Canada Recovery Benefit (New)
The new Canada Recovery Benefit would be effective from September 27, 2020 for one year and would provide a benefit amount of $400 per week for up to 26 weeks to workers who are not eligible for EI, mainly the self-employed and including those working in the gig economy. These individuals may still require income support if they continue to be unable to return to work due to COVID-19 or had their income reduced relative to pre-COVID-19 pandemic (attestation-based).
The benefit would be available to residents in Canada who:
- are at least 15 years old and have a valid Social Insurance Number (SIN);
- have stopped working due to the COVID-19 pandemic and are available and looking for work; or are working and have had a reduction in their employment/self-employment income for reasons related to COVID-19;
- are not eligible for Employment Insurance;
- had employment and/or self-employment income of at least $5,000 in 2019 or in 2020; and,
- have not quit their job voluntarily.
Workers would apply after every two-week period for which they are seeking income support and attest that they continue to meet the requirements. In order to continue to be eligible for the benefit the claimant wound need to look for and accept work when it is reasonable to do so. The benefit is taxable.
To encourage claimants to return to work, they would be able to earn income from employment and/or self-employment while receiving the benefit, as long as they continue to meet the other requirements. However, to ensure that the benefit targets those who need it most, claimants would need to repay some or all of the benefit through their income tax return if their annual net income, excluding the Canada Recovery Benefit payment, is over $38,000. In other words, claimants would need to repay $0.50 of the benefit for each dollar of their annual net income above $38,000 in the calendar year to a maximum of the amount of benefit they received.
This means that for a worker who received 10 weeks of the Canada Recovery Benefit in 2020 for a total of $4000, they would have to repay all of the benefit if their net income exceeded the threshold by $8000 (twice the benefit payment amount). In this example, the worker would have to repay the full benefit amount if their net income was greater than $46,000 (not including the Canada Recovery Benefit) in 2020.
The Government of Canada intends to introduce legislation to support the delivery of the new recovery benefits.
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Canada Recovery Benefit scenario: self-employed worker
Self-employed worker whose business is affected by the COVID-19 pandemic
- Ibrahim is a self-employed bookkeeper in Toronto, ON
- He earned $34,000 in 2019 but his business has slowed due to COVID-19.
- Ibrahim applied for and received the Canada Emergency Response Benefit (CERB) but his benefits will run out in September.
- While his business has begun to rebound, it is still not business as usual and he is only back to working at 40% capacity.
What could Ibrahim qualify for?
- With the Canada Recovery Benefit, he could receive $400 per week for up to 26 weeks. If his annual net income for 2020 is above $38,000 (excluding the Canada Recovery Benefit payments), he would need to repay some or all of the benefit when he files his annual income tax return for 2020.
Source: Please consult with the Government of Canada website as this may be subject to change.