Canada’s COVID-19 Economic Response Plan with Guy Anderson | E010
A review of government programs to aid business and individuals.
Summary:
In this episode of Financial Planning for Canadian Business Owners, Jason Pereira, award-winning financial planner, university lecturer, writer, talks with Guy Anderson, Full-Licensed Investment and Financial Planner with Aligned Capital about Canada’s response plan to the COVID-19 coronavirus pandemic.
Episode Highlights:
● 01:24 – Guy Anderson introduces himself and what he does
● 01:50 – They go over the first category of benefits for businesses: avoiding layoffs and rehiring employees.
● 05:05 – What is involved in the ‘extending the workshare program’?
● 06:09 – The temporary changes to the Canada Summer Jobs Program
● 07:04 – Reduced and Deferred Payments refers to income taxes and sales remittances.
● 07:34 – Jason Pereira explains the Business Credit Availability Program and the Canada Emergency Business Account.
● 09:58 – Many business owners don’t qualify for some subsidy programs because pay themselves in dividends.
● 10:34 – The Launching an Insured Mortgage Purchase Program is up to $150 billion dollars.
● 11:46 – The Bank of Canada is creating some liquidity in the housing market.
● 13:55 – The Office of the Superintendent of Financial Institutions has lowered the domestic stability buffer by a point and a quarter.
● 16:27 – Jason goes over the tax deferrals for the self-employed and industries that were hit hard by the coronavirus pandemic.
● 18:22 – Industries that have been set back by COVID-19 include airports, agriculture, food distribution, job placement and recruiting, and the film Industry.
● 19:39 – The government has planned support for individuals and families, including the increase to the Canada Child Benefit.
● 22:32 – Jason and Guy discuss mortgage support.
● 24:50 – The Indigenous Community Support Fund is of $305 million.
● 26:40 – What is the Reaching Home Initiative, and the support for living shelters?
● 28:13 – What types of support is being provided for mental health and for seniors?
● 33:07 – What programs are assisting students and recent graduates?
● 34:38 – Every province in Canada has their own support nuances.
● 35:38 – Kind.Wealth.ca has organized pro-bono initiative of independent financial planners who are offering their services for free to people in need.
● 36:38 – Cato
3 Key Points
1. The government will cover up to 75% of wages for up to 12 weeks, up to a threshold of up to around $58,000.
2. The Canadian government has extended the tax filing deadline and the tax payment deadlines can be deferred until August 31st.
3. The Bank of Canada has dropped interest rates to about 25 basis points.
Tweetable Quotes:
● “The amounts that they are covering, the 15%, that seems fair because for the period that they are talking about. Most businesses probably didn’t see the drop off right away. So, 15% seems fair.” – Guy Anderson
● “Anyone that hires a student under the Canada Summer Jobs Program will basically receive 100% of the minimum wage in the province they are in, covered. So, I got to tell you, I’m very much looking forward to hiring an army of students.” – Jason Pereira
● (Canada Emergency Business Account) “It is a line of credit of $40,000 for basically an interest-free line of credit. This one is very interesting. It is interest-free for the first year.” – Jason Pereira
Resources Mentioned:
● Facebook – Jason Pereira’s Facebook
● LinkedIn – Jason Pereira’s LinkedIn
● FintechImpact.co – Website for Fintech Impact
● jasonpereira.ca – J. Pereira’s Website
● Linkedin – Guy Anderson’s Linkedin
● KindWealth.ca – Website for Kind Wealth - Pro-Bono COVID-19 services.
Full Transcript:
Speaker 1: Welcome to the Financial Planning for Canadian Business Owners Podcast. You will hear about industry insights with award-winning financial planner and entrepreneur Jason Pereira. Through the interviews with different experts with their stories and advice you will learn how you can navigate the challenges of being an entrepreneur, plan for success and make the most of your business and life. And now your host, Jason Pereira.
Jason Pereira: Hello and welcome to Financial Planning for Canadian Business Owners. I'm your host, Jason Pereira. Today I show a little something different. As you all know right now we are all suffering through the entire COVID crisis around the world and as such economies around the world and governments around the world that have been impacted, and the governments have come together depending on what country you're in to put up together economic relief packages. Canada is no different and there's been a pretty extensive one put in place, and this is an episode that is dedicated to helping you understand at least the top line of what all of these programs are. Now, instead of listening to me talk the entire time, I decided to invite a colleague of mine and friend, Guy Anderson, on to the show to help guide us through the conversation. Guy, thanks for joining us.
Guy Anderson: Happy to be here, Jason.
Jason Pereira: Thanks. So let's get started because there's a lot to cover and actually before we do that, one second, just tell everybody who it is you are and what it is you do and then we'll jump in.
Guy Anderson: Yeah, great. As you mentioned, we've known each other a long time. I'm part of the FPAC group that you founded. I'm also a fully licensed investment advisor and financial planner with Aligned Capital. I operate primarily out of Toronto, Canada, but licensed across the country and I guess I do pretty much exactly what you do. Full financial planning and investment advice.
