Apr 17, 2020
To qualify or not to qualify for CERB: Ask BNN Bloomberg
Answering key questions you have about CERB in week two of the rollout
With growing economic uncertainty during the COVID-19 pandemic, the financial landscape is shifting every day.
Whether it's dealing with sudden unemployment, ballooning debt, or expenses related to working from home, BNN Bloomberg wants to help Canadians navigate these uncharted waters.
That’s why we created Ask BNN Bloomberg, where you can have your personal finance questions answered by industry professionals.
Email or send your questions via video to email@example.com, and we will aim to answer them here every Friday.
Questions and answers have been edited for clarity. Last names will not be used.
Do students qualify for the Canada Emergency Response Benefit?
Tareque in Mississauga, Ont.
There’s a student who’s in her last semester and has her permanent residency in Canada. Field placement was suspended and the job market is horrible.
During the academic year, students get support through student loans and bursaries but now that college is over there’s no support through financial aid and no places to get hired in order to manage the cost of food, utilities and rent.
Would students in this kind of situation be eligible for CERB? (April 12, 2020)
Jessica Moorhouse, financial counsellor and personal finance blogger for JessicaMoorhouse.com:
So I’ve been fielding a tonne of questions recently about the Canada Emergency Response Benefit (CERB), most of the questions being ‘Am I eligible, can you tell me?’. The criteria of course is all on the Canada Revenue Agency (CRA) website so make sure to take a good look at that; but for instance, one common question I’ve been getting from students is ‘Am I eligible?’
So typically if you just graduated or maybe you finished a semester and you’re on summer break, this is the time you would try to find work or find that first full-time job after university. I know this is not the best time to find a job, but this is someone who graduated in 2009 during the last recession, so I feel your pain.
Unfortunately, with the current [CERB] benefit and its current criteria, you’re most likely not eligible. It was really developed to give financial relief to people who were already working and thus laid off, or their hours were cut to zero, or they are self-employed they can no longer earn any income through their business directly because of COVID-19.
If you were already unemployed or you now just can’t find a job because of COVID-19, the criteria doesn’t seem to take you into consideration. So unfortunately, most likely you’re not eligible, but this is why I always say wait for some good news. I’m sure some more things will be coming down and hopefully they will help you in your situation. Make sure to contact the CRA directly and see if you have a special circumstance that makes you eligible [for CERB]. (April 14, 2020)
Canadian government bond vs. GIC
Tony in Montreal:
I have $95,000 to invest. What is a safer investment? I don't want to lose my capital under any circumstance.
Am I better off buying: 1) 5-year Government of Canada bond or 2) a 5-year Guaranteed Investment Certificate (GIC) with a major Canadian chartered bank with Canadian Deposit Insurance Corporation (CDIC) coverage?
Is one investment better than the other? (April 14, 2020)
Paul Harris, partner and portfolio manager at Harris Douglas Asset Management:
The second option would be best for an individual that does not want to lose any capital.
The individual could opt for a cashable GIC with a lower rate but would allow more flexibility in case they require the funds early. (April 14, 2020)
Qualifying for CERB while on maternity leave
Filippo in Montreal:
I went on maternity leave in February 2019. I have not received any maternity benefits (I did earn more than $5,000 in 2019) in over a month and have two small children that are obviously at home with me due to the closure of daycares, so I cannot return to work. I am still employed and I am deemed on unpaid leave.
I believe I am eligible for the CERB. Would you be able to clarify it for me? (April 12, 2020)
Dilys D’Cruz, VP and head of wealth management at Meridian Credit Union:
Things are changing so rapidly, so it’s critical for this individual to visit the government’s website and check out the details [on CERB], because the government recently expanded the criteria to allow for people who have reduced their hours and are making less than a $1,000, and also if your employment insurance ran out.
