Wage Subsidies

As your trusted advisor, HGA has simplified as much as possible the 2 wage subsidies that have been announced by the government. 

HGA Recommends:
Take advantage of the 10% wage subsidy immediately. Doing so will not impact your eligibility to use the below noted 75% wage subsidy.

Eligibility:  

• There is NO APPLICATION NECESSARY to use the 10% wage subsidy. 
• Canadian Controlled Private Corporations (CCPCs), partnerships, charities, and non-profit organizations.T
• Taxable capital of associated corporations must be less than $15 million (in preceding taxation year)
• Subsidy period is: March 18 to June 19, 2020 

HGA Recommends: 

• Reduce your remittance of federal and provincial income tax (not EI/CPP). 
• The subsidy is equal to 10% of gross employee remuneration. 
  • Applicable only for employees who are individuals employed in Canada – salaries, wages, bonuses, or other remuneration 
• The subsidy maximum is $1,375 per employee, $25,000 total per employer (in the 3-month period). 

 

Need assistance calculating the wage subsidy? 

• Use the following template to calculate the subsidy: https://www.taxtemplates.ca/wage-subsidy/ 
• Use the following link for guidance on how to record the subsidy in your general ledger (although this link is QBO specific, this link can be used to guide you on how to account for the subsidy using any accounting program): https://quickbooks.intuit.com/learn-support/en-ca/getting-started/temporary-wage-subsidy-for-employers/00/516529 

 

Important items to note: 

• T4 reporting to employees is not affected by this subsidy 
• You must continue to deduct income tax, CPP, and EI from employees as usual. This subsidy is calculated when you remit these amounts to the CRA. You cannot reduce your remittance of CPP contributions or EI premiums. 
• If your subsidy for the period is greater than your remittance, you can carryforward the subsidy to the next period and reduce a future payroll remittance.

 

Resources: 

• https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/frequently-asked-questions-wage-subsidy-small-businesses.html 

 

 HGA Recommends: 

Watch your email or follow our blog for updates on when the 75% wage subsidy is available for you to access. At this time, applications for the 75% wage subsidy are not available. In the meantime, register for My Business Account Access to ensure you can quickly access this benefit when it becomes active.

 

If your business has experienced a decline in revenues due to COVID-19, your business may qualify for the 75% wage subsidy (Canada Emergency Wage Subsidy (CEWS)). 

The federal government announced additional details and changes to the Canada Emergency Wage Subsidy, and these changes were ratified by Parliament this weekend. These changes are outlined below in red. 

• Do not worry if you have already been using the 10% subsidy. This will be considered upon payment of the 75% subsidy. 

 

How to apply: 

• Applications are not yet open. When they are, you can apply via: 
  • CRA “My Business Account” portal 
  • Another TBD web-based application 

Type of business: 

• Individuals, taxable corporations, partnerships consisting of eligible employers, non-profit organizations, registered charities 

 

Eligibility and details: 

• Attestation of: 

• • A minimum 15% drop in revenues in March 2020, and 30% for the following months. 

Eligible Periods	Claiming period	Required reduction in revenue	Reference period for eligibility
Period 1	March 15 – April 11	15%	March 2020 over:   A) March 2019, or  B) Average of January and February 2020
Period 2	April 12 – May 9	30%	April 2020 over:   A) April 2019, or  B) Average of January and February 2020
Period 3	May 10 – June 6	30%	May 2020 over:  A) May 2019, or  B) Average of January and February 2020

• • Revenue from business carried on in Canada earned from arm’s-length sources 
  • Calculated using the employer’s normal accounting method 
  • Excludes revenues from extraordinary items and amounts on account of capital 
  • Revenue can be recognized under the accrual method, or cash method, but not both 
  • If your business qualifies for a subsidy period noted above, you automatically qualify for the next subsidy period as well 
• Employer will do everything that it can to pay the 25% of wages not subsidized by CEWS 
• Verification of eligibility is expected to happen after the COVID-19 crisis 
  • Employer may be required to repay amounts, or face further prosecution in the case of fraudulent claims 
• Eligibility for the CEWS of an employee’s remuneration, will be limited to employees that have not been without remuneration for more than 14 consecutive days in the eligibility period, i.e., from March 15 to April 11, from April 12 to May 9, and from May 10 to June 6. 

 

Subsidy amount: 

• 75% of the amount of remuneration paid, up to the first $58,700 (annual equivalent) of wages or salary paid to the employee 
  • Remuneration does not include non-taxable employment benefits 
  • Based on the LESSER of employee’s average weekly wage pre-March 15, 2020 [more details to come on this], the amount the employee is being paid during the “eligibility period”, or $847 per week 
  • Employers are expected to make the best effort to top up salaries to 100% of the maximum wages covered 
  • For non-arm’s length employees (ie. a professional corporation paying its controlling shareholder) eligibility applies per above, so long as the non-arm’s length employee was on payroll prior to March 15, 2020 

• Payment of the subsidy is received by cheque or direct deposit within 6 weeks of application date for the CEWS benefits 
  • Payment would decrease by the amount received under the 10% wage subsidy, if applicable 

• Subsidy is considered taxable income 
• The CEWS now includes a 100% refund for certain employer-paid contributions to Employment Insurance and the Canada Pension Plan. This refund would cover 100% of the employer-paid contributions for eligible employees for each week throughout which those employees are on leave with pay and for which the employer is eligible to claim for the CEWS for those employees. 
  • An employee will be considered to be on leave with pay throughout a week if that employee is remunerated by the employer for that week but does not perform any work for the employer in that week. 
  • This refund would not be available for eligible employees that are on leave with pay for only a portion of the week. 
  • This refund is not included in the weekly maximum benefit per employee of $847. Regular payroll remittances must continue to be collected and remitted as usual. This refund will be administered at the same time as CEWS. 

Steps to take now: 

• Ensure you have online CRA access for your business and set up direct deposit. For additional guidance, please refer to HGA’s blog post on this topic.
• Get your books in order – being on top of bookkeeping on a timely basis will be important to ensure you are able to calculate your eligibility, apply and receive timely payments
• Compile reports that show revenue earned in March, April and May 2019, and January and February 2020. 

 

If you have any questions, please contact your HGA Advisor or info@hgacpa.com.