Jason Pereira: Yep. Excellent. So, well, let's get started on what the government has done to help everybody in this very trying time. So we'll start off with businesses and the first category is avoiding layoffs and hiring [inaudible 00:01:54]. The first category of benefits has to do with avoiding layoffs and rehiring employees. So let's get started, Guy. I'll let you take the reins.
Guy Anderson: Right. Okay. So as you mentioned, there are three categories that the government has implemented in their economic response plan, and in the business category, the first one is the Canada Emergency Wage Subsidy, which will cover a portion of the employer's cost. Can you explain that a little bit deeper?
Jason Pereira: Yeah. So this is the big one. This is one where they will cover up to 75% of wages for up to 12 weeks up to a threshold of around $58,000. They may even cover more than that, but there's been a lot of back and forth and change in this program. It's kind of everything's evolving day by day, but essentially it's the maximum benefit of the lesser of 847 per week per employee, or 75% of their pre-crisis remuneration.
Jason Pereira: And the way you qualify for this is that it's a month by month benefit. So between March 15th and April 11th if you saw a reduction in revenue of 15% as compared to the average of January or February, or March of the previous, then you qualify. After that, for the next two months it's a 30% drop. So I don't know how you feel about this one, Guy. I'm glad they improved it, but I feel like they really dropped the ball on some of this stuff.
Guy Anderson: Yeah, they've tweaked this one a few times, have they not? And it is probably one of the more confusing ones to understand. But at the end of the day, I see what they're trying to do here. They're chosen the 58,000 because that's the yearly maximum [inaudible 00:03:25] amounts. So 847 this is the weekly amount. So they're really just doing 75% of the YMPE. Then the, yeah, the amounts that they're covering, the 15%, that seems fair because for the period that they're talking about most businesses probably didn't see that drop off right away. So 15% seems fair, although it's probably a little bit arbitrary and then 30% April in and May, that's probably when most employers are going to see the biggest drop. But I do think that they could have done it better. I'm just not sure myself how I would've done it.
Jason Pereira: Yeah. I think here's the issue, right? And it's already been changed once, simply because a lot of companies ... If you are in a company in rapid growth phase 15% to the previous year, which was the original comparison, if you're in rapid growth 15% versus the previous year, maybe you doubled your business in a year, right? That leaves you out in the cold, and this entire ... Okay, so they've adjusted it downward the 15% for the first period, but now it's a 30% drop for the second period? What if you're 29"? What if you're 27 right? There's companies out there that need real help that could be left out in the cold by this and that's the challenge.
Jason Pereira: And I think that they're very concerned about not giving money to companies who don't deserve it, and I kind of get it, but at the same time, given the situation we're in right now my belief was give it to everybody and claw it back if profits actually increase or some other metric. But right now worry about keeping people in jobs.
Guy Anderson: No, you raise a good point there. That might be a better approach doing the claw back, and that's what I was getting at when I was saying that I don't know how I would have done it better because the numbers 15 and 30% reduction in income, it does seem a little arbitrary. [crosstalk 00:04:58].
Jason Pereira: You got to draw a line somewhere, but I mean the problem is that how many companies suffer because of it? But let's move on from there. Let's move on to the next program.
Guy Anderson: Sure. So the next one, the extending the workshop program.
Jason Pereira: Yeah. So this is a program that already existed whereby if you don't have enough work to go around for all the employees you have you could basically have multiple employees share one, or three people share two jobs by reducing their hours and there would be a benefit to keeping them employed. So there was a maximum of that of 36 weeks. It's been extended to 76 and part of that is just in light of the fact that what if you were already in week 37? Suddenly that wasn't going to be an option for you and then in addition to that, it's going to take a while to ramp up a production after this is all over. So I think this one was relatively well thought out, so I'm okay with that.
Guy Anderson: Yeah. Again, I don't have any big complaints about this one. I think the government has actually responded fairly well across most mandates here. And to be honest, I'm not sure what the pickup on this was in the general before the COVID calamity.
Jason Pereira: Yeah, I don't know. We don't have stats on that, but that was a well thought out extension. I would say that much. It was [crosstalk 00:06:03].
Guy Anderson: Yeah, no, I agree with this one for sure. Right, it keeps people employed even though they're not fully employed and keeps them employed longer. I agree.
Jason Pereira: Exactly, exactly.
Guy Anderson: On to the Temporary Changes to Canada Summer Jobs program. Oh, this one's pretty interesting, hey?
Jason Pereira: I like this one. This is going to pay anyone who hires a student under the Canada Summer Jobs Program will basically receive 100% of the minimum wage and in the province they're in covered. So I've got to tell you, I am very much looking forward to hiring an army of students. I joke because I don't know how many students I can hire into this program, but for lack of better term, it is free labor or at least highly subsidized labor. So I encourage anyone who has work for students to take a really good look at that.
Guy Anderson: I don't know if all the details are worked out on this one either, but it does say that you get 100% of the provincial and territorial minimum wage for each employee. So if you do hire an army it sounds very much like you do would get coverage for each one you do hire.
