2020 Federal Budget: Responding to COVID-19
Emergency pandemic response and economic stabilization
What the 2020 Budget Means for You
Finance Minister Bill Morneau presented the 2020 federal budget to the House of Commons on March 18, 2020. The budget contained 8 significant measures affecting Canadians' taxes, benefits, and financial planning, with a projected fiscal deficit of $381.6 billion against a GDP growth forecast of -5.4%.
The 2020 budget was unlike any in Canadian history. Within days of presentation, CERB replaced the original measures as the pandemic severity became clear. The emergency response programs collectively supported nearly every Canadian household and business.
COVID-19 support
Canada Emergency Response Benefit (CERB)
The Canada Emergency Response Benefit provides $2,000 per four-week period to workers who lost their income due to COVID-19. Self-employed individuals, gig workers, and employees not covered by EI are all eligible. CERB is taxable income and must be reported on the T4A slip issued by the CRA; approximately 8.9 million Canadians received payments totalling $81.6 billion.
Canada Emergency Wage Subsidy (CEWS)
The Canada Emergency Wage Subsidy reimburses eligible employers up to 75% of employee wages for employees who would otherwise be laid off. Employers experiencing a revenue decline of at least 15% in March or 30% in April and May 2020 qualify. The subsidy is taxable income to the employer and must be included in income for tax purposes; over $100 billion was paid out over the program's lifetime.
Canada Emergency Business Account (CEBA)
The Canada Emergency Business Account provides interest-free loans of up to $40,000 to small businesses and not-for-profits to cover operating costs during the pandemic. If 75% ($30,000) of the loan is repaid by December 31, 2022, the remaining 25% ($10,000) is forgiven and constitutes a taxable government assistance in the year of forgiveness. Over one million businesses received CEBA loans.
Canada Emergency Commercial Rent Assistance (CECRA)
The Canada Emergency Commercial Rent Assistance provides forgivable loans to qualifying commercial property owners to reduce rent by at least 75% for small business tenants experiencing pandemic-related revenue declines. The federal government covers 50% of rent, the landlord forgives 25%, and the tenant pays 25%. Tax implications arise for the landlord: the forgivable amount is government assistance included in income.
Benefits & Credits
GST/HST Credit Emergency Payment
A one-time extra GST/HST Credit payment doubles the maximum annual credit amount for the 2019-2020 benefit year. Single Canadians receive up to an additional $443, couples up to $580, and families with children up to $153 per child. The payment is automatic for Canadians already receiving the regular GST/HST credit based on their 2018 tax return.
Retirement savings
RRIF Minimum Withdrawal Reduction
Required minimum withdrawals from Registered Retirement Income Funds are reduced by 25% for 2020, allowing seniors to avoid selling investments at pandemic-depressed prices. This mirrors a similar 25% reduction implemented during the 2008 financial crisis. A retiree who would normally be required to withdraw 5.28% of their RRIF value needs to withdraw only 3.96% in 2020.
Education
Canada Student Loan Payment Moratorium
All Canada Student Loan and Canada Apprentice Loan repayments and interest accumulation are paused from March 30 to September 30, 2020. The moratorium helps recent graduates who cannot find employment due to the pandemic. No interest accrues during the suspension period, which differs from a typical deferral arrangement.
Tax administration
Income Tax Deferral
The deadline for paying income tax balances owing for the 2019 and 2020 tax years is extended to September 1, 2020, without interest or penalties. Instalments due in June, July, and August 2020 are also deferred to September 1, 2020. Business income tax and GST/HST remittances are similarly deferred, allowing businesses to preserve cash during the initial months of the pandemic.
Winners and Losers
Who Benefits Most
- Workers who lost income to COVID (CERB)
- Employers retaining staff (CEWS wage subsidy)
- Small businesses (CEBA interest-free loan)
- Seniors with RRIFs (reduced withdrawal minimums)
Who Pays More
- CERB recipients (taxable benefit, many underprepared)
- All taxpayers long-term (extraordinary deficit spending)
What CPAs Are Saying
We asked Canadian CPAs to share their perspectives on the 2020 budget measures and how they're advising clients.
"We processed hundreds of CERB applications for clients and the delivery speed was remarkable. The CRA issued payments within days of application. The challenge was the tax liability — many low-income recipients spent the full $14,000 and were surprised by a $2,000+ tax bill in April 2021."
"CEBA was a lifeline for our small business clients. The $10,000 forgivable portion was essentially a grant if repaid by the deadline. The tax treatment — included in income in the year of forgiveness — was clear and manageable for most businesses."
"The RRIF minimum withdrawal reduction was quietly one of the most important measures for seniors. Markets dropped 30% in March 2020 and forcing 5% withdrawals would have crystallized massive losses. The 25% reduction gave retirees breathing room."
Year-End Tax Planning Checklist
Based on the 2020 budget measures, here's what to consider before December 31:
- Set aside tax on CERB and CEWS income received in 2020 — amounts are fully taxable and withholding was limited
- RRIF holders: confirm you've elected the reduced 25% minimum withdrawal amount before year-end distributions
- Ensure CEBA loan forgiveness amount is included in income in the year the loan is forgiven