Four considerations for Canadians receiving CERB
By ATB Financial 10 July 2020 3 min read
Back in March, the Canadian Government introduced the Canada Emergency Response Benefit (CERB) to help Canadian residents who lost their jobs or work hours due to COVID-19 (and did not quit their job voluntarily). The benefit was designed to help Canadians pay their bills while businesses shut-down to limit the spread of the coronavirus.
When initially launched, the program provided $500 per week for up to 16 weeks, but fast-forward a few months and the need for the program continues as Canadians are still experiencing the financial hardship of COVID-19.
If you’re one of the 8.16 million Canadians that applied for CERB, here are four things you should know:
1. CERB has been extended an additional 8 weeks
The Canadian Government recently announced that they have extended CERB for an additional eight weeks, increasing the total length of the program to 24 weeks.
That’s great news for the 13.7 per cent of Canadians who are dealing with unemployment or reduced hours. And, while the benefit does give some breathing room for those unable to find sufficient employment, the Canadian government is encouraging applicants to continue their job search and track their ongoing job search activities.
If you’ve already applied for CERB, the process hasn’t changed. You can continue to apply for the benefit through your Canada Revenue Agency (CRA) account as long as you continue to meet the eligibility requirements.
If you haven’t applied for CERB yet, and you’re eligible to apply, you have until December 2, 2020 to apply for retroactive payments. Students who don’t meet the CERB eligibility requirements can apply for the Canada Student Response Benefit (CESB).
2. Your CERB eligibility can change
The gradual re-opening of businesses and assistance from the Canadian Emergency Wage Subsidy (CEWS) will allow more Canadians to return to work. If this is the case for you, just remember that earning more than $1,000 CAD (before taxes) per month makes you ineligible to receive CERB payments.
In response to the changing landscape, the federal government has communicated measures that encourage Canadians to apply to CERB honestly. To date, over 190,000 repayments have been made to the CRA by applicants who did not meet the eligibility requirements. If you’re currently applying for CERB and expect to be heading back to work soon, consider whether or not you still meet the eligibility requirements. If you recently applied but aren’t sure if you still qualify, we recommend stashing that money into a savings account until you know whether or not you have to pay it back.
3. Depending on the province you live in, you can exempt a portion of your CERB income when applying for other benefit programs
The impact of CERB on other social assistance programs varies from province to province. Alberta, Manitoba, Ontario and Quebec take back a portion of the CERB payments from social assistance, whereas other provinces are either taking back the entire payment or none at all.
If you live in Alberta and receive both CERB and Assured Income for the Severely Handicapped (AISH) or Income Support, a portion of your CERB will not impact your provincial benefits. For details on what is exempt, visit the Government of Alberta page.
If you’re receiving social assistance or disability benefits, you can apply for CERB as long as you made at least $5,000 in 2019 or the last 12 months (income must be from employment or self-employment).
4. CERB counts as taxable income
Unlike Employment Insurance (EI), CERB payments do not have income tax deducted before they are distributed to you, meaning they will be added to your taxable income. If you are a CERB recipient, you have the potential to earn up to $12,000 over the course of 24 weeks, meaning you will likely earn more than the basic personal amount ($13,229) over the course of the year.
With additional income, you should plan to pay at least 15% (the lowest tax rate for 2020) on this money. The total income tax you pay will ultimately depend on how much you earn that year and your marginal tax rate. If possible, we recommend saving 15% or more of your CERB payments to help cover any income tax you will be required to pay.
It is important, now more than ever, to properly budget every month. If your income or expenses have been impacted by circumstances created by COVID-19, we recommend creating a budget revisiting it frequently, or whenever your financial situation changes.