Jason Pereira: Yeah, I think they haven't had it tested where someone tries to replace their entire staff with it, but we'll see what happens.
Guy Anderson: Exactly. So there's the risk in that, right?
Jason Pereira: Yep. Okay. Moving on.
Guy Anderson: So reduced and deferred payments. I guess that refers to income taxes and sales, remittances, et cetera.
Jason Pereira: Yeah, basically. So they've extended the tax filing deadline and the tax payment deadline. So basically the bottom line on this is if you owe tax to the government corporately you're going to be able to defer that until August 31st, because at this point we all know people need to hold on the cash as long as possible to keep their businesses going. [crosstalk 00:07:28]
Guy Anderson: [inaudible 00:07:29].
Jason Pereira: Yeah, sales tax is a little bit different. HST's a little bit different. So you're able to defer until June 30th in that regard.
Guy Anderson: And access to credit. So a lot of companies may need some money just to keep afloat. Can you speak to the candidate emergency business account or the establishing of the line of credit?
Jason Pereira: Yeah, so there's two. The Business Credit Availability program is one where they've basically provided $40 billion for distribution through Business Development Canada, Export Development Canada, and I think from Development Canada as well. And the way this is done is you apply through those intermediaries, you get underwritten if it's less than $100,000 it's a faster application typically off their website. Anything more, it's a full underwrite. They are really backlogged right now. I can tell you that people applied three weeks ago and I've yet to hear back other than, "Just the wait, we're working on it." And really the terms of this loan are pretty straight forward. It's I believe at 3.3% interest rate with interest-only for the first year and then interest plus principal for the next two years. So I've told many businesses that you know what? Especially given the backlog, if you think you might need it, just apply as soon as possible and worst-case scenario, even personally my business doesn't need it right now, thank God, but I would rather have 100,000 extra sitting in the bank account at a time like this and paying 3.3 interest than not. So I'll take advantage of that one.
Guy Anderson: Then the Canada Emergency Business Account Business Account. Tell us-
Jason Pereira: Yeah, Canada Emergency Business Account, this is interesting. I just apply for it this morning. So you can apply for this through your normal bank, typically online. It is a line of credit of 40,000 for basically a interest-free line of credit, and this one's very interesting because it's interest-free for the first year and then after that, you basically have to start paying interest on first the accrued amount and then any money going forward. After the first year, what happens is that it turns into a five year loan at five percent. The one interest in catch to this is that if you only borrow 10,000 or borrow the entire amount and payback at least 30,000, they will forgive $10,000 on this. So if you qualify you might want to take this because it's potentially $10,000 of subsidy for you for free.
Jason Pereira: Now, to qualify for it, you do have to have a business that has T4 income and you have to have payroll between 50,000 to a million dollars. Unfortunately, I know that's left out some people who have lower income, and one of the things that was unfortunate about many of these programs is if you're an entrepreneur who's taking dividends instead of income, yeah, you fail the test for a lot of these programs, including the wage subsidy. So yeah, some of these things need to be better thought out quite honestly. But that is-
Guy Anderson: [crosstalk 00:09:56].
Jason Pereira: Sorry?
Guy Anderson: I was just going to raise that. Yeah, there's a lot of business owners that I've worked with in the past that have chosen just to pay themselves dividends for whatever reason, and because they're not getting T4 income, they won't qualify for this. So that's a part of this I think that wasn't thought through very clearly either.
Jason Pereira: And I'll say this much, for those of you who want to know what's the better option there was an episode I did previously with Kim Moody where we went out over the basics of Canadian Taxation and talked about income versus dividends specifically, and the misconception that it ends up paying less tax with dividends. It's not the case. So choose wisely and this is unfortunately those cases where if you chose a certain way it's not working in your favor. So moving on, let's get to the next level.
Guy Anderson: So this one that I have on the list is Launching an Insured Mortgage Purchase Program. I see it's up to $150 billion. Can you expand on that?
Jason Pereira: Yeah, so basically Canada, they were concerned about this causing a 2008-like crisis and the housing sector in Canada, especially given our massively inflated prices and the fact that CMHC insurance basically covers 100% of the downside. So they put together this mortgage program to buy some of the riskier mortgages that was on the CMHC's books. That's 150 billion. So there will be no housing liquidity crisis because of this, hopefully. And that's what that was incentive for.
Guy Anderson: Right, so other than the fact that we've got a million people unemployed and the housing industry will likely see a slow down just based on fewer people being able to afford properties, but it doesn't look like there's going to be a liquidity issue otherwise.
Jason Pereira: Yeah, exactly. They-
Guy Anderson: [inaudible 00:11:24], right?
Jason Pereira: If you think it was a series of dominoes, right? You think about people's income, their ability to pay their mortgage, the insured level of the mortgage versus not, and then the amount of foreclosures that would happen in order to push the prices lower. Then there's the domino effect that happens has on valuations and then debt. They did what they could to stop the dominoes from falling early on to prevent them from falling later.