So, without knowing all the details in this specific case, I would highly recommend that this individual talk to her accountant and her employer to ensure that she does in fact qualify [for CERB]. But on the surface, it does look like she would qualify because she made more than $5,000 last year, she’s not getting an income, and she has been impacted due to COVID-19.
I also highly recommend that anybody who has been impacted financially because of COVID-19 seek the advice of a financial advisor who can steer you through the various programs the government is offering and help put you on a plan to manage through this financially difficult time. (April 15, 2020)
Government aid for seniors
Lilybeth in Toronto:
Would you please advise on whether the Canadian government is providing assistance to seniors like me who are on a fixed income. I am receiving my CPP pension, Old Age Security pension and company pension.
However, the value of my TFSA and RRSP have been drastically reduced as a result of COVID-19 and my hands are tied because if I liquidate, I will suffer a tremendous loss. I use my TFSA to supplement my income to cover living expenses. (April 2, 2020)
Tony Salgado, president and founder at AMS Wealth:
Yes, the Canadian government has introduced an economic measure to assist seniors who are currently drawing from their Registered Retirement Income Fund (RRIF). For 2020, the minimum required withdrawal has been reduced by 25 per cent for all account holders. This measure will allow seniors to retain more capital inside their registered account for future investment.
However, this measure does not assist seniors who may not have a RRIF or have yet to convert their Registered Retirement Savings Plan (RRSP) to a RRIF. For instance, if you are 68 years old and do not have a RRIF, this economic measure will not apply to you or provide any relief.
Many seniors require more guaranteed retirement income within their retirement plan. This should be a critical discussion point when conducting financial planning as various solutions exist to provide a level of guarantee to retirees. Taking less investment risk needs to be part of the conversation. (April 14, 2020)
Accessing CERB after EI benefits end
Jack in Oakville, Ont.:
I lost my job in 2019, and my Employment Insurance (EI) benefits ran out in December 2019. On March 18, I had an interview that went well. I was advised I would start working on March 23, with an employment agreement coming before then. I followed up and was told on March 21 that due to the situation with COVID-19, the company would not proceed with hiring me after all.
Am I eligible for CERB? Had it not been for COVID-19 I would have been working now. Again, I will appreciate your help clarifying this matter. (April 14, 2020)
Chantel Chapman, founder of What The Finances:
I’m really sorry that you were not able to go through with that job offer you had, and I hope that my answer will bring you some peace in this challenging time.
So recently the government promised that they would be extending the CERB to those that have exhausted Employment Insurance (EI) benefits. Also, as the application states now, it says you are eligible if you are not able to work due to COVID-19. With your situation and because the company couldn’t hire you because of COVID-19, I believe you have a strong case to be eligible.
The government does acknowledge that they haven’t been able to analyze every scenario and communicate eligibility so they’ve recently said that they will not unjustly penalize people who applied in good faith and later find out they’re ineligible.
I think you’re okay for eligibility but I would make sure that you have that proof of the offer. (April 15, 2020)
Paying back CERB funds
Leslie in Peace River, Alb.:
What if my employment status changed and I want to repay the CERB funds? (April 15, 2020)
Peter Papadakis, principal of financial planning and tax advisory services at Kerr Financial Consultants:
Congratulations on returning to work! You are in the enviable position of not having to rely on the CERB to cover your expenses.
Given the fact that the CERB is a new program, there have been many cases of people receiving double payments or receiving benefits for which they are not eligible. The CERB has many moving parts and individuals can easily receive benefits for which they are not eligible. As conditions improve, there will likely be individuals who will apply for the CERB on the assumption that they will not be receiving income for a given period, but then find themselves being called back to work.
If you received a [CERB] cheque and still have it, you should mail it back to Canada Revenue Agency’s tax centre in Sudbury, Ont. If you have cashed the cheque or received the CERB by direct deposit, then mail a personal cheque, payable to Receiver General for Canada, to CRA indicating that it is repayment of the CERB. You should include your social insurance number on the cheque. At the current time, CERB funds cannot be repaid electronically. (April 15, 2020)
Landlords eligible for CERB?
