2021 Federal Budget Summary
If you’re like us, you were anxiously awaiting the Federal Budget on April 19, 2021.
Or, perhaps, you lead a more interesting life. We can’t blame you.
We didn’t get a budget in 2020, so this is the first big financial rollout that we’ve had in two years. Leading up to the budget every year, finance and accounting nerds start whispering behind their hands about what will be in the budget. It’s like gossip, but for people with a calculator fetish.
Will they get rid of the principal residence exemption? (No, they did not.)
Will they roll out a universal basic income? (No, they did not.)
Will they increase the amount of a capital gain that is taxable? (It’s 50% and it stayed 50%, at least for this year.)
Salacious, we know.
Even if you don’t get fired up about government announcements or tax planning, the truth is that the Federal Budget, and the provincial budgets, impact you and the decisions you’re making about your life. These public policies impact you deeply, though you may not have clarity about it just yet, and may not feel the impact for a while.
It’s important to remember that a budget is actually a proposal. It’s a plan. It’s not legislation until it’s been accepted by the entire system. When you have a minority government in place, as we do currently, that budget better have components in it that make the other parties want to mark “YES” on their ballots.
As Dr. Robson, an economist, said on Twitter: This is actually two budgets. One is a budget to cope with uncertainty about the next six months now that Wave 3 is going so poorly in ON, AB, and elsewhere. Then there’s another budget that is about recovery, but a recovery that is greener and more equitably shared.
We liked her summary so much that we thought we’d use that as a structure to summarize some of this budget for you. We do say “some” because federal budgets are notoriously large and this one is no different. We definitely recommend that if you’re looking for something specific, or would like more detail, you check out the full budget – which also includes some great visuals! – right here.
Budget One: Coping with Uncertainty
Extend Support Programs
The Canada Emergency Wage Subsidy (CEWS) is being extended from June to September 2021. This provides employers with funding to cover some wages if the business has experienced revenue declines. Only declines of 10% or more will qualify for this benefit starting on July 4th, and the maximum weekly benefit will decrease from $857 to $226. Interestingly, any public corporation found to be paying its executives more in 2021 than in 2019 will repay the equivalent in wage subsidy amounts received after June 5, 2021.
The Canada Emergency Rent Subsidy & Lockdown Support provides a rental and mortgage subsidy to qualified organizations. The budget proposes extending this until September 25, 2021, with gradual decreases beginning July 4, 2021.
The Canada Emergency Business Account (CEBA) provided interest-free, partially forgivable loans; first of $40,000 and later increased to $60,000. If a business repays that loan by December 31, 2022, up to $20,000 will be forgiven. The application deadline is being extended to June 30, 2021. Access to the program is being improved through investments in the Community Futures Network and Indigenous Business Initiative.
Implement a New Support Program
The Canada Recovery Hiring Program (CHRP) is an incentive program designed to encourage businesses that are experiencing revenue declines to hire new staff. Again, the threshold is a 10% decrease in revenues, which would allow the business to benefit from a subsidy of up to 50% of wages for new hires. This subsidy decreases over time to 20% by the final period. Employers can apply for both CEWS and CHRP, but they’ll benefit from just one – whichever pays the highest amount.
Extend and Increase Access to EI & Related Benefits (CRB)
The waiting period for new claims started between January 31 and September 25, 2021 has been waived. The Canada Recovery Benefit (CRB) is being extended by 12 weeks to a total of 50 weeks. The first of those 12 weeks pay $500 per week, and the last 8 of those weeks pay $300.
The Canada Recovery Caregiving Benefit (CRCB) is being extended by an additional 4 weeks, to a maximum of 42 weeks, at $500 per week.
The budget proposes allowing for the potential extension of the CRB and associated benefits, including regular EI benefits, until no later than November 20, 2021.
There are also plans to make access to regular EI easier and EI sickness benefits longer.
Support for Seniors
Those pensioners who are at or over the age of 75 as of June 2022 will receive a one-time payment of $500 in August 2021. Legislation is also being introduced to increase regular OAS payments for those pensioners over age 75 by 10% on an ongoing basis as of July 2022. This is an increase of $766 annually to pensioners who qualify for the maximum amount in the first year, indexed for inflation.
Reduce the Burden of Student Debt
At the start of the pandemic, the government imposed a six-month moratorium on student loan repayments, and suspended interest accrual on those loans throughout 2021 and 2022. This waiver is now extended to March 31, 2023. Currently, those with incomes of $25,000 per year or less are not required to make payments on their loans. This budget proposes increasing that threshold to $40,000, and will index this amount to inflation. On top of that, the cap on monthly student loan payments will be reduced from 20% to 10%. They also plan to double Canada Student Grants, extend disability supports, and invest in several programs that will help students increase skills and land new jobs.