Guy Anderson: Fair enough. And the Bank of Canada, moving on to this one, the Bank of Canada has actually taken on quite a bit of activity here too to create some liquidity in the market too. Can you speak to some of the things that the Bank of Canada has done?
Jason Pereira: Yeah, so the big one everybody knows about it is they've dropped interest rates to fit to about 25 basis points right now. The US has actually done between 25 basis points and zero and we'll peg them there as long as we need to. So that's the first thing is making money cheap to reduce everybody's burden on debt. Then the second piece is they're providing liquidity support for financial institutions meaning that if there's short term shortfalls of cash, they will pump money into the market in order to make sure that there's solvency and efficient markets, which was one of the problems we saw in 2008 where liquidity dried up.
Jason Pereira: So yeah, so those are the actions to date, there could be more. One other thing, unfortunately, to mention to people is that despite the fact interest rates have come down to this level, do not expect it to be paying your bank 25 basis points on a mortgage. In fact, if anything, the banks have not fully passed along all of the interest rate cuts. They've passed along a lot of it and I'll give him credit for that, but they haven't passed along all of it. And in fact, after one cut rates actually at a five year went higher, believe it or not. So another reason to love your bank.
Guy Anderson: Yeah. How do you feel about that? Because when others pricing these things out months ago, some of the mortgages were offered at prime minus and now even if the priced a prime or whatever it might be prime plus now. So even though I'll come down the rates have come down the rates that clients are actually able to get are relatively the same or maybe even more expensive than there were [inaudible 00:13:11].
Jason Pereira: I got one better for you. I got my mortgage that I took out over almost four years ago now. I'm paying a rate that is almost the same as the current five-year. So-
Guy Anderson: The rates are substantially lower now than they were when you took it out, right?
Jason Pereira: [inaudible 00:13:25], yeah. So there's two parts to this, right? There's the posted rate, which is the base number, and then there's what kind of discount they're going to give you off of that. They're less likely to pass on the discounts right now. And I guess, right? In fairness, it's a solvency issue for them, right? They want to make sure that they're going to survive this as much as anyone else and unfortunately, if you're renewing right now, that's not the greatest deal for you. That being said, I do believe that once we get out of this there will be a period where the rates will still be low enough for people to take advantage of it. So it is what it is. We just have to weather the storm right now.
Guy Anderson: Fair. Now speaking of banks though, I think the office of the superintendent of financial institutions, they also reduce the capital ratios or lowered the domestic stability buffer by a point and a quarter, right?
Jason Pereira: Yeah.
Guy Anderson: Can you speak to what that means?
Jason Pereira: So that's a bit of a intricate issue. So basically what it comes down to is that all financial institutions have to keep a certain amount of cash reserve and a certain amount of assets. They're given a certain amount of risk that they're able to take based on total assets. What they've done here is they've allowed them to loosen up on these restrictions, which then frees up the banks too to increase their lendable capital by 300 billion. So what they've done is made it easier for banks to lend up to $300 billion more to business.
Guy Anderson: Yeah, I think that's pretty amazing as well. Did you want to move on to industry now? Because there are some implications to specific industries. Do you want to talk about that now?
Jason Pereira: Let's talk about self-employed first and then we'll move on to industry.
Guy Anderson: Okay. So for self-employed individuals, the Canada Emergency Response Benefit, the CERB, this is a big one as well. Can you speak to that one? A bit of how it would apply to most self-employed people I guess? The gig economy [inaudible 00:15:04].
Jason Pereira: The gig economy. Well, I mean here's the thing. So this was meant to help Canadians, period. Right? And it was meant specifically to help people who are going to be mass filing for EI. So instead of the EI benefit, what you'll receive is a $2,000 per month benefit for up to four months. This one everybody knows about, but one of the things that everybody was frightened of is with the change in employment dynamics in the last 10 15 years a lot more people are self-employed practitioners. They're not necessarily incorporated. They don't necessarily pay EI. So they wouldn't have EI benefits, wouldn't be covered by it. So they would fall through the cracks unless something was done.
Jason Pereira: So the CERB basically is all-encompassing and bottom line is if you can't work because of COVID, and they've kind of defined that out and you are a gig economy worker, like an Uber driver or whatever it is, then you will qualify for this and have applications for this started the week of the sixth and you can apply for this my account portal, the CRA, it is very, very simple from what I've seen thus far.
Guy Anderson: This is the one that they spread out over the course of a week. Where if your birthday was in the first three months of the year, is that the one?
Jason Pereira: Yeah, so basically what happened was in the first week and to prevent the entire system from crashing from every out of work Canadian logging in simultaneously they basically spread out the application period so that it was a quarter of the year for the first four days, and then as of the 10th, as of Easter, you will be able to log on at any time regardless of birthday to apply for it.
Guy Anderson: And similarly for the self-employed, they've also introduced some deferral of tax remittances and more time to pay your taxes. Can you expand on those two?
