The government programs for COVID-19 and their acronyms continue to evolve as we move through this pandemic.
Canada Emergency Bank Account
This is the $40,000 interest-free loan that many producers have been talking about. Repaying this loan by Dec. 31, 2022, will result in forgiveness of up to $10,000 of the loan.
It has continued to evolve. There is a list of criteria that must be met to qualify. However, the major change to the criteria is in regards to payroll and expense requirements. To qualify, you must meet one of the following criteria:
- Your payroll paid in 2019 was between $20,000 and $1,500,000.
- You have eligible non-deferrable expenses between $40,000 and $1,500,000.
Non-deferrable expenses include costs such as rent, property tax, utilities, insurance, and regularly scheduled debt payments. We expect non-deferrable farm expenses such as fertilizer, chemical and seed bills for the 2020 crop year to qualify.
If you are applying under the non-deferrable expense stream, the application is more complex. You will be required to submit supporting documentation of your 2020 eligible non-deferrable expenses to qualify.
There is uncertainty on the audit activity that will come from this program. Even if you have qualified under the payroll method, it is important you track the $40,000 of non-deferrable expenses the loan was used for and can provide documentation to the government if requested.
Temporary wage subsidy
This program provided a 10 percent wage subsidy (up to $1,375) for wages paid between March 18 and June 19. Any wages paid after that will no longer receive this subsidy.
If you are an eligible employer but did not reduce your wage remittances, you can still calculate the subsidy and ensure the Canadian Revenue Agency reimburses you the amount at the end of the year.
Canada Emergency Wage Subsidy
Generally, this program provides a 75 percent wage subsidy if revenues of your operation have dropped by 30 percent. This has been extended to Aug. 29. Continue to monitor this if you produce a crop that has been negatively affected by COVID-19, such as potatoes.
Here are other items you should consider:
- Discuss with your financial institution the current terms and interest rates on your debt.
- Have proper protocols in place with hired hands to meet legal requirements and to lower the risk of COVID-19 spread at your operation.
- Prepare for a COVID-19 spread at your farm in the middle of harvest. How do you ensure the crop is harvested on time in this scenario?
With harvest quickly approaching, it will be tougher to stay on top of these programs. Make sure you stay in touch with your adviser to discuss any changes.
Colin Miller would like to thank Riley Honess and Travis Dow of KPMG for their assistance with writing this article.
Colin Miller is a chartered accountant and partner with KPMG’s tax practice in Lethbridge. Contact: firstname.lastname@example.org.