The Canada Revenue Agency (CRA) has smoothed the application process for the Canada Recovery Benefit (CRB). Are you still confused if you are eligible for the benefit?
When the COVID-19 pandemic struck, the government implemented a nationwide lockdown to control the spread of coronavirus. It closed all non-essential services and travel, significantly affecting main industries from airlines to retail to oil to real estate. Many Canadians were temporarily and many permanently out of work.
The CERB versus the CRB
The CRA gave out $2,000 every month in Canada Emergency Response Benefit (CERB) to help Canadians who were out of work because of the pandemic or those who were on Employment Insurance (EI) claims. The CERB helped four million Canadians return to work. Canada’s unemployment rate has reduced from 13.7% in May to 9% in September.
The CERB has ended, and the Justin Trudeau government has replaced the benefit with CRB and EI. The CERB covered both people with and without EI. But the CRB only covers people without EI.
EI pays a claim to beneficiaries if they lost their job for no fault of theirs. This could mean you lost your job because the company shut down or downsized. But the government won’t give you an EI or CRB if you quit voluntarily or if your employer terminated you for misconduct, labour disputes, or poor performance.
You can’t live off the benefit permanently. Hence, the EI and CRB requires you to be available for work, actively searching for a job, and taking up any good opportunities that come your way.
What if you lost your job for reasons not related to COVID-19?
The confusion occurred, as the CRA said you should be unemployed or not employed because of COVID-19-related reasons. There is a difference between unemployed and not employed.
The CERB states, “You have stopped or will stop working because of COVID-19 or are unable to work because of COVID-19.” This meant that you lost your job because
- The company cut jobs due to the pandemic;
- You can’t go out and work because you are at high risk if you get infected; or
- You can’t work because you have to stay home and care for a family member.
The above three conditions change in CRB. The CRB states, “You were not employed because of COVID-19-related reasons, or your average weekly income reduced by 50%.”
This means you could have lost your job for other non-COVID-19-related reasons, but you are actively searching for a job and haven’t yet got work because,
- The pandemic has dried up jobs in your industry. For instance, the airline and the oil industry have a high unemployment rate.
- You were working before the pandemic, but you stopped working, as your medical condition puts you at high risk if you are infected. But you are actively looking for work that you can do from home.
Passive income versus CRA cash benefits
The CRA cash benefits are temporary and come with many conditions. A better option is to have a passive income in your Tax-Free Savings Account (TFSA). You can access this amount anytime until the benefit pool lasts. You need not worry about eligibility or taxes on withdrawals.
If you have saved up $5,000 every year for the last 10 years in securities that paid 5% annual returns, you would have $74,000 in your TFSA. The pandemic has created a dividend sale where you can get good dividend stocks for a 40%-60% discount. If you put in $25,000 each in RioCan REIT and Enbridge, they will earn you $375 a month in dividend income. This income could start as early as next month.
Both the stocks are trading at 45% and 32% discount, respectively, as the lockdown has impacted their revenue. The two stocks will recover with the economy. The first signs of recovery would be visible in RioCan’s third-quarter earnings on October 29. As retail shops reopen, its rent collection will improve. The risk factor is the magnitude of default and rent abatements by small retailers.