Jason Pereira: Yeah, same basic rules. I mean HST is going to be pushed back to June and essentially you can hold off on paying your income tax. Again, right now, making sure he has enough cash in the bank to pay their rent and their food is more important.
Guy Anderson: So in line with the businesses, there are some specific benefits that the government is introducing for specific industries that are particularly hard hit. I see some for agriculture, for airports, and for broadcasters. Just can you speak to these, Jason?
Jason Pereira: Yeah, so the first one, agriculture, fisheries, and aquaculture. These are labor-intensive industries and many of them also rely on migrant work in many cases. These are with closed borders and with people not being able to work because they're staying at home and in isolation, these are not businesses that we can work remotely. And because of that, they're going to take a disproportion and hit to their bottom line but they're also vitally important to the food security of the country. So $5 billion has been put together for additional lending to these industries and they'll hopefully be able to recoup from it.
Jason Pereira: Airports, it's no surprise that airports are getting just beat right now given the fact that they're at the frontline of this and no one's flying anywhere right now. So essentially, they are waiving the leases that the airports pay to the government right now and therefore allowing them to essentially be rent-free for a while in order to shore them up.
Jason Pereira: And the last one's broadcasters. And at first, I shrugged my shoulders about this one, but it makes perfect sense. When companies start cutting back, one of the first things that goes is advertising. It's great, you know, it drives in business but it's not core to just turning the lights on. So because of that, I have no doubt that there's been a cutback in advertising dollars spent in the last couple of weeks. So what's happened is the CRTC is basically requested ... It's not going to request licensing fee payments for the next little for a while. For 2020 to 2021 in order to allow awesome some shoring up cash. Now, I personally do not know how much that is, but it's something to help.
Guy Anderson: It's hard to imagine airports and agriculture, any other industries being worse hit. So it's pretty-
Jason Pereira: Oh, I've got clients with some interesting ones. I got one in food distribution. They'll tell you, the other one's job placement. Anyone who's in a recruiting or headhunting capacity right now-
Guy Anderson: Yeah, they would've evaporated, hey?
Jason Pereira: Zero work but even basic paramedical services. A chiropractor can't work right now unless it's absolutely medically necessary.
Guy Anderson: And the film industry has been decimated. There's absolutely nothing going on, right?
Jason Pereira: No, I quietly know about a couple of soon to be bankruptcy's based on that, unfortunately. It's interesting too because that industry's already been the benefactor of tons of government funding because of the multiplication effects, right? You decide to fund one movie and the crews, the carpentry, the catering, everything in the area just benefits from it. So it's got a real multiplier effect. But yeah, I think there might be some pushback towards throwing more money in an industry that's already getting so much money in the first place.
Guy Anderson: Well, it does employ a lot of people and it generates a lot of GDP.
Jason Pereira: Yeah, it's not so much the people that I think will be in trouble. It's there are some suppliers and some service providers out there that are smaller. Production, post-production, whatever, might be that basically are just not as capital ready for something like this and I think that's going to be [inaudible 00:19:38].
Guy Anderson: Okay, so the government's also introduced a bunch of plans, support for individuals and families. And the first one that comes to mind is the increase to the Canada Child Benefit. That's pretty impressive and it's pretty easy to take part in this, isn't it?
Jason Pereira: Yeah, I mean if you have kids you're probably already taking part of it in the first place. So they're providing an extra $300 per child for the current year, and this will mean approximately $550 more for the average family. Now, there's an archaic formula as to how this works that I don't even fully understand, but there's a calculator online somewhere. In fact, if you want to look at what you can qualify for amongst various benefits, a friend and colleague, Preet Banerjee, on his website has put together a calculator to help you figure that out.
Jason Pereira: But the Canada Child Benefit, the amount you'd get depends on a couple of things. It depends on household income in the previous year and it also depends on your number of children. So the more you make, the less you get, the more kids you have, the more you get but there's a entire forum behind that. But yeah, that's going to help a lot of people.
Guy Anderson: Right. And individuals are also getting a break on the goods and services tax as well, right?
Jason Pereira: Yeah. So if you qualify for GST, for the rebate, the rebate's gone up. So it'll be an average additional benefit of 400 for an individual and 600 for a couple. So one of the things, just because, here's a pro tip for you. Just because you do not qualify for or you're allowed to pay your taxes later, doesn't mean you should file them later. I would say file them now. First off your counsel will thank you because they could probably use the work right now because a bunch of people think they don't have to file right now. But if you qualify for the GST credit or if you're going to start qualifying for Canada Child Benefit, or if you're expecting a refund that's all money waiting for you and you have nothing to lose by filing early, especially because you don't have to pay until August. So I would suggest everybody get on that as soon as possible.
Guy Anderson: Yeah, that's actually a good point because a lot of this, especially on the individual side, is tied to whether you filed your taxes. So if you haven't filed even last year, you may not qualify for these things, right?
Jason Pereira: Well, you do qualify, but you won't be getting them, right?
Guy Anderson: But you won't be getting them, pardon me. Yeah.
