Assetsoft - Blog #Coronavirus

Tax Relief and Funding By Municipalities and Governments for the Commercial Real Estate Industry

Mon, 08 Mar 2021 09:00:00 -0500

You can edit text on your website by double clicking on a text box on your website. Alternatively, when you select a text box a settings menu will appear. your website by double clicking on a text box on your website. Alternatively, when you select a text box.The COVID-19 crisis has been so unique that governments are taking measures we haven't seen in decades. Throughout the world, tax relief and funding programs have been vital for ensuring different regions even survive the pandemic.

The worst long-term damage from coronavirus is the financial turmoil it's generated. How various governments ride this wave is vital to ensure businesses survive. That's why we'll go through the most critical tax relief and funding efforts across the globe.

The United States

The US has rolled multiple tax aids for citizens since the pandemic started. The IRS has been vital in ensuring people, businesses, and organizations can survive the crisis. In 2021, the second wave of Economic Impact Payments makes the latest help.

Individuals don't need to do anything as long as they're eligible. These payments are automated via direct deposits. The official website offers constant news about these measures. Businesses that suffered the most damage can also apply for these benefits.

IRS Measures

The IRS provides tax relief for multiple categories, covering most of the population. Individuals, families, businesses, and retirement and health plans are eligible for the tax relief programs.

Interest payment refunds, tax credits, and deadline exceptions are just part of the package. Even unemployment tax treatments have been vital pieces to help financial victims from the pandemic.

Biden’s $1.9 trillion relief bill

One of the most important recent news has been President Biden’s trillionaire relief plan for COVID-19. The budget splits into reducing coronavirus’ spread, family assistance, and emergency relief for businesses and communities.

Biden's administration measures include a $2,000 total in stimulus checks, expanding insurance for unemployment, and increasing child tax credit. Expectedly, this cash should increase purchasing power and aid the economy as families spend these amounts on businesses.

The United Kingdom

On the other hand, the UK has already updated their COVID-19 funding measures for the following two years. The UK's approach is somewhat different from the US because they focus on aiding local authorities instead of centralizing help.

While the government is optimistic about the virus dying out with incoming vaccination, not all problems will disappear immediately. This support package is estimated at around £3 billion for 2021.

The plan for 2021-2022

The plan goes through a £1.55 billion budget to guarantee aid against the pandemic's immediate and long-term consequences. It also reforms local tax support and income guarantees, distributing an additional £670 million fund.

They’re also continuing the guarantee schemes for local tax losses, with an estimated value of £800 million. Additionally, social care funding oscillates the £1 billion mark.

COVID-19 expenditures

The most compelling aspect is the £1.55 billion for coronavirus-related expenditure pressures. It goes through the Relative Needs Formula, the same method used during the last fourths of the 2020-2021 funding.

Past funding is an essential consideration for allocating this budget. The main focus will be local authorities facing more significant difficulties for the current period. That includes social care for adults and children, public health, and country re-opening.

Local tax measures

The local tax support focuses on enabling financially vulnerable households suffering from the pandemic. These supports include welfare systems. On the other hand, the tax income guarantee states that deficit repayments will spread throughout the three following years.

Additionally, irrecoverable local tax deficits will be part of the spending review. The government will be responsible for compensating 75% of these losses to local authorities. Scope loss measurements for councils and businesses will follow different approaches.

SFC extension

Finally, the government will likely continue the 2020-21 scheme for the start of the 2021-22 financial period. Its operation is confirmed for the first quarter of the upcoming financial year, from April to June.

The same principles from the previous year will remain during the extension, with a deductible rate and loss absorption for councils sitting at 5%. Eligibility for losses is also the same as the current scheme. The same documentation available today will remain relevant.

Business reliefs

Finally, this recent report from TaxAssist Accountants goes through significant business reliefs in the UK. Essentially, it goes through the extension for the relief plan from Budget 2020 into the current year.

Additional grant funding has also made the announcement, including funding for leisure, hospitality, and retail businesses. Other budgets have been allocated for businesses already receiving extraordinary relief.

Other grants include discretionary funds for local authorities, business rates and grants, hardship reliefs, and micro-business funds.

Australia

Australia has provided extensive documentation regarding its tax relief and funding attempts. What's worth noting is that the Australian government already provides financial assistance in the JobKeeper program and other support programs.

Despite that, every state and local government is free to provide additional assistance. This support divides into several categories, but do note that there’s no guarantee that all local governments will implement all or some of these measures.

Payroll tax relief

This type of relief includes threshold and waiver increases for payroll taxes, as well as interest-free deferrals. How it’s delivered will determine the repercussions of receiving this type of support.

