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. retirement
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 weekly.
Questions and answers have been edited for clarity. Last names will not be used.
How does investment income factor into CERB eligibility?
Rick in Winnipeg:
Does having ongoing investment income (interest and eligible dividends from large corporations) disqualify a person from the Canadian Emergency Response Benefit (CERB) that they otherwise qualify for based on meeting income from employment tests? (May 11, 2020)
Jamie Golombek, managing director of tax and estate planning at CIBC Wealth Advisory Service:
The Canada Emergency Response Benefit provides eligible individuals with $2,000 a month - that’s $500 a week - for up to 16 weeks if you’ve lost your job as a result of COVID-19.
So either you’ve lost your job or you’re staying home to take care of someone who’s sick with COVID-19 or perhaps you’re staying home to take care of children that don’t have adequate daycare during the period of COVID-19, you may qualify.
You have to meet a number of conditions: First of all, you’ve got to be at least 15 years of age, you have to be residing in Canada and finally you have to have at least $5,000 of income in the prior year or the previous 12 months prior to application and have no less than $1,000 of income while you’re actually receiving the benefit.
The question then is: What is income?. So to qualify, you have to have either employment or self-employment income of $5,000 in the previous 12 months and while you’re receiving the benefit you can’t earn more than $1,000 of employment or self-employment income.
So as a result, any type of investment income is fine, as well as pension income, so these do not count towards qualifications either on the eligibility side or in terms of disqualifying you from continuing to receive the CERB while you earn investment income. (May 13, 2020)
CERB eligibility for business owners
Johnny in Montreal:
My wife and I own a small business. The business is incorporated, and for the last two years, instead of being on the payroll we are paying ourselves back from the shareholder loan to the business. Therefore, we don't have a T4 at the end of the year. Nor is this considered a dividend.
Are we entitled to CERB? Our business is closed and we haven't taken any repayment since March 15. (May 11, 2020)
Jordan Damiani, senior wealth advisor at Meridian:
That’s a great question. As you mentioned, if you’re a business owner who derives their income through the repayment of a shareholder loan, it wouldn’t generate a T4 slip. Unfortunately, this is one of the key eligibility pieces of the CERB - that you do show at least $5,000 of T4 income in 2019.
The definition was also expanded to include non-eligible dividends that might be payed out of a corporation. This is also going to be important given that the CRA’s goal was to pay out Canadians as quick as possible by audit later.
Now having said that, if you do have employees and a minimum payroll of $20,000 up to $1.5 million, you might be eligible for the Canada Emergency Business Account (CEBA), which is a $40,000 interest-free loan. As long as you fully repay it between January 1, 2021 and December 31, 2022, $10,000 of that loan will be fully forgiven.
Thanks again for the question and I wish you all the best. (May 14, 2020)
Meeting the requirement for CEBA
James from Calgary:
I am a self-employed small business consultant and my clients have all basically suspended my work until such time as the COVID-19 crisis has ended.
The Canada Emergency Business Account (CEBA) loan amount that is being offered through banks is stated to require a payroll of "The Borrower’s total employment income paid in the 2019 calendar year was between $20,000 and $1.5 million."
However, in lieu of regular salaries through 2019, my consulting company instead paid sporadic "other than eligible dividends" out of the company’s retained earnings. This was done only because paying regular salaries through 2019 would have only exaggerated a greater projected corporate financial loss for the 2019 tax year.
The "other than eligible dividends" paid in lieu of salaries though would definitely meet the more than $20,000 requirement.
Is my small business eligible for a CEBA loan given I have paid "other than eligible dividends" as opposed to salaries? (May 7, 2020)
Robyn Thompson, personal finance expert and president at Castlemark Wealth Management Inc.:
If you are a business owner here in Canada and you have elected to pay yourself dividends instead of salary, you will not qualify for CEBA.
In order to qualify, you must have been in operation as of March 1, have a federal tax number and payed yourself or your employees a salary between the amounts of $20,000 or $1.5 million collectively for the 2019 calendar year.
Now the catch is that you would have had to pay a salary or employment income that shows up on either your or your employees’ T4 slips. On your business account it would show up under box 14 known as T4 sum.
Again, if you’ve taken dividends in lieu of salary, you will not qualify for the CEBA program at this time. I would recommend that you take a look at other government programs that are geared to individuals such as the CERB. (May 15, 2020)
Can I collect CERB after refusing work?
Gerry in Guelph, Ont.:
Seasonal workers and employers who no longer have summer and fall employment due to festivals and event closures, can they continue to collect CERB and for how long? Can it be extended past the 16 weeks?
If I live with a person that is compromised with COVID-19 due to their health and my work calls me back, can I refuse and continue to collect CERB? Especially if my work requires me to mingle with the public? Would this not put my loved one at risk? (May 13, 2020)
Janine Rogan, personal finance expert and Chartered Professional Accountant:
Seasonal workers who find themselves out of work will qualify for the CERB, and while this program is only currently available for 16 weeks, the government may choose to extend this program as the pandemic progresses. But, right now CERB is only available for the period of March 15 to October 3.
The Canada labour code provides the right to refuse work in dangerous situations and most provinces have similar legislation. That being said, if you or someone you live with has tested positive for COVID-19, it’s best to have an open conversation with your employer.
If you have been required to self-isolate, then employees should follow the guidance they have received from provincial or federal health authorities. (May 21, 2020)
RRIF withdrawal relief amid COVID-19
Lalita in Markham, Ont.:
Prime Minister Justin Trudeau announced as a relief to seniors he was going to allow a reduction of 25 per cent in the registered retirement income fund (RRIF) withdrawal for 2020.
However, when I asked my financial institution they told me that since I had already withdrawn my full amount in January, I am not qualified for that reduction. I do not understand that logic. Why am I not entitled to that tax break? What did I do wrong? I had every right to withdraw that at that time. Can I not put the 25 per cent back into RRIF?
Am I missing something? Can somebody please explain that to me? (May 21, 2020)
Barry Choi, personal finance blogger for Moneywehave.com:
You did nothing wrong. The 25 per cent refers to the minimum amount that must be withdrawn from a registered retirement. There is no tax break. Since you can't contribute to your RRIF, you can't put that 25 per cent back in.
The Prime Minister introduced the 25 per cent reduction as a relief measure so seniors wouldn't have to withdraw money during what was a volatile time in March. If you had withdrawn your money in January or February, you would have likely missed the market crash anyways. (May 25, 2020)
To have your personal finance question answered an industry professional, send an email to email@example.com.
Sign up for BNN Bloomberg's new weekly newsletter, Home Economics, which aims to help Canadians navigate their personal finances in the age of social distancing and beyond. Have it delivered to your inbox every Friday by subscribing at https://www.bnnbloomberg.ca/subscribe.