News & Views
On September 23, Julie Payette, Governor General of Canada, delivered the Speech from the Throne to open Parliament and outline the federal government’s agenda. The speech doesn’t include spending or program details — those details are expected when the government releases its economic and fiscal position, including projections for new economic measures, later this fall. While the 55-minute speech was broad, there were a number of items that caught our attention. Here’s what we will be keeping an eye on with future government updates and legislation.
Continued economic measures
The government reinforced the intention to continue some of their key economic measures in response to the pandemic. With legislation introduced on September 24, the Canada Emergency Response Benefit (CERB) will transition to three new benefits: the Canada Recovery Benefit (CRB), the Canada Recovery Sickness Benefit (CRSB), and the Canada Recovery Caregiving Benefit (CRCB) — which will be administered through the Canada Revenue Agency (CRA). Like CERB, these benefits will be taxable and the amount will remain at $500 weekly. Employment Insurance (EI) benefits for eligible Canadians will also be paid at a minimum weekly benefit rate of $500.
Each new benefit targets a different group of Canadians. The CRB is for workers who are self-employed or not eligible for EI and still require income support. It can be paid for up to 26 weeks. The CRSB is payable for up to two weeks for workers who are sick or must self-isolate for reasons related to COVID-19. Finally, the CRCB is payable for up to 26 weeks per household for eligible Canadians unable to work because they must care for a child under the age of 12 or a family member because schools, day-cares, or care facilities are closed due to COVID-19, or because the child or family member is sick and required to quarantine. These changes are effective September 27.
Other benefits being extended focus on businesses. First, the Canada Emergency Wage Subsidy (CEWS) will be extended through the summer of 2021. And, the Canada Emergency Business Account (CEBA) will be expanded to help businesses with fixed costs.
Personal tax potpourri
The speech touched on several personal tax items. For those with “simple” tax returns, the government intends to introduce free, automatic tax filing to make sure Canadians receive the benefits they qualify for. This could reduce some of the work associated with completing annual tax returns for some Canadians.
For seniors, the government remains committed to increasing Old Age Security (OAS) payments once recipients turn 75. It also intends to increase the Canada Pension Plan (CPP) survivor benefit. These commitments were part of the 2019 Liberal re-election campaign.
For Canadians with disabilities, the government intends to create a new Canadian disability benefit, similar to the current Guaranteed Income Supplement (GIS) for seniors. For reference, the GIS is an income-tested, non-taxable, monthly benefit for seniors who are 65 or older. Also, the government intends to improve the process for determining eligibility for government disability programs and benefits. If this includes an increase in the number of Canadians eligible for the disability tax credit (DTC), it could increase the number of Canadians eligible for a registered disability savings plan (RDSP). This combination has the potential to improve future income sources for Canadians with disabilities.
Finally, for families with childcare needs, the government intends to create a Canada-wide early learning and childcare system that will build on previous investments and learn from the model that already exists in Quebec. In Quebec, parents who send their child to a subsidized childcare provider pay a basic contribution of $8.35 per day directly to the provider. This is indexed annually on January 1. If such a model was extended nationwide, families could see a material reduction in their out-of-pocket childcare expenses. This could also reduce the value of the childcare expense deduction. The cost savings realized by families from such a program would exceed the reduced tax savings associated with a lower childcare deduction.
The government wants to identify additional ways to tax extreme wealth inequality. One way they intend to do this is to complete their efforts to limit the stock option deduction for individuals at large corporations. This originated as a campaign promise back in 2015 and has gone through multiple iterations since. Currently, the employee stock option deduction allows eligible employee stock option benefits to be taxed like capital gains (50% of the amount is taxable) rather than fully taxable, like employment income. What the additional ways are remains to be seen and future fiscal updates or legislation may be key sources of details.
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The Speech from the Throne laid out the government’s agenda. Since no federal budget was announced for the spring, as is customary, we’ll have to wait for details from either fiscal updates or proposed legislation. So, we must be patient, not jump to conclusions or pre-emptively plan for changes that may not happen. Until then, stay well and stay safe.
The commentary in this publication is for general information only and should not be considered investment or tax advice to any party. Individuals should seek the advice of professionals to ensure that any action taken with respect to this information is appropriate to their specific situation. Manulife, Manulife Investment Management, the Stylized M Design, and Manulife Investment Management & Stylized M Design are trademarks of The Manufacturers Life Insurance Company and are used by it, and by its affiliates under license.