For instance, businesses' allowable deductions will be lower if there's no payable tax for payrolls. Refunding payroll taxes offers businesses allowable deductions less the given refunds. However, GST consequences won't apply for relief coming from the state and territories.

Business support

Business support is a little more complicated. Some of the payments for supporting small businesses count as NANE income (non-assessable non-exempt) when filing taxes. These payments include funds, such as the Sole Trader Support, Alpine Business, Licensed Hospitality Venue, Business Support, Melbourne City Recovery, and Outdoor Eating and Entertainment package.

Criteria for NANE eligibility include the payment being from one of those programs or belonging to the 2020-21 financial period. Small business entities during the same financial year are also eligible.

Government payment assistance is assessable income, however. That includes single payments and installments. Businesses using accruals accounting methods, income is derived as the payment right comes. Cash accounting derives the income after receiving the payment.

GST for grant funding usually isn't necessary unless when the value is provided in return. That includes goods, services, binding legal obligations, or other requirements for receiving the payments.

Voucher subsidy schemes

These vouchers enable eligible people to buy from businesses damaged by the COVID-19 pandemic. They represent contributed amounts from the state toward purchases. These vouchers vary in where you can use them.

However, regular applications include consuming in restaurants, bars, clubs, and cafes. Accommodations and recreation are also applicable. Tax implications are the same as the previous scheme.

Electricity rebates

A less common approach to financial relief used by states is electricity rebates. Several states have automated this benefit for both households and even businesses.

These rebates don’t count as assessable income, but businesses need to consider the implications. Most importantly, these rebates reduce claimable deductions from electricity.

Land tax relief

Land tax relief is another relief effort used by some territories. The main focus is to offer more breathing room for businesses harmed by the coronavirus. Credits, rebates, deferrals, refunds, reductions, and waivers make up the various types offered.

It’s vital to note that landlords must provide rent relief for business tenants if they wish to be eligible. Taxation consequences of this measure depend on the delivery.

Rent relief

We already mentioned how to rent relief was a requirement for landlords' eligibility for land tax relief. However, other states have issued waivers and reductions directly.

Some states have also implemented both practices. This measure has focused on commercial tenants within properties owned by the government. Again, deliverability determines taxation repercussions.

The Australian Treasury’s relief and recovery fund

This document detailing the COVID-19 Relief and Recovery Fund is another excellent read. The fund consists of $1 billion to help communities and industry sectors offset the losses from the crisis.

The types of support will depend on what the population needs to improve recovery. They can include fee reliefs, increasing grant program payments, and targeting new programs toward specific needs.

New Zealand

Measures in New Zealand also focused on alleviating the financial downturn from COVID-19. Like other tax reliefs and funding attempts, the approach depends on business and people’s circumstances.

The following measures also complement a considerable amount of educational resources available about COVID-19 and its implications.

Use-of-money interest

This relief effort was one of the first measures implemented by the New Zealand government, as early as March 2020. Use-of-money interest refers to writing off late payment interest by Inland Revenue.

It was applicable for payments after February 14 of the same year. Eligibility requires people to inform the government that they’ve been affected by COVID-19 and rendered unable to meet payments.

Tax leverage

The measures also allow New Zealanders to estimate/re-estimate provisional taxes, with early refunds for overpayments. People unable to pay their taxes can request installment payments and write-offs depending on the situation.

Extension for filing dates on income tax is also a possibility. It depends on the situation, but remissions may be available as well. Certificates of exemption and tailored tax codes are also available for workers.

Special entitlements

Entitlements include re-estimating child support payments and tax credits for families depending on yearly incomes against expenses. That means adapting taxes and obligations to your income.

Finally, paid parental leave is another entitlement for certain people. Eligibility requires baby expectations or birth. Additionally, those becoming children's (under six) primary caretakers after April 2016 are also eligible.

Middle East

The Middle East is one of the most complicated regions regarding our current subject. However, we can go through the two most prominent measures for tax relief and funding.

Even with all the information available, evaluating these measures' repercussions on your company can be a challenge. That's why having access to professional financial services has become more of a need than an advantage.

The IMF measures

Since the pandemic started, the International Monetary Fund has been a critical player for the Middle East. It continuously urged governments to provide pertinent relief programs to the population.

The pledge aimed primarily toward preventing the pandemic's financial damage. The central thesis was that a temporary crisis shouldn't cause long-term repercussions, like unemployment and business bankruptcies.

Particular cases

This article offers more insight into the COVID-19 situation in the Middle East. However, even that article fails to provide a complete outlook of the measures. However, it's worth noting the regions mentioned have implemented financial relief.

