April 8, 2020
Travis D. McKay
Hillenbrand Kozicki LLP
COVID-19 – Small Business Owners – CERB Benefit
Recently the Government of Canada announced the CEWS which offers a wage subsidy of 75% per employee up to $873 per week for any employer who has seen a drop in revenue of 30% or more due to the COVID-19 pandemic. To read more about the CEWS Benefit see our blog here:
The CEWS was a concern for many Small Business Owners that are incorporated. and pay themselves via dividends instead of salary, because their own compensation would not be eligible for the CEWS Subsidy. Thus, many Small Business Owners were looking at no income for themselves while their businesses were shut down due to COVID-19
Today, the CRA announced that individuals who receive non-eligible dividends (the type of dividends generally paid out by corporations entitled to pay the small business corporate tax rate) are eligible to claim these amounts in order to qualify for the Canadian Emergency Response Benefit (CERB). The CERB Benefit pays $2,000 per 4-week period for those not working due to COVID-19.
So, a small business owner who received at least $5,000 in dividends from a Canadian Controlled Private Corporation (“CCPC”) in 2019 is likely entitled to apply for CERB. CERB provides a payment of $2,000 every 4-weeks for a maximum of 16 weeks. To qualify for CERB an individual must:
- Expect to be without employment or self-employment income for at least 14 consecutive days in the initial four-week period. For subsequent benefit periods, they expect to have no employment or self-employment income.
- Be over 15 years of age;
- Have had income of at least $5,000 in 2019 or the previous 12 months;
- Have been forced to stop working because of COVID-19, this includes work stoppage due to;
- contracting COVID-19;
- having to take care of children who lost child care;
- having to take care of a family member; or
- employer termination, layoff or hours reduced to zero.
Note: A Small Business Owner with REDUCED income does not qualify for CERB, the INDIVIDUAL must have or anticipate ZERO income to the Individual.
Applications for CERB are open at the Canadian Revenue Website under the “My Account” tab starting today. To speed up the process for receiving the CERB benefits individuals should ensure they have registered for direct deposit under their CRA Account.
The Government has staggered the application dates based on the month of birth of the Applicant as follows:
|Birth Month||Apply for CERB on||Best day to apply|
|January, February or March||Mondays||6-Apr|
|April, May, or June||Tuesdays||7-Apr|
|July, August, or September||Wednesdays||8-Apr|
|October, November, or December||Thursdays||9-Apr|
|Any month||Fridays, Saturdays and Sundays|
Conclusion: Any small business owner that paid herself at least $5,000 in dividends in 2019 or the last 12 months and who is no longer working due to COVID-19 is likely eligible to apply for the CERB. Applications can be filed via the CRA website under the “My Account Tab.”