Jason Pereira: So in [crosstalk 00:21:35] is they put in a provision for extra time to file your income tax returns. I actually wish that they hadn't done this. I actually wish that they had still said instead of August 31st, which was a new deadline, June 1st which is the new deadline. I really wish they had pushed it back a week or two at most because frankly, you can basically ... The amount owing is not going till August, but there's a lot of data that has to be processed for some of these benefits. So everybody should hopefully file as soon as possible. I know I'm waiting on a refund.
Guy Anderson: All right. Well, that's just good advice. Hopefully, most people don't extend any longer than they have to. I guess some people who still rely on physically meeting with their tax preparer though, the fact that they can't take their shoebox to their accountant and get their taxes prepared I think that's the main benefit that this would provide the ones that-
Jason Pereira: Well, if you're an individual that's a very simple option for that. It's called simple tax and it's free so there's no excuse. Bottom line is if you've got access to a computer, you can file all your taxes very quickly.
Guy Anderson: Fair enough. Yep. Okay, so we've spoken to the extra time, now, mortgage support. Now, this is one that's getting a lot of interest because the, well, [inaudible 00:22:38] just talk about mortgage support that the government's introduced.
Jason Pereira: Yeah, this is one of the bigger provisions and I think it's actually a smarter one. They've cut a deal with the banks. The banks are going to allow deferral of up to six months on people's mortgages. Now, this is a "Case by case basis." And I have seen a lot of chatter online about very inconsistent feedback. I've seen people with very high incomes qualify for this. I've seen people with moderate incomes qualify for this or not qualified for this because they were told to clean out their RESP first. So I don't know that everybody knows exactly what the rules are here. I don't know if the banks aren't coming up with different rules themselves or if they're not changing on a regular basis, but here's what it comes down to. You have the option to defer, if approved your mortgage payments up to six months, and the benefit to that, of course, simply being that your cash flow needs are reduced for that six month period, thereby reducing the amount the government needs to support you right now.
Jason Pereira: However, you do two things to be aware of, one, it's not a break because that interest is still accruing. So it's just going to get tacked onto the end. So you're not actually saving any money, you're just basically pushing off the payment. The other piece is that there's still some question as to whether or not this is going to really hurt your credit rating or not. And even if they say, "No, we don't want that to happen." A lot of this reporting [inaudible 00:23:47] happen to credit agencies happens automatically. So there may not be a way to stop it anytime soon. So basically do your homework, get it in writing. If you can get confirmation, that it's not going to hurt your credit rating, but do your homework, make the application if you feel you need to, but it's there if you need it.
Guy Anderson: So that one's massive, right? The credit issue. I mean, just taking advantage of the six month deferral could help with your current cash flow issues. But yeah, if it's going to affect your credit rating, I mean, invariably your ability to access cheaper credit going forward for the next seven years would be affected. So that's a big question mark that's overhanging this. I agree with you.
Jason Pereira: Yeah. I'm having a hard time believing that that, even if it did happen initially, wouldn't be given a carte blanche later. I mean, just the political risk and not fixing that is enormous. So hopefully, they get around to actually making sure that there's a public announcement that, "No, no, no, this is a one-off exception and then that's the end of it." So we'll see.
Guy Anderson: Yeah, I'd imagine that there'd be some sort of mandate come down to the rating agencies that they'd have to clean that up and expunge it from people's records or whatever, but I agree.
Jason Pereira: [inaudible 00:24:50].
Guy Anderson: And the government's actually provided some support to indigenous peoples as well starting with the Indigenous Community Support Fund of $305 million. [crosstalk 00:24:59], Jason?
Jason Pereira: Yeah. I mean, these communities already face a lot of economic challenges. So another $305 million has been basically put out to help these communities in particular. Specifically around issues like supporting elders because they do have an aging population, addressing food insecurity, education support. So things that they were already having a difficult time in. So yeah, so they've done a lot to support at-risk communities.
Guy Anderson: Right, and they've also done one that they've labeled here the Supporting Preparedness in First Nations in Inuit Communities.
Jason Pereira: Yeah. This is-
Guy Anderson: That one's up to $100?
Jason Pereira: Yeah, So I mean, think about this. I mean, if you're one of these communities out in the middle of, pardon the term, in the middle of nowhere, and you get even one case, you're already facing limited access to healthcare in the first place. It could devastate a community very, very quickly. So if anything, these very, I mean, frankly the hardest to reach communities in Canada are typically indigenous communities. And if we don't throw a bunch of money at the problem than a bunch of bodies, it could get pretty ugly pretty quick. So this was $100 million earmarked to make sure that this does not cause a devastation in these communities.
Guy Anderson: So moving onto one [inaudible 00:26:07] categories, supporting people who need it most. Improving access to essential food support.
Jason Pereira: Yep. So, and I think I saw some in the news about the other day. A lot of the community associations that help take care of food insecurity are going to be stretched to the limit right now. So they're providing an extra $100 million for national, regional, and local organizations like the Salvation Army, Second Harvest, Food Banks of Canada, whatever it might be who already feed people who are food insecure to basically help them buy more food because otherwise their inventory is going to run out pretty quick.
