Provincial & Federal Budget Changes for Canadian Payroll in 2016

Here's our annual post that summarizes which budgets changes will and won’t impact Canadian Payroll. Subscribe to stay current, if you haven't already.

At the time of writing the following Canadian jurisdictions have released their 2016 budgets:

Federal

On March 22, 2016, the Federal Budget was presented by Finance Minister, Bill Morneau. The Budget has the following impacts on Payroll.

Employment Insurance Changes
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.

Retirement Remains at Age 65
The age of retirement remains at age 65.  In 2012, the Harper government said it would raise the age of retirement to 67 in 2023, however this change will no longer be implemented.

Middle Income Tax Cut, High Income Tax Increase
The government previously announced a 1.5 per cent tax cut for the middle-income tax bracket. These tax changes decrease income taxes for those making between $45,282 and $90,563 from 22 per cent to 20.5 per cent.. To compensate, it will raise taxes by four points from 29 to 33 per cent for those who make more than $200,000.

TD1 Changes
Post-secondary students will notice a change on their tax forms: tax credits for textbooks and the Education Tax Credit will be eliminated by 2017.

For more information on the Budget, please visit the #Budget2016 website.

Alberta

On April 14, 2016, the Honourable Joe Ceci,President of Treasury Board and Minister of Finance tabled the 2016 Budget in the Alberta Legislature.

The Budget contained no changes relating to payroll beyond the tax increases which have been in effect since October 1st, 2015. For information on those tax changes, go here

For more information on the Budget, visit the Ministry of Finance website.

British Columbia

On February 16, 2016, the British Columbia Provincial Budget was presented by Finance Minister, Michael de Jong. The Budget has the following impacts on Payroll:

Medical Services Plan Changes
The British Columbia Medical Services Plan Premium Calculation Method will be changing effective January 1, 2017

  • Effective January 1, 2017, the British Columbia Medical Services Plan premiums (MSP) will have a new rate structure to reflect premium charges for adults only. For example, a household with one parent and two children will be charged a single adult rate, rather than the previous three-person rate.

Below are the changes that have been reflected in the BC Budget:

Current MSP rates in effect since 1/1/2016 MSP rates to come into effect 1/1/2017
$75.00 for one person $78.00 for one adult
$136.00 for a family of two $78.00 for one adult with one or more children
$150.00 for a family of three or more $156.00 for two adults
  $156.00 for two adults with one or more children

Premium Assistance Eligibility

Families and individuals receiving premium assistance who currently pay partial premiums will see their premiums reduced, and additional households earning above the current premium assistance threshold may qualify for assistance.

For example, a couple with two children earning up to $51,000 may qualify for assistance, and a single parent with two children earning up to $48,000 may qualify for assistance.

  • Premium assistance is based on an individual’s net income for the preceding tax year as reported on line 236 of their Notice of Assessment (or for couples, their combined net income) adjusted for age, family size, disability and any reported Universal Child Care Benefit and Registered Disability Savings Plan Income.
  • A new calculator is now available on the government website to help British Columbians estimate whether they could qualify for premium assistance today, and when the enhancements take effect in 2017. Access the calculator here.

Further details on when individuals can apply for the enhanced premium assistance effective January 1, 2017, will be provided in the coming months.

For more information on the Budget, visit the Ministry of Finance website.

New Brunswick

On February 2, 2016, Finance Minister, Roger Melanson tabled the 2016-2017 Budget in the New Brunswick Legislative Assembly. The Budget has the following impacts on Payroll.

Changes to Income Tax Rates and Brackets
Effective January 1, 2016, the government has eliminated the top marginal personal income tax rate of 25.75% and lowered the 21% tax rate to 20.3% for taxable income over $150,000. Beginning January 1, 2017, indexation of this income bracket will be consistent with all other income brackets in New Brunswick.

The table below illustrates the new tax rates in effect as of January 1, 2016:

2016 rates and brackets prior to budget Revised rates effective 1/1/2016
Income Brackets ($) Rates (%) Income Brackets  Rates (%)
0 – 40,492 9.68 0 – 40,492 9.68
40,492 - 80,985 14.82 40,492 - 80,985 14.82
80,985 - 131,664 16.52 80,985 - 131,664 16.52
131,664 - 150,000 17.84 131,664 - 150,000 17.84
150,000 - 250,000 21.00 150,000 - and over 20.30
250,000 - and over 25.75    

HST Rate Change
An increase to the HST rate from 13% to 15% will come into effect on July 1, 2016.

