Canadians who lost their jobs due to COVID-19 were relieved when the Canada Revenue Agency (CRA) began distributing the Canada Emergency Response Benefit (CERB) within weeks after the onset of the pandemic.
However, CERB was a temporary measure, and it was going to end at some point. After two extensions to the $2,000 per month payment, it came to an end on September 27, 2020. Canadians were worried about CERB ending because millions were still unemployed.
The anxiety wore off in October with the announcement of continued support for Canadians affected by COVID19. The government introduced more benefits for Canadians still jobless due to COVID-19, including the Canada Recovery Benefit (CRB).
CRB also has a $2,000 payout for eligible Canadians and has the same purpose. Still, there are a few significant differences between the programs you should know.
Differences between CERB and CRB
The government revamped the Employment Insurance (EI) benefits to allow more people to qualify for the benefits. However, employed and self-employed individuals who did not qualify for EI can apply for CRB. The CRA started accepting applications for CRB on October 12, 2020.
If you had been collecting CERB, it would be wise to know the differences between CERB and the CERB alternative program before you apply for it.
- Same amount but a shorter duration
CRB also pays the same $500 per week amount as CERB. However, CRB is available for 26 weeks and not 28 weeks, like CERB. Additionally, you can collect CRB for any of the 26 weeks between September 27, 2020, and September 25, 2021.
- Different payment scheme
Like CERB, there is an eligibility period for CRB. CERB had four-week eligibility periods. CRB has two-week periods instead. CRB does not renew automatically. You must apply for the benefit once the period ends and your situation has not improved.
- Taxed at the source
CERB was a taxable benefit, but the CRA distributed the funds without deducting taxes. It means you would receive the full $2,000 for the four-week eligibility period. The CRA is deducting a 10% withholding tax from the $1,000 CRB payments. It means that you will receive $900 bi-weekly through CRB instead of $1,000.
Another major difference with CRB is that it is not just for unemployed Canadians. If your loss of income due to COVID-19 is more than 50%, you can qualify for the benefit. With CERB, you could not qualify if you earned more than $1,000 before applying for the benefit.
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Creating a more lasting income
While both the CERB and now the CRB are useful benefits to support your income, these are temporary measures. You should create a more lasting passive income that can supplement your active income for a longer time. Investing in a portfolio of dividend stocks and storing them in your Tax-Free Savings Account (TFSA) is an ideal way to go.
Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is an exceptional stock that you can consider to begin building such a portfolio. Also known as Scotiabank, BNS is the third-largest Canadian bank in terms of its market capitalization. The company has invested billions of dollars over the last ten years to expand its international presence.
It invested heavily to expand into Mexico, Peru, Chile, and Columbia to leverage the untapped market. The countries are suffering from financial challenges due to COVID-19. It means that BNS might not see much short-term profitability from those markets.
However, its long-term prospects look bright. As the middle class expands in the South American countries, the demand for credit cards, loans, and investment services will increase.
Earnings from any assets stored within your TFSA can grow tax-free. It means that you can leverage Scotiabank’s dividend payouts and capital gains to grow your account balance substantially. The stock is trading for $60.87 per share at writing, and it pays its shareholders at a juicy 5.91% dividend yield.
I think it could be a valuable addition to your TFSA to provide you with more lasting passive income and growing your wealth.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends BANK OF NOVA SCOTIA.