Guy Anderson: Right. So they've also introduced one that they're Enhancing the Home Initiative. What's that one about?
Jason Pereira: Yeah, so we all know the concepts of meals on wheels. So this is about providing food to people who have food insecurity who basically can't leave, right? So we have to be able to get them a nourishment, otherwise they're going to starve in their own house and that's something we can't have. Now, in addition to that, it's not just them there's also accommodations for shelters. People who are without a home, right? These shelters don't exactly have a ton of room for social distancing. So we have to address that issue as well.
Guy Anderson: Yeah, I think that's a big one, right? People who use the shelter system, like you said, there's a very little ability to shelter or sorry, socially distance one another so there's definitely a lot of support needed there. And there's also support for women's shelters and youth. Can you speak about those?
Jason Pereira: Yeah, and this is one of the ones that are ... Kind of frightening one is that, well, what women's shelters, I mean, we don't want to see people who are in a bad position forced to stay home due to social distancing and the protocols, right? So this is all about making sure that people who, again, are in a vulnerable situation, that the organizations that support them are going to be funded to deal with this. Especially because frankly, I would think that if you're in a bad situation, being locked up with that person 24/7 in a house, not able to leave ain't going to make that any better. So yeah, I think it's very important that we support those people when they need to leave.
Guy Anderson: Yeah. And that's one of the things that's not just Canada, but I saw the United Nations indicated that that's one of their main concerns too, is about domestic abuse and et cetera. So it's really good that they're supporting there too. And what about mental health support for youth? $7.5 million dollars funded there.
Jason Pereira: Yeah. For Kids Help Phone and they've been on the news talking about the massive influx they've had as well, and it's one of those things wants to break your heart and one of the things that came up, which was just ..., I mean, we're seeing and unfortunately the bad side of humanity comes out in this stuff too, but the number one way child abuse is detected in Canada is typically through teachers. And if these kids are out of school for prolonged periods of time in high-stress situations their potential discovery of that issue just kind of goes away. So doing what we can when these kids do reach out is vitally important and they recognize that.
Guy Anderson: Right. Plus the pandemic can be pretty stressful for kids just in general, right? So the fact that they have somewhere to turn to if they don't have someone at home to support them then I think that's a great initiative. And I think-
Jason Pereira: Even my five year old talks about not doing stuff because of the Coronavirus, right? So it's having impact on everybody.
Guy Anderson: Yeah, absolutely. There's no one that's unaffected by this, for sure. So we spoke about individuals and we've spoken about indigenous peoples, et cetera. There are some supports here for seniors as well. The one that I think that most people focus in on is the reduced minimum withdrawals from your RIF. 25% that people can reduce their RIF withdrawals within for 2020. Can you speak to that?
Jason Pereira: Yeah. So I mean, anyone who's got a RSP that's converted to a RIF, which has to be done no later than the year in which you turn 71. You're now forced to take money out of the RIF according to a government schedule. And the concern there was that, "Well, wait a sec. The market crashed when this happened." So now you were asking people to take money out of their RIFs when they were basically facing 30% down-markets. Now, I think more is made of this that needs to be. I mean, first of all, we've been lucky enough to have a pretty decent rebound thus far. So the cut is not as deep as it used to be. Then the other piece is that, hopefully, and you can't count on this, but hopefully anyone who's in their senior years was invested more conservatively and not just a 100% stock, right?
Jason Pereira: So I'm glad they did this, because you can't account for everybody doing the right thing with their portfolio, but the way this works is just whatever the government said you were going to have to take, 25% less and what we've done with this is when we talk to clients, we've talked about their cash positions and they don't need cash then we've just turned off the RIF for now and those payments and will basically be restarted at some point in their future. Or if you don't do anything, they'll make sure the minimum gets paid automatically at the end of the year. So if you need the cash continue to take it. If you don't need the cash and then you know what"? Hold off. Take advantage of the 25% reduction.
Guy Anderson: Right. You raise a good point too, like if someone was invested, let's say inappropriately but they had more equity in there in the RIF they showed up and they were down 30%, and they were forced to take that withdrawal, it's pretty hard to recoup that amount back in your RIF once you've made that withdrawal. I mean, the numbers are, they just work against you. So that means that your RIF would ultimately deplete far faster than the need be, right?
Jason Pereira: Yeah, and here's the plug for getting the proper financial advice. The reality is that if you're in retirement and you're in a RIF, and you have money coming out according to government schedule, which is around five percent or more that goes up over time, being 100% ... And this is your primary source of income. If you were highly exposed to stocks, that is a terrible decision. Now that said, it might be necessary to try to seek a higher rate of return in order to get to your goals, but you should not be in a position where when the markets were down 30% you were down 30%. That is not paying attention to risk tolerance. So yeah, so for the large part, hopefully the market's rebounding have minimized the need for this sort of thing.