It’s worth noting that the 10% cap on monthly student loan payments puts Canada on par with the rules in the U.S., which is great. An enormous difference, however, is that in Canada, our government effectively pays the difference between the monthly minimum (that amount at the 10% cap) and the actual monthly amortized amount.
Increase Travel Safety
Investments in Transport Canada infrastructure, collaboration with international partners for touchless and secure air travel, sanitization, and enhanced screening.
Budget Two: Equitable, Green Recovery
National Early Learning and Child Care System
This is some of the biggest news to come out of this budget. We’re investing up to $30 billion over the next 5 years, and $8.3 billion ongoing into childcare. The commitment is to reduce parent fees by 50%, to an average of $10 per day for all regulated childcare spaces, as well as increasing the number of those spaces. If a child attends care 22 days out of each month, that means paying on average only $220 per month. Compare that to the current averages for toddler care (much higher for infants) in:
- Toronto: $1,578 per month
- Vancouver: $1,165 per month
- Smaller towns: $807 per month
As planners, we know that the crushing cost of childcare is a massive blow to many of the young families that are trying to get ahead. Add in the skyrocketing cost of housing and the disproportionate impact that COVID-19 has had on women (what many economists are calling a “she-cession”), and many people at this stage of life are struggling.
While this new system is very likely to have a long-term positive impact on families and our economy, we were disappointed to learn that this still likely leaves shift workers out in the cold. The direct investment is likely to help people with traditional Monday-to-Friday, 9-to-5 jobs, but those with late-shift retail, restaurant, and personal support worker jobs are still going to have a hard time finding licensed, reliable, and low-cost childcare. We’re still excited about the lower costs for traditional workers though!
Federal Minimum Wage of $15 Per Hour
The intention of this legislation is to bring all the provinces and territories who are not yet at the $15 per hour point up to it, without reducing the minimum wage for those jurisdictions where it’s higher.
Increase Access to Canada Workers Benefit
Currently, the Canada Workers Benefit provides a small tax refund to those who qualify. This budget raises the income threshold where the Canada Workers Benefit ends so that more low income earners have access to this benefit. They’re also allowing the “secondary earner” in the family to earn up to $14,000 annually before their income is considered in the testing for this benefit.
A New Disability Benefit
Over the next three years, the plan is to reform the eligibility process for federal disability programs, such as the Disability Tax Credit (DTC) and other benefits. There’s a small expansion to the DTC eligibility mental functions list that includes attention, concentration, perception of reality, regulation of behaviour and emotions, as well as verbal and non-verbal comprehension. This is said to increase eligibility for 45,000 more people across Canada, but we don’t yet have clarity on when.
A variety of mental health supports are proposed, including investments in national mental health service standards, specific projects for those disproportionately impacted by Covid-19, an online wellness portal, and a crisis hotline.
A great deal of investment is being directed towards Canadian businesses to increase adoption of and access to digital technology, support scientific and technical research, provide loans, help the aerospace sector recover, develop entrepreneurs from equity deserving groups (racialized Canadians, Black, youth, LGBTQ2, women), increase venture capital funding, increase clean technology exports, remove barriers to internal trade, lower the cost of credit card transaction fees, invest in trade-related infrastructure, modernize borders, support innovation and industrial transformation, invest in AI, photonics, genomics, satellites, quantum technology, and so much more.
Broadband for Everyone
On top of the $6.2 billion already available for universal broadband since 2015, this budget proposes an additional $1 billion over the next six years to improve internet connections for Canadians.
Climate Action Incentives
Chapter 5 of the budget is entirely dedicated to the environment, from adding money to the Net Zero Accelerator, providing capital to support large-scale clean technology projects, significantly reduce corporate income tax rates for businesses that manufacture zero-emission technologies, creating a “Critical Battery Minerals Centre of Excellence” and funding battery research and development, improving charging and fueling stations for zero-emission vehicles, converting federal buildings to clean electricity by 2022, reducing transportation and landfill emissions, investing in “forest based bio-economy”, publishing a green bond framework, and much more. There’s also interest-free loans for homeowners of up to $40,000 for complete deep-home retrofits that reduce the home’s environmental footprint and energy bills.
There’s funding to the CMHC to create new housing for vulnerable Canadians, affordable housing, and direct financial assistance for low-income women and children fleeing violence. Additions to previously announced funding will go to the National Housing Co-Investment Fund for the creation of new housing units, as well as the construction, repair, and operating costs of transitional housing and shelter for women and children fleeing violence. There’s additional funding from the Rental Construction Financing Initiative, which will convert vacant property into housing, funding for Canada’s Homelessness Strategy, and housing for veterans.
As we said, there’s a lot more in this budget to sift through, and there may be areas that are specific interest to you that we didn’t cover. It’s worth having a bit of breeze through the whole thing, to find the items that mean the most to you.