Iran and Pakistan have requested emergency loans from the IMF.
COVID-19 hit Lebanon while it was still seeking foreign aid, thus strengthening this need.
Turkey has been one most outspoken about financial measures, slashing interest rates being the most prominent.
Egypt has also employed significant funding, interest rate cuts (3%), and postponing bank loans.
Tunisia had also announced health care and financial resources to reduce the financial impact and IMF loans.

Finally, the Morocco government has launched public cleanup operations and a $1.5 billion aid fund to support healthcare and devastated industries.

Canada

Finally, Canada has also been quite open with its COVID-19 relief measures. It divides its support measures depending on the recipient: people, businesses, sectors, and organizations.

The measures include employee rehiring, job creation, tax relief, employment insurance, and mortgage referrals. It's also aided self-employed people and indigenous entrepreneurship. Various industry sectors also experienced different measures according to their needs.

Trudeau’s recent tax relief

Despite the importance of the mentioned relief efforts, Prime Minister Trudeau's latest tax relief is less known. This relief aims toward coronavirus-related income support beneficiaries.

It means that these people won’t have to worry about overdue tax interests from benefit programs. The minimum period is a year, and self-employed people will also receive amnesty if they’d received benefits without qualification.

Around 40% of Canada's labor force has received payments from the country's Emergency Response Benefit. The tax interest waiver will last until the end of April 2022. Eligibility for the relief requires earning less than CAD 75,000.

How apartment vacancy rates are redefining rental control across major cities in Canada

Mon, 01 Mar 2021 09:00:00 -0500

Apartment vacancy rates have always been a problem in Canada. With a robust immigrant influx, rental demand is one of the largest in the world. Cities like Toronto and Vancouver are staples of high rental prices.

However, COVID-19 seems to be defying that. Major cities have undergone noticeable shifts in supply and demand. How have these changes affected rental control? That’s what we’ll find out.

How has rent control traditionally functioned in Canada?

Every province in Canada has different rules for rent increases. Some provinces let landlords raise the rent whenever they want. Others require them to ask tenants to approve the raise.

Ontario is a great example. It technically has rent control, but many rentals aren't subjected to these regulations. Landlords can set different rents between tenancies, yet there’s a maximum allowable increase.

Rent control isn't always mandatory

As we mentioned, not all provinces place strict rent control on landlords. However, even those that do so often have exceptions. For example, apartments built after the 1st of November 1991 are exempt from these controls.

Similarly, buildings built before that date are still exempt as long as they entered the market afterward.

Rising prices have been a challenge for a while now

Even in the linked report, written in 2017, rapid increases in rental prices have been a staple for most cities. The main reason why these controls aren't adequate is that they were created in a different context.

The legislation came in 1992. During that time, rental properties were in short supply, and these incentives aimed to boost construction projects.

Low vacancies and high rent: is it getting out of control?

The Globe and Mail have an excellent article detailing the reasons behind Canada's low vacancy rates. While the report and interviews are from 2016, it does offer solid observations.

The article also sheds light on a long-standing problem: prices have been escalating rapidly for years now. Even in 2016, vacancy rates were as low as under 1% for specific cities.

A challenge for everyone

The report begins with the story of a woman struggling to find a home for her family. Even less-luxurious spaces than where she’d been staying were over $200 more expensive. Her story included waiting among crowds waiting for the same thing: a rental.

That’s a problem many have experienced. Even recent reports state how difficult it is to find spaces to rent in multiple sectors.

Is discrimination a problem?

Immigration is a significant factor responsible for Canada’s rental demand. However, many prospective tenants report landlords hesitating to lease their spaces to immigrants.

The problem also seems to be true for young people and even those under social assistance. It's led to the creation of organizations like the Center for Equality Rights in Accommodation.

Supply issues

Construction for spaces intended for rentals in the long-term is considerably slower than those intended for sale.

The move from focusing on rentals to building for sale has been a growing trend for decades now. The problem has called for special incentives, including fee waivers and density bonuses for building rentals.

Have incentives worked?

Historically, cities like Vancouver have been commended for their housing efforts. Even Toronto and similar cities have attempted to boost their rental building supply.

However, inventory is still too low for the quickly-growing population. Immigration and young adults setting out to find independence inflate demand daily. Experts still argue that the market focuses too much on homeowners instead of supporting renters.

What do experts believe?

The report points out that 1984 was a vital year for this shift. It saw the cancellation of tax-incentives and similar programs. Between the 60s and 70s, these programs were responsible for countless units produced per year.