Mohamed in Oakville, Ont.:
I have two rental properties and this is my only income. One of the tenants stopped paying the rent for April (due on April 1) and he informed me that he will not be able to pay the rent for April while the other tenant paid on time. The contribution of the first property (the one where the tenant stopped the payment) is almost 55 to 60 per cent of my monthly income. Am I eligible to apply for the Canadian Emergency Response Benefit (CERB) or not, taking into consideration that I have some savings in the bank? (April 13, 2020)
Kelley Keehn, consumer advocate at FP Canada:
I’m so sorry to hear about your situation, but how kind of you to pass on that relief to your renters albeit at a significant income loss to you. So on April 15, the prime minister announced new tweaks to the CERB program. If you earn $1,000 or less per month you’re now eligible. Now your question didn’t specify exactly how much you’re earning, but if it is under that $1,000 per month, you’re now eligible to apply. (April 15, 2020)
Managing rental property costs amid the pandemic
Susanna in Edson, Alb.:
I am a retired veteran living on an army pension. I also have a rental property, a hotel condo, but it is now shut down indefinitely due to the pandemic. Therefore, I have zero rental income but still have to pay over $1,600 for maintaining the condo, e.g. condo fees, property taxes, repairs and maintenance, and interest payments on my home equity line of credit.
Am I eligible to apply for any government relief subsidies? (April 12, 2020)
Barry Choi, personal finance blogger for Moneywehave.com:
Unfortunately, there are no subsidies or relief programs that the government is offering that you would qualify for. Since your condo is a rental property, you also would not qualify for any mortgage deferrals.
I doubt that any programs will be introduced later that would address your situation as the government likely does not believe they're responsible for any supplementary income that Canadians may rely on. (April 13, 2020)
Forced leave without pay
Peter in Vancouver:
My employer is asking some of us to take a mandatory leave of absence during this COVID-19 pandemic for periods of two to 16 weeks without pay but with benefits.
I am in the helicopter maintenance business and this has been declared an essential service at this time. But my employer says it is in reaction to declining revenues. There have been no outbreaks at any of our facilities but their intention is to mitigate layoffs. Instead we are encouraged to take advantage and apply for the CERB to tide us over. Is this legal? (April 11, 2020)
Muneeza Sheikh, employment lawyer at Levitt LLP:
If your employer places you on a forced mandatory layoff, that’s something which should be considered to be legally untoward or unlawful.
While an employer has the right to lay you off either for 13 weeks without benefits or 35 weeks with benefits, simply sending you home on a mandatory leave even if they continue your benefits and not issuing a Record of Employment (ROE) for a layoff would qualify for a constructive dismissal.
If essentially you’re being told that you’re still an employee but they’re not going to pay you and there isn’t any work to do then the legal recourse they have available is a layoff. Now that layoff in and of itself may also be challenged as a constructive dismissal unless there is a term in your employment agreement which allows your employer to do that.
But if I was at the receiving end of a notice from my employer telling me to go home on a mandatory leave, I have job protection but no job and no pay, that is considered to be a constructive dismissal in that your employer is obligated to pay you at law.
You should not be accepting that under any circumstances. (April 15, 2020)
Tax planning strategy for real estate
Ian in Mississauga, Ont.:
My wife and I bought an investment property in our company and currently rent it out. We are contemplating selling our home and moving to the cottage up north but using the rental property as our city home. We bought the townhouse for about $650,000 and it’s now worth about $800,000.
Should we keep it in the company or buy it back personally? If so, I assume we would have to pay a taxable benefit or some kind of fair market value (FMV) rent to the corporation?
