST/HST returns if they are able to do so. However, the CRA will not assess penalties for the late-filing if the GST/HST returns due during that period are filed by June 30, 2020.

Annual filers will also be able to defer until June 30, 2020, the GST/HST instalments due on or after March 27, 2020 and before June 2020.

Taxpayers who file their GST/HST returns and rebates in paper format may not receive their refunds or rebates until normal CRA operations resume. Some returns and rebates filed electronically may be processed automatically unless such filings become subject to additional review.

Businesses and other taxpayers should ensure that they continue to file all GST/HST rebate applications and claim credits within the required due dates.

For more information, please refer to the link below:


If you have any questions, please contact your Lipton advisor.

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Ontario’s Action Plan to Respond to COVID-19 – Tax Aspects

Ontario’s Action Plan to Respond to COVID-19 – Tax Aspects

On March 25, 2020, the Ontario Government announced new tax relief measures in response to the COVID-19 pandemic.

Temporary Increase to Employer Health Tax Exemption

Businesses with less than $5 million in “total Ontario remuneration” currently have an exemption from employer health tax for the first $490,000 of remuneration. Retroactive to January 1, 2020, the exemption will increase to $1 million. Taxpayers who have already paid instalments on the basis of the $490,000 exemption can expect their returns to be corrected.

New Regional Opportunities Investment Tax Credit

The new Regional Opportunities Investment Tax Credit will be a 10 per cent refundable tax credit available to Canadian-Controlled Private Corporations (CCPCs) who make qualifying capital expenditures in Ontario, but only if made outside Ottawa, the Greater Toronto Area and various other regions near the Greater Toronto Area.

Qualifying expenditures are those between $50,000 and $500,000 on property classified, for the purposes of the capital cost allowance rules in the Income Tax Act, under Class 1 or Class 6 (including certain expenditures with respect to eligible commercial and industrial buildings). The credit is only available to the extent that the qualifying investment becomes “available for use” on or after March 25, 2020, as that term is used with respect to the capital cost allowance rules.

Deferral of Certain Taxes and WSIB Premiums

Businesses will also be able to defer certain filing and remittance obligations. These amounts remain owing, but businesses will not have to pay them until August 31.

With respect to WSIB, businesses can defer remitting premiums for the period starting March 25 and ending August 31, 2020, with no penalty or interest. Moreover, interest on outstanding premium payments will not accrue. All employers covered by the WSIB workplace insurance are automatically eligible for the relief.

As mentioned in our recent communication to you, beginning April 1 and up until August 31, 2020, businesses will not incur any penalty or interest if they miss filing or payment obligations for Employer Health Tax, Tobacco Tax, Fuel Tax, Gas Tax, Beer, Wine and Spirits Taxes, Mining Tax, Insurance Premium Tax, International Fuel Tax Agreement, Retail Sales Tax on Insurance Contracts and Benefit Plans and Race Tracks Tax.

Postponed Property Tax Reassessments

The Municipal Property Assessment Corporation (MPAC) normally values properties in Ontario every four years for determining property taxes. This will be postponed until 2021. As a result, property taxes in 2021 will be the same as the valuations in place for 2020.

If you have any questions, please contact your Lipton advisor.

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Increase in wage subsidy, New loans for Small Businesses, GST/HST Payments and Other Matters

On March 27, 2020, Prime Minister Justin Trudeau made a number of new announcements as outlined below.

The Prime Minister unveiled that the government is going to be increasing the payroll subsidy in an effort to thwart layoffs due to COVID-19. This subsidy will now cover up to 75 percent of salaries, an increase over the original 10 percent subsidy plan.  The wage subsidy will be back-dated to Sunday March 15.  No further details were announced, but are expected on Monday.

The federal government is also introducing the Canada Emergency Business Account (CEBA). The new measure will offer qualifying businesses:

  • $40,000 loan from banks, which will be guaranteed
  • The loan will be interest-free for the first year
  • Under certain conditions, $10,000 of it will be forgivable

The government will also be providing an additional $12.5 billion through Export Development Canada to help small and medium-sized businesses with operational cash flow.

For more details on these topics, please click on the provided link.

GST and HST payments, along with duties and taxes owed on imports, will be deferred until June 30, 2020.

For more details on this topic, please click on the provided link.

For employees who have already been laid off, Trudeau emphasized that the Canada Emergency Response Benefit, which was announced on Wednesday, is still applicable.

If you have any questions, please contact your Lipton advisor.

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