Additional changes, like ending social housing programs, have also contributed to the dwindling rental supply.

Are rentals becoming a luxury?

Curiously, the article also mentioned that supply is relatively healthy for high-income individuals. Those facing the real problem are lower-income populations, like millennials, service workers, and similar demographics.

Rental options include remains of buildings built during the 80s, few subsidized social housing projects, and smaller spaces, like basement suites.

Is it the same for all markets?

Finally, the article explains multiple property types. For instance, condo investment usually focuses on short-term leases while waiting for buyers. Annexes only appear as homeowners need an extra income.

Purpose-built spaces offer more stability, but fixed-term leases and other loopholes are standard for landlords needing to adjust their rents. The social housing market has also faced challenges for keeping rates low while coping with rising service bills.

Has anything changed during the COVID-19 crisis?

This report from the CMHC provides an excellent overview of the rental market before COVID-19 became a pandemic. The article starts by mentioning a 1% vacancy rate in apartment rentals closing 2019.

Naturally, that means increases in average rents in the market. The survey also revealed Vancouver and Toronto topped the pricing lists.

Secondary rental is more expensive

The secondary rental condominium market had surpassed purpose-built spaces. That’s true for all cities in the survey. Unfortunately, homeownership affordability drives more demand for rentals.

The report also mentions two programs from the CMHC focused on increasing the housing supply. Time and more research will be necessary to determine if they're successful.

COVID-19’s spread and the rental market: What happened?

The COVID-19 crisis brought intriguing developments to Toronto's rental market. For instance, the Greater Toronto Area experienced the highest vacancy rate in over a decade. As the pandemic spread, the vacancy rates for big cities increased by over 1%.

Short-term rentals lost their attraction with travel restrictions. Unemployment also placed significant stress on people trying to meet their rent. As Landlords struggled to keep renters, negotiating power for prospects increased.

Naturally, it also means that implementing modern property management software becomes more of a need than an advantage.

The hit in rental demand

The main reason behind these changes is how rental demand has decreased considerably with the pandemic. Student population, migration obstacles, and employment conditions mean the main fall in the renter population.

Non-permanent residents have been vital in maintaining renter demand. The largest cities experienced between 2% and 3% vacancy rates. However, regions like Regina and Edmonton saw 7.5% and 7.2% spikes, respectively.

An exciting shift: has the pandemic made life easier for renters?

Now, the report mentioned that landlords were still hesitant to lower their rents. However, they’re a lot more open to giving leisure in other areas.

The data they collected suggested that lowering deposit fees, giving free months in rent, and even including utilities in the rent were more popular.

Vacancy rates surging amid coronavirus

Continuing the previous subject, the CBC also reported on the record highs experienced by Toronto in vacancy rates. More specifically, it’s the first time in approximately 50 years in which Toronto has experienced such high numbers.

The fall in demand amid COVID-19 coincided with a record number for new condominium developments. Therefore, the Greater Toronto Area experienced a whopping 4.6% vacancy rate for 2020’s fourth quarter—over four times 2019’s numbers.

Young working population: the most prominent victim?

Purpose-built space has been experiencing constant falls every year. We also need to consider how the younger population was the biggest unemployment victim in 2020. The portion that young workers occupy in the renter population played a massive role in increasing vacancy rates.

With vaccination and immigration rising consequentially, population growth will likely drive demand back up. The same is likely accurate for employment rates.

The pandemic and population outflow

The article also mentioned that rent averages have decreased throughout most of Canada. The monthly decline marked 8% from 2019 rates for the last quarter. The number was 5.7% for the entire year.

Most decreases happened for Vancouver, with a 6.7% decrease. However, Gatineau, Hamilton, and other cities experienced up to 22% rate increases in 2020. Outflow from urban regions to more affordable spaces was a key factor.

Has the case been the same for the entire country?

However, this article from CBC News explains that not all of Canada has experienced the same drop in rent prices. For instance, London experienced record highs in 2020, with a 7% boost to a $1,119 monthly average.

Interestingly, vacancy rates in the region are 0.2% above the national average. However, rent prices haven’t reached the $1,500 national average yet.

The reason for that increase without rent prices the following suit is because of the supply causing it. The main reason for the vacancy rate increase was an influx of new rental units instead of a weaker demand.

Is it mainly for the upper tiers?

It also means that the supply of cheap apartments is running low. Only 2.3% of rentals in the region were 30% of a household's average income, thus considered affordable.

Landlords understand that business will recover once the pandemic is over. That means they'll have the liberty of dictating prices with the regularly-high demand from pre-COVID levels.