With budgets coming down across the country we thought it would be helpful to summarize which budgets will and won’t impact Canadian Payroll. In addition we’ve provided when these changes take effect and helpful links for you so you have a quick reference to the best source for more information in each jurisdiction so you can be sure you stay compliant and are ready to meet new requirements.
At the time of writing the following Canadian jurisdictions have released their 2015 budgets:
- British Columbia
- New Brunswick
- Northwest Territories
- Nova Scotia
Federal - November 6, 2015
On October, 19, 2015, Canadians voted in new Liberal party Prime Minister, Justin Trudeau. During the course of his election campaign, the party announced it would make certain changes related to income tax rate calculations that may impact payroll. Although no time frame has been provided as to when these changes will happen it is anticipated that they will be introduced in the near future now that the new government has taken office.
Tax Cuts for the Middle Class
Taxable income between $44,700 and $89,401 taxed at a lower rate of 20.5% instead of 22%.
Tax Increases for High Income Earners
A new tax bracket of 33% for annual income over $200,000.
TFSA Limit Decrease
The annual TFSA contribution limit would be decreased from $10,000 to the previous limit of $5,500.
Elimination of Income Splitting
Currently, income splitting allows the higher-earning spouse in a family with kids under 18 to transfer up to $50,000 of income to the lower-earning spouse so it can be taxed at a lower rate. It is anticipated that income splitting will be eliminated.
New Canada Child Benefit to Replace Universal Child Tax Benefit
The new government proposes a non-taxable child benefit calculated on a sliding family income scale.
OAS Age to Remain At 65
The new government has stated that they will not proceed with plans to gradually increase the age of eligibility for Old Age Security by 2023.
The new government has discussed working with the provincial jurisdictions in order to enhance the Canada Pension Plan benefits. There is speculation this could provide the “solution” to the Ontario government’s concern about insufficient retirement savings, making the proposed Ontario Retirement Pension Plan no longer necessary.
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Federal - April 21, 2015
The Budget contained no increases to personal income tax rates, but introduced direct and indirect measures impacting payroll as noted below.
Items that will directly impact Payroll include:
Lowering the EI Premium Rate in 2017
In 2017, the Government will implement the seven-year break-even Employment Insurance (EI) premium rate-setting mechanism, which will ensure that EI premiums are no higher than needed to pay for the EI program over time. Any cumulative surplus recorded in the EI Operating Account will be returned to employers and employees through lower EI premium rates once the new mechanism takes effect. This initiative is expected to result in a 21 percent reduction in the EI premium rate, from $1.88 in 2016 to an estimated $1.49 in 2017.
Extending Compassionate Care Benefits
As of January 2016 the Government proposes to extend the duration of Compassionate Care Benefits from the current six-week benefit period to a benefit period of six months through the Compassionate Care Benefits EI program.
A Quarterly Remitter Category for New Employers
Budget 2015 proposes to reduce the number of remittance payments that new employers must prepare and submit to the CRA. Beginning in 2016, new employers will be eligible for quarterly remitting if they have monthly withholding of less than $1,000 and maintain a perfect compliance record in respect of their Canadian tax obligations. This measure will not affect the amount of tax owing, just the timing of the payments. This amount of withholding corresponds to the withholdings related to one employee at a salary of up to $43,500, depending on the province of residence.
Federal Adoption of the Business Number as a Common Business Identifier
Budget 2015 announces the Government’s commitment to undertake initial planning and preparation required for federal adoption of the Business Number as a Common Business Identifier. The Budget also proposes to give the Minister of Employment and Social Development Canada (ESDC) and the Minister of Labour the authority to collect, use and verify Business Numbers to administer programs for which they are responsible.
The Business Number is a nine-digit number that the CRA assigns to an organization for tax matters. Under the proposed approach, an organization dealing with the federal government would only have to register once to be eligible to access a range of federal programs and services for organizations, instead of having to register separately under each federal service or program. This adoption would make it simpler for organizations to interact with government, and enable more efficient digital self-service.
