2021 Federal Budget

COVID-19 Related Measures - Personal

COVID-19 Personal Benefits

The federal budget (Budget 2021) proposes to extend the Canada Recovery Benefit (CRB) an additional 12 weeks to provide a maximum benefit period of 50 weeks. The first four additional weeks will be paid at the current rate of $500 per week, with the subsequent eight additional weeks paid at a rate of $300 per week.

Additionally, Budget 2021 proposes to extend the Canada Recovery Caregiving Benefit (CRCB) an additional four weeks to provide a maximum benefit period of 42 weeks at a rate of $500 per week.

The Budget further proposes legislative amendments to allow for additional extensions of the benefits as needed until no later than November 20, 2021.

The Budget also proposes to allow an option to claim a deduction in respect of the repayment of a COVID-19 benefit in the year in which the benefit amount was received rather than in the year in which the repayment was made.  This choice is available for benefit amounts repaid before 2023.

COVID-19 Related Measures - Businesses

Canada Emergency Wage Subsidy Extension

Budget 2021 proposes to extend the Canada Emergency Wage Subsidy (CEWS) past its previous end date of June 5, 2021, until September 25, 2021.  The applicable subsidy rate will gradually decrease as part of a phase-out of the program. 

Combined CEWS Rate for Periods 17 through 20

	Period 17:  June 6 – July 3	Period 18:  July 4 – July 31	Period 19:  Aug 1 – Aug 28	Period 20:  Aug 29 – Sept 25
Maximum weekly benefit per employee	Up to $847	Up to $677	Up to $452	Up to $226
Revenue Drop
70% and over	40% base + 35% top-up = 75% CEWS	35% base + 25% top-up = 60% CEWS	25% base + 15% top-up = 40% CEWS	10% base + 10% top-up = 20% CEWS
50% to 69%	40% + Top-up: 1.75 x (revenue drop – 50%)	35% + Top-up: 1.25 x (revenue drop – 50%)	25% + Top-up: 0.75 x (revenue drop – 50%)	10% + Top-up: 0.5 x (revenue drop – 50%)
>10% to 49%	0.8 x revenue drop = CEWS rate	0.875 x (revenue drop -10%) = CEWS rate	0.625 x (revenue drop -10%) = CEWS rate	0.25 x (revenue drop -10%) = CEWS rate
0% to 10%	0.8 x revenue drop = CEWS rate	0%	0%	0%

For publicly listed corporations receiving the CEWS, if top executives are found to receive more compensation in 2021 than they did in 2019, a portion of CEWS amounts received will be required to be repaid.  The amount repayable will be equal to the lesser of: 

• The total of all wage subsidy amounts received in respect of active employees for qualifying periods that begin after June 5, 2021; and
• The amount by which the corporation’s aggregate specified executives’ compensation for 2021 exceeds its aggregate specified executives’ compensation for 2019.

Canada Emergency Rent Subsidy Extension

Budget 2021 proposes to extend the Canada Emergency Rent Subsidy (CERS) from June 5, 2021, until September 25, 2021.  Similar to the CEWS, a gradual phase-out of the program will result in the decrease of the rate of the subsidy available in each subsequent period.

Base Rate CERS

Budget 2021 proposes to extend Lockdown Support for locations affected by public health restrictions from June 5, 2021, until September 25, 2021.  The current 25% rate for the Lockdown Support remains unchanged.

Canada Emergency Business Account Extension

The Canada Emergency Business Account (CEBA) provides small businesses with an interest free loan for non-deferrable expenses up to $60,000.  A third of the loan (up to $20,000) is forgivable if the remaining amounts of the loan are repaid by December 31, 2022.  As previously announced, the deadline to apply for the CEBA has recently been extended to June 30, 2021.

Canada Recovery Hiring Program

The Canada Recovery Hiring Program (CRHP) will provide a subsidy of up to 50% on the incremental remuneration paid to eligible employees between June 6, 2021, and November 20, 2021.  An employer can apply for CEWS or CRHP but not both in the particular qualifying period.  Incremental remuneration is the difference between an employer’s total eligible remuneration paid to eligible employees for the qualifying period, and its total eligible remuneration paid to eligible employees for the baseline period (March 14, 2021 to April 10, 2021).

Provided an eligible employer’s revenue decline is greater than the “revenue decline threshold” for the qualifying period, the subsidy available will be equal to the employer’s “incremental remuneration” multiplied by the subsidy rate for the qualifying period.  The revenue decline threshold for period 1 is 0%, with the remaining periods having a revenue decline threshold of 10%.  The revenue decline will be determined using comparison periods similar to the CEWS. 

Measures Impacting Individuals

National Early Learning and Child Care System

Budget 2021 proposes to establish a Canada-wide early learning and child care system. The federal government will work with provincial, territorial, and Indigenous partners with the intention to provide access to regulated child care nationwide for an average of $10 per day by 2025-26.