Guy Anderson: Right. So there's a couple of other smaller items that they had under the support for seniors. They have a supporting and delivery system through The United Way. What's that one about?
Jason Pereira: Yeah, additional services that seniors need, right? So maybe they weren't set up on meals on wheels. Maybe they need medications delivered. These are the people at most risk right now, right? I take great comfort in knowing that my grandfather is in a retirement home that's been quarantined since the day he got there. Right? And that knowing that there's been no positive tests and frankly, these are the people that need to be put us far away from this thing as possible because they're the ones who are suffering the greatest degree of death.
Jason Pereira: So what this is doing is preventing them from having to leave, from having to go outside and getting them the basic essentials of daily life. That was something that, you know we would take for granted, but maybe they would just walking on the street to the pharmacy. That's something that doing that now is taking their lives into their hands.
Guy Anderson: And how does that play into or compliment the New Horizons Program? That's the other initiative they have for seniors.
Jason Pereira: Yeah. So I'm not really familiar with the New Horizons Program too much. It's apparently a community- based program that helps provide essential services. So I think this is trying to fill in the gaps for things that people that hadn't organized already. So it goes back to the essentials of food and medication. Essential services such as doctor's visits. Basically getting volunteers to help them with basic medical care. All it really is they're just slapping a name on a program that's basically there to meet basic needs of those seniors and the support they've given us largely going in that direction already.
Guy Anderson: So the last group I think that we haven't covered yet is students and recent graduates. They've also introduced some plans to support students. Can you speak to the Loan Deferral Program and so some of the other programs that they've introduced?
Jason Pereira: Yeah, so there's really only two. So we already talked about the Canada Summer Jobs program. So that is again, higher a graduate because it's going to be cheap if not free. Secondly, it's basically they're allowing a suspension of payments of an interest on Canada student loan programs right now. So as we know-
Guy Anderson: [crosstalk 00:33:34] September this year or something?
Jason Pereira: Sorry?
Guy Anderson: Until September 30th I think.
Jason Pereira: Yeah, till September 30th. So essentially they're over this period where, "Hey, there's no chance if you're a recent graduate or you're a student you're going to be able to basically find work to pay for this." They're just putting a complete and total freeze on principal and interest right now. And again, because they sponsor this program, they can do that, right? Because they're the lenders but essentially it's basically, yeah, they've done what they can to hold off a student's ... I mean, if you're a student you'll qualify for the emergency benefit. So that's giving you some cash in your pocket. You will not have to worry about the overhead of your loan. If you were lucky enough to be a student, a recent graduate and own a home, you can push off your mortgage. But then there's Canada Summer Jobs program is also there to help you, hopefully get your feet wet in the industry.
Jason Pereira: So yeah, so that a pretty effective, comprehensive coverage of all the different benefits that are available. And of course, we kind of just do the top line there. It's important, especially with business owners to seek proper help in the application of these. Because I will say this much, the individual benefits are all very easy to get. The corporate ones involve some work. Oh, and the one thing we did not mention is that check with your province, because every province has some sort of benefits program right now that is doing something. It might not be much, might be ... Some of them are actually providing income support work, but for instance, we're in Ontario and we're receiving a $200 per child for basically they said childcare, but really it's for expenses related to trying to keep your child at home. So probably things like teaching supplies that you need to order on Amazon now because school is not going back in anytime soon.
Guy Anderson: That's right. Yeah, I think we've done a pretty comprehensive overview, but like you said, each one of these has got some nuances that each individual's going to want to walk through. Probably with their financial advisor, but at the end of the day there's some pretty impressive, I wouldn't say opportunities, but initiatives down here and like you said, at each level of the government. So [crosstalk 00:35:25].
Jason Pereira: Yeah, I'm going to put a plug in here for an initiative I'm involved with. A friend of mine, David O'Leary, over at Kind Wealth on his website, I think kindwealth.ca, he has organized a pro bono initiative of independent financial planners who are basically their services for free to people in need right now. We're not going to sit back and create a full financial plan for you, but we're going to help guide you through this very stressful time. So if you or someone you know could benefit from talking to a professional about what's available to them, how to handle everything from basic cash flow to applying for programs, just reach out. It's free, there's no shame. We're here to help.
Jason Pereira: So as always, I want to thank the guest. Thanks for taking the time to come in over Zoom, like everything else these days, and I wish you the best. I wish everybody please stay safe. So as always, this has been Financial Planning for Canadian Business Owners, and I am Jason Pereira, your host. If you enjoyed this podcast, please leave a review on iTunes, Stitcher, or wherever it is you get your podcast. Until next time, take care.
Speaker 1: This podcast was brought to you by Woodgate Financial, an award-winning financial planning firm catering to high net worth individuals, business owners, and their families. To learn more, go to woodgate.com. You can subscribe to this podcast on Apple Podcast, Stitcher, Google Play, Spotify, and SoundCloud. For more episodes, go to jasonperreira.ca. You can even ask Siri, Alexa, or Google Home to subscribe for you.