Enhanced CRA Services
Budget 2015 acknowledges actions taken by the CRA to enhance its administrative processes and its service options for organizations, including:
- Requiring CRA enquiries agents to use a standard Agent ID when dealing with organizations, making it easier for employers and representatives to provide feedback on CRA services
- Launching its first mobile reminder app for CRA remittances
- Expanding online payment options with the launch of pre-authorized debits
- Developing a plain-language publication that will provide information to help organizations understand and prepare for the CRA audit process, including understanding their rights, responsibilities and available recourses
The Government will also propose legislative amendments to allow taxpayer information to be shared between tax and non-tax debt collectors within the CRA, in order to facilitate the collection of certain non-tax debts that are owed to federal or provincial governments.
Streamlining Withholding Requirements for Non-Resident Employers
Budget 2015 proposes an exception to income tax withholding obligations for qualifying non-resident employers, for payments made after 2015 to a non-resident qualifying employee who has an exemption from Canadian income tax because of a tax treaty and who is not in Canada for 90 or more days in any 12-month period that includes the time of the payment. Although a qualifying non-resident employer will not be obligated to withhold tax under these circumstances, it will continue to be responsible for its reporting requirements under the Income Tax Act.
Modernizing the Canada Labour Code (for federally regulated employers)
Budget 2015 proposes to introduce amendments to strengthen and simplify administration and enforcement of the Canada Labour Code (CLC). These amendments will provide for new short-term and long-term unpaid leaves for family responsibilities and enhanced bereavement leave, to provide employees with increased flexibility to balance work and informal caregiving obligations in times of need. These amendments will also address violence and sexual harassment in federally-regulated private-sector workplaces, to ensure that employees are treated fairly and protected from harm in the workplace.
Budget 2015 also proposes to amend the CLC to ensure that interns under federal jurisdiction, regardless of pay, receive occupational health and safety protections and are subject to basic safety standards, and to clarify the circumstances under which unpaid internships can be offered.
Working While on Claim Pilot Extended to August 2016
Budget 2015 proposes to extend the current EI Working While on Claim pilot project to August 2016. Under this pilot, claimants can keep 50 cents of their EI benefits for every dollar they earn, up to a maximum of 90 percent of the weekly insurable earnings used to calculate their EI benefit amount.
Items that will directly impact Payroll include:
Tax-Free Savings Account Limit Increase
The Tax-Free Savings Account (TFSA) was introduced with an annual contribution limit of $5,000 per individual, indexed to inflation in $500 increments. On January 1, 2013, the TFSA annual contribution limit increased to $5,500 due to indexation. Budget 2015 proposes to increase the TFSA annual contribution limit to $10,000. This increase will apply as of January 1, 2015, so that a single annual contribution limit of $10,000 applies to the 2015 and subsequent calendar years. The TFSA annual contribution limit will no longer be indexed to inflation.
Other Proposed Initiatives
Budget 2015 also proposed several other initiatives including several Canadian Labour Market Enhancements, a Financial Literacy Strategy and Efforts to Combat the Underground Economy.
Alberta - October 27, 2015
No Impact on Payroll
- The Budget resulted in no additional income tax increases to those which have been in effect since October 1, 2015; nor were there any other changes impacting payroll.
- The government did announce it will incur additional expenses that would create a deficit; however the government decided to increase alcohol and tobacco taxes in order to assist with additional funding. They also indicated that the tax on insurance premiums will be increased by 1% effective April 1, 2016.
Changes to Alberta’s personal income tax withholding rates were effective on October 1, 2015 as follows:
|Annual Taxable Income||
Withholding Income Tax Rate
(Effective October 1, 2015)
|Up to $125,000.00||10%|
|On the next $25,000 from $125,000.01 to $150,000.00||12%|
|On the next $50,000 from $150,000.01 to $200,000.00||13%|
|On the next $100,000 from $200,000.01 to $300,000.00||14%|
|On amounts over $300,000.00||15%|
British Columbia - February 17, 2016
Changes to British Columbia Medical Services Plan premiums effective January 1, 2017
- In the Feb. 17, 2016 provincial budget, changes to MSP premiums and Premium Assistance were announced that will be effective Jan. 1, 2017. Further details on the enhanced Premium Assistance program and when you can apply will be available in the coming months.
New Brunswick – April 9, 2015
Two New Tax Brackets Added for Income in Excess of $150,000
- A new tax bracket will be created at a tax rate of 21 per cent for taxable income from $150,000 to $250,000, and another bracket at rate of 25.75 per cent will apply to taxable income greater than $250,000, effective January 1, 2015.
Northwest Territories - February 5, 2015
No Impact on Payroll
- The 2015/2016 Northwest Territories Budget included no changes to provincial tax rates or other areas that will impact payroll.
Nova Scotia – April 9, 2015
No Impact on Payroll
- The 2015/2016 Nova Scotia Budget included no changes to provincial tax rates or other areas that will impact payroll.
Nunavut - February 25, 2015
No Impact on Payroll
- The 2015/2016 Nunavut Budget included no changes to provincial tax rates or other areas that will impact payroll.
Ontario – April 23, 2015
The Budget contained no increases to personal income tax rates, but did provide summarized consultation recommendations on the proposed Ontario Retirement Pension Plan (ORPP) and announced other measures that may impact employers’ payroll practices in future years.
Ontario Retirement Pension Plan (ORPP)
For more information on the proposed ORPP and to sign up for updates on this initiative please go to the ORPP website.
Other Initiatives Which May Have an Impact on Payroll
The Ontario Budget 2015 also contained the following initiatives which may have an impact on employers’ payroll and human resources practices:
- Initiatives for matching skilled workers with the right job
- A review of the apprenticeship training tax credit
- Measures to combat the underground economy
- An action plan to stop sexual violence and harassment in the workplace and elsewhere
The Ontario Budget also stated that amendments will be proposed to the following acts in an effort to improve administrative effectiveness and enforcement, as well as to enhance legislative clarity and regulatory flexibility to preserve policy intent:
- Employer Health Tax Act
- Freedom of Information and Protection of Privacy Act
- Insurance Act
- Pension Benefits Act
- Retail Sales Tax Act
- Taxation Act, 2007
Québec - March 26, 2015
Workforce Skills Development and Recognition Fund threshold increased to $2 million
- Effective 2015, amendments will be made to the Act to promote Workforce Skills Development and Recognition (also known as the “1% law”) and regulations in order to raise the payroll threshold at which employers become subject to the Act, from $1 million to $2 million.
Gradual reduction of the Health Services Fund contribution rate for small and medium employers in the service and construction sectors
- Eligible employers with a total payroll of $1 million or less will see their contribution rate gradually decrease, from 2.7% to 2.25%:
- 2.55% on January 1, 2017
- 2.40% on January 1, 2018
- 2.25% on January 1, 2019
- When fully implemented, eligible employers with a payroll greater than $1 million, but less than $5 million, will be subject to contribution rates from 2.25% to 4.26%.
Personal Health Contribution to be Eliminated Over Three Years
- Budget 2015-2016 announced the gradual elimination of the personal health contribution, beginning January 1, 2017.
- As of 2017, all individuals whose net income does not exceed $42,235 will be exempted from paying a health contribution. Individuals with a net income of greater than $42,235 and less than $137,250 will see their maximum contribution reduced by $200, to $125 in 2017 and to $80 in 2018. Individuals with a net income over $137,250 will see their maximum contribution reduced by $1,000, to $800 in 2017 and $600 in 2018.
- As of the 2019 tax year, the health contribution will be abolished for all Quebecers.
Saskatchewan - March 18, 2015
No Impact on Payroll
The 2015/2016 Saskatchewan Budget included no changes to provincial tax rates or other areas that will impact payroll.
Yukon – April 2, 2015
Changes to Personal Income Tax Rates
- The Budget included changes to existing territorial personal income tax rates, an additional tax rate on income over $500,000, and the elimination of the five per cent surtax on territorial taxes payable over $6,000.
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About the Author
Marlo Hertling has worked with leading HCM organizations and has been helping Canadian companies implement HCM solutions for more than 15 years. She is the Vice President of People & Culture at Avanti Software Inc and serves as Avanti's HCM subject matter expert.More Resources by Marlo Hertling