Federal Minimum Wage

Budget 2021 announces the intention to establish a federal minimum wage of $15 per hour, indexed for inflation, to support workers in the federally regulated private sector.  In instances, where the provincial or territorial minimum wage is higher, that higher minimum wage will continue to apply.

Interest-free Loans for Home Energy Retrofits

Budget 2021 proposes to provide homeowners and landlords interest-free loans of up to $40,000 for undertaking certain deep home energy retrofits identified through an authorized EnerGuide energy assessment. These loans are intended to help finance more costly retrofits such as replacing windows and doors, installing high-efficiency furnaces and water heaters, or making insulation improvements.

Vacant Property Owned by Non-Residents

Effective January 1, 2022, Budget 2021 proposes to introduce an annual 1% federal tax on the value of vacant or underused non-resident, non-Canadian owned residential real estate.  Beginning in 2023, owners who are not Canadian citizens or permanent residents will be required to file an annual declaration as to the property’s use and value.  Significant penalties will be imposed if such a declaration is not filed.

Old Age Security

Budget 2021 proposes to increase Old Age Security (OAS) benefits for seniors 75 years of age or older in a two-step process. The first step will be a one-time payment of $500 in August 2021 to OAS pensioners who are 75 years of age or older as of June 2022.  This one-time payment will be exempt from the definition of income for the Guaranteed Income Supplement.

The second step will involve increasing the regular OAS payments for pensioners 75 years of age and older by 10% beginning in July 2022.  It is estimated this this will increase the annual benefit to a pensioner receiving the maximum OAS benefit by $766 in the first year and will be indexed to inflation going forward. 

Canada Workers Benefit Enhancement

The Canada Workers Benefit (CWB) is a non-taxable refundable tax credit.

Budget 2021 proposes to expand the CWB by increasing:

• The phase-in rate from 26% to 27%
• The phase-out thresholds to $22,944 (from $13,194) for single individuals without dependent and to $26,177 (from $17,522) for families, and
• The phase-out rate from 12% to 15%

Budget 2021 will also allow a lower working income spouse or common-law partner to exclude up to $14,000 of their working income when calculating adjusted net income for the purposes of the above threshold.

The CWB changes will apply to the 2021 and subsequent taxation years, with amounts being indexed after the 2021 year.

Employment Insurance (EI)

Budget 2021 proposes several changes to EI to ensure the program remains accessible. Changes include maintaining uniform access to EI benefits across all regions with an entrance requirement of 420 hours for regular and special benefits. Additionally, claimants will be able to receive benefits sooner due to modifications pertaining to severance, vacation pay, and other monies paid on separation.

The Budget also proposes the enhancement of sickness benefits from 15 to 26 weeks effective summer 2022.

Access to the Disability Tax Credit

Budget 2021 proposes to update the list of mental functions of everyday life that is used for assessment for the Disability Tax Credit (DTC). Using terms that are more clinically relevant will make it easier to be assessed, reduce delays, and improve access to benefits.  

The Budget also proposes to recognize more activities in determining time spent on life-sustaining therapy and to reduce the minimum required frequency of therapy to qualify for the DTC.

These proposed changes will apply to the 2021 and subsequent taxation years, in respect of DTC certificates filed with the Minister of National Revenue on or after Royal Assent.

Canada Student Loans and Apprentice Loans

The government intends to introduce legislation that will extend the waiver of interest accrual on Canada Student Loans and Canada Apprentice Loans until March 31, 2023.

Budget 2021 also proposes to increase the threshold for repayment of assistance from $25,000 to $40,000 for borrowers living alone, and the threshold will be modified for students from larger households to match the Canada Student Grants. Additionally, the cap on monthly student loan payments will be reduced from 20% of household income to 10%.

Tax on Select Luxury Goods

Budget 2021 proposes to introduce a luxury tax on the retail sale of select automobiles, planes, and boats. The tax will be effective January 1, 2022 and will apply to automobiles and planes priced over $100,000, and boats priced over $250,000. Certain exclusions apply.  The tax will be calculated as the lesser of 20% of the value over the applicable limit, or 10% of the total value of the item. The luxury tax increases the final sale price for the purposes of GST/HST.

Excise Duty on Vaping and Tobacco

Budget 2021 proposes to increase the tobacco excise duty rate effective the day after Budget Day, and implement a tax on vaping products in 2022.

Other Tax Measures

• The federal government is consulting on proposals to enhance Canada’s mandatory disclosure rules. 
• Budget 2021 proposes to expand existing anti-avoidance rules with respect to avoiding tax liabilities by transferring assets to others to include other complex transactions.  Penalties can also be imposed on those who devise or promote such transactions.
• Budget 2021 proposes amendments to confirm that CRA officials will have the authority to require the person to respond to questions orally or in writing including any form specified by the CRA official.