Apr 10, 2020
From CERB eligibility to deducting office expenses: Ask BNN Bloomberg
Tax strategies to take when working from home: Our Family Office CEO
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 firstname.lastname@example.org, and we will aim to answer them here every Friday.
Questions and answers have been edited for clarity. Last names will not be used.
Qualifying for the Canada Emergency Response Benefit (CERB)
Al in Ajax, Ont.:
I'm a contract worker who is not working now due to the virus. However, I am only now getting paid for work I had done two to three months ago. I've gone 14 days in March without receiving an invoice payment, so I guess I'm good to collect the first month of [Canada Emergency Response Benefit] CERB. But what happens in other months when I get one day of pay for old work I've done? (April 7, 2020)
Kelley Keehn, consumer advocate at FP Canada:
You are correct that if you have gone 14 days now without income in March you are eligible to apply for the CERB. However, if you receive income in the future you may not be eligible.
So keep in mind, there’s actually seven payment periods. The benefit started March 15, so it will be retroactive to that and it goes all the way to Oct. 3. So if you’re not eligible right now you may be for one of those seven periods to a maximum of four periods. So that would be $2,000 a month for a maximum of four payment periods.
You may be eligible one month, you may get some payments the next month and be eligible again the next month so you need to apply for it each payment period, and so far as of April 14 the language still is that you have to be without income for 14 consecutive days because of COVID-19. (April 8, 2020)
Eligibility for CERB if denied EI
Mike in Edmonton:
I live in Edmonton and was laid off on December 15, 2019. I am with the Teamsters Union and was hauling pipe for the Trans Mountain pipeline. I knew that I didn’t have enough hours for employment insurance but I was able to access the remainder of an old claim. That ended in early February 2020. I have had no income since then. When I heard about the Canada Emergency Response Benefit, I applied for EI not knowing at that time that we had to apply at Revenue Canada. I was denied of course because I didn’t have quite enough hours. Will that application that was denied by EI automatically be sent over to RC and applied to the Canada Emergency Response Benefit, or should I be applying? Do you think I will be eligible for this benefit? I have been applying through the union to get back to work, but there are so many workers out of work, I have not been able to go back as of yet. (April 7, 2020)
Michael Samotis, senior financial advisor at Kerr Financial Consultants:
The federal government program to assist individuals during the COVID-19 crisis, the CERB, started receiving applications on April 6. To qualify for this program, one of the following two conditions must be met: you must have stopped working because of COVID-19 or you must be eligible for Employment Insurance benefits.
In your case you did not meet either of those two conditions as you had stopped working before the onset of the COVID-19 crisis and you had not accumulated enough hours to qualify for Employment Insurance benefits. There are about 600,000 individuals in Canada who lost their jobs before the COVID-19 crisis and who cannot access Employment Insurance or CERB benefits under the current rules. Currently, in all levels of government including Alberta, there are no additional support programs available for individuals like yourself, but we are hopeful that as the situation evolves additional support will be provided. (April 9, 2020)
Parking cash in short-term treasury ETFs
John in Castlegar, B.C.:
Is it safer to put your cash holdings in a short-term treasury exchange-traded fund than to leave it in the brokers savings account if you are above the $100,000 limit the government guarantees? And would you earn more interest now that rates have collapsed? (April 3, 2020)
Jamie Golombek, managing director of tax and estate planning at CIBC Wealth Advisory Service:
Short-term treasury ETFs currently have a challenge in terms of investing new capital yields that are less than 40 basis points for a three-year maturity. Money market funds might be a good substitute to a brokerage savings account in terms of both having low-interest rate risk and easy accessibility.
Short-term treasury ETFs have an average maturity of one to three years, whereas money market funds have a maximum maturity of one year. One can find yields of more than one per cent in some of the lower-fee money market funds currently available. Admittedly though, there’s a slightly higher credit risk in a money market fund than a treasury ETF but this can be carefully managed with diversification and careful credit selection.
Also, I should point out with any ETF, short-term treasury ETFs have some other unique considerations versus let’s say buying a money market fund or brokerage savings account such as the bid-ask-spread as well as potential trading commissions. (April 7, 2020)
Claiming work from home expenses
Henry in Vancouver:
Is there a maximum portion of house rental expenses (50 per cent?) after which you lose primary residence status (i.e. not capital gains tax when you sell?). We also rent the basement which is already 39 per cent of the area. The business uses about 15 to 20 per cent of the area. (April 7, 2020)
Tim Cestnick, co-founder and CEO of Our Family Office Inc.:
If you’re working from home during this pandemic, it’s possible that next year when you file your tax return for 2020, you may actually be able to claim a deduction for some of your home expenses that relate to this home office you’re now working from.
The question becomes, ‘What percentage of your home expenses can you actually claim?’. This is where you need to be a bit careful. So, the average person is probably claiming somewhere between 10 and 20 per cent of their home as their workspace during this time.
Once you get north of about 25 per cent you’re getting to be in rarefied territory where you could be putting a red flag on your tax returns, so be aware of that. If you claim over 50 per cent of your home is being used for work purposes, that’s definitely a red flag and the thing you have to be careful of is that [Canada Revenue Agency] could come back and say: ‘You know, your workplace is really not ancillary to the use of your home as a residence, your house is actually most of a workspace.
In that case, you could run the risk of not being eligible for the full principal residence exemption to shelter your home from tax later if you were to sell it at a later profit. That portion of your home that is considered to be business could actually end up being taxable at that time.
So all this is to say, calculate your workspace percentages carefully and make sure you don’t get too greedy because you want to preserve that exemption for later. (April 8, 2020)
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