What would you consider to be the best tax planning? (April 12, 2020)
Silvia Jacinto, tax partner at Crowe Soberman:
We don’t typically advise a client to own a personal use property in a company, because as you have alluded to, this creates taxable benefit issues. As the shareholder of the company, you will be deemed to have received a taxable benefit from your company generally equal to the fair market value rent you would have had to pay another arm’s length person to use the property.
There is no step up in the cost of the property in the corporation for the personal use benefit and therefore this may lead to double taxation in future when the property is sold in the corporation.
In addition, when the property is sold by the corporation, it will be subject to capital gains tax (no principal residence exemption is available in this situation) and you will receive a taxable dividend from the corporation if and when you extract the after-tax sale proceeds.
Ultimately, you may want to consider removing the property from the corporation before any further increase in value, but this will likely result in tax consequences to both you and the corporation.
Alternatively, you can keep the property in the corporation and pay the corporation fair value rent, thereby treating the property as a purely investment asset in the corporation (i.e. no different than the corporation renting the property out to an arm’s length person). When the property is ultimately sold, the same capital gain and tax liability implications (as discussed above) will arise as the principal residence exemption is not available. (April 14, 2020)
Bulking up a TFSA
Lynne in Lethbridge, Alb.:
Hello, I'm a senior and would like to keep up my retirement fund. Would it be a good idea to add to my TSFA at this time? I believe I get 1.5 per cent interest in this fund. I have lots of room in the fund for contributions, more than the $6,000 allowed for 2020. (April 12, 2020)
Jamie Golombek, managing director of tax and estate planning at CIBC Wealth Advisory Service:
Now may actually be the perfect time to make a contribution to your tax-free savings account (TFSA) if you’ve got accumulated room because you haven’t always maxed out the maximum amount you put into your TFSA. If you have extra cash right now with the markets down, depending on what you invest in you might have an opportunity to top up the TFSA.
Now there are all kinds of investments that one can put into the TFSA, from savings accounts with guaranteed rates of return by many of the financial institutions as well as other products like GICs, stock market portfolios, mutual funds, ETFs, what have you. An opportunity to catch up on TFSA allows you to take advantage of market up turns and invest for the long-term.
Remember you can always take money out of the TFSA tax-free and then recontribute it, beginning the following year. To check your TFSA contribution limit, go online using the CRA my account, and click on TFSA contribution room. (April 13, 2020)
Choosing an investment strategy
Tyrell in Calgary:
I am a 28-year-old from Alberta and I am in the agricultural industry (family farm) so I am still making a decent wage every month ranging between $3200 to $6000, depending on what time of year it is - which comes out to approximately $62,000 to $67,000 a year.
I own a house, still owing about $250,000, but I have two roommates helping with the bills. I also have a truck with about $35,000 owing but I have no credit card debt and have about $20,000 saved up in various savings accounts and TFSAs.
One day I will also inherit land worth a substantial amount but that’s not what I expect or depend on in the short-term, next five to 15 years.
Recently I have become really aware how important investing will be after this crash and I just wonder other than investing in diverse ETFs or in a TFSA, what are some other safe things to look into? What are some higher risk and reward options for a person like me? And also, what are some signs we have bottomed out and the rise is on the horizon? (April 7, 2020)
Filomena May, financial advisor at Filo Financial Solutions of Raymond James Ltd.:
You have cash flow. Review the interest rate on the truck but you presumably have a tax deduction with the family farm.
You have a small mortgage but review the rate, expecting an inheritance that will be tax-free, and you have roommates to make payments. You can accomplish more by investing wisely.
Max out your TFSA room and tax-free growth. Anything that you require near-term should not be invested in riskier investments. Many ETFs are not low-risk. There’s a range of great investments from stocks to high-quality mutual funds, dividend vs. growth-producing and diverse sectors. Do not focus solely on one or two industries as things change quickly.
Trying to time the market is not wise during these times, as we cannot predict what will happen in the next 12 to 18 months, so it’s best to add money in regularly so you are buying investments on sale. (April 14, 2020)
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