For more information on the Budget, visit the Ministry of Finance website.

Newfoundland and Labrador

On April 14, 2016, the Honourable Cathy Bennett, Minister of Finance, and President of Treasury Board for Newfoundland and Labrador tabled the 2016 Budget. The Budget has the following impacts on Payroll.

Government Introduces Temporary Deficit Reduction Levy
The government is implementing a temporary tax known as the Deficit Reduction Levy of up to $900 annually depending on personal taxable income.

Individuals with a taxable income of $20,000 or less will be exempt. The levy will come into effect July 1, 2016.

The table below illustrates how the Temporary Deficit Reduction Levy will work. Employers will notice similarities with the Ontario Health Premium and the Quebec Health Contribution.

Taxable Income Temporary Deficit Reduction Levy
Not more than $20,000 $0
More than $20,000 but not more than $25,000 $0.01 -$300
More than $25,000 but not more than $36,000 $300
More than $36,000 but not more than $38,500 $300.01 - $450
More than $38,500 but not more than $47,000 $450
More than $47,000 but not more than $49,500 $450.01 - $600
More than $49,500 but not more than $72,000 $600
More than $72,000 but not more than $74,500 $600.01 - $750
More than $74,500 but not more than $200,000 $750
More than $200,000 but not more than $202,500 $750.01 -$900
More than $202,500 $900

The government will begin the phasing out of this temporary tax initiative in 2018.

Tax Rate Changes Effective July 1, 2016
Effective July 1 2016, the tax rates and brackets will change as follows:

Income Tax Brackets Rates Revised Rates (2016) Revised Rates (2017)
$0 - $35,148 7.7% 8.2% 8.7%
$35,149 - $70,295 12.5% 13.5% 14.5%
$70,296 - $125,500 13.3% 14.55% 15.8%
$125,501 - $175,700 14.3% 15.8% 17.3%
Over $175,700 15.3% 16.8% 18.3%

HST Rate Change
An increase to the HST rate from 13% to 15% will come into effect on July 1, 2016.

For more information on the Budget, visit the Newfoundland and Labrador Department of Finance website.

Nova Scotia

On April 19, 2016, the Honourable Randy Delorey, Minister of Finance tabled the 2016 Budget in the Nova Scotia Legislature.

The Budget contained no changes relating to Payroll.

For more information on the Budget, visit the Nova Scotia Government’s website.

Ontario

The implementation of the Ontario Retirement Pension Plan (ORPP), Pooled Registered Pension Plan (PRPP) redevelopment, and proposed reduction rates for the Workforce Safety Insurance Board (WSIB) have been delayed.

For more information on the Budget, visit the Ministry of Finance website.

Minimum Wage Rates Across Canada

Updated minimum wage rate info can be found here.

Prince Edward Island

On April 19, 2016, the Honourable Allen F. Roach, Minister of Finance and Chair of Treasury Board tabled the 2016 Budget in the Prince Edward Island Legislature. The Budget has the following impacts on Payroll.

Provincial TD1 Tax Credits Change Effective 2016
Effective for 2016, the tax rates and brackets will change as follows:

Non-Refundable Credit Amounts ($) 2015 2016 Change($) Change(%)
Basic Personal Amount 7,708 8,000 292 3.8
Spouse 6,546 6,795 249 3.8
Dependant 6,294 6,795 501 8.0

HST Rate Change
An increase to the HST rate from 14% to 15% will come into effect on October 1, 2016.

Québec

On March 17, 2016, Québec Finance Minister Carlos Leitão tabled the 2016-2017 provincial Budget. The Budget has the following impacts on Payroll.

Expedited Elimination of the Personal Health Contribution
The Québec personal health contribution was scheduled to be eliminated from the tax table calculations as of 2019 with a gradual reduction beginning in 2017. This elimination will be expedited by an immediate reduction retroactively effective to January 2016.

See below for the new tax rates in effect as of January 1, 2016*:

*Please note: the Québec government has agreed to more effective and efficient implementation using the July 1, 2016 tax tables rather than an off-cycle publication.

For 2016, the maximum health contribution will be:

  • Reduced to $50 (from $100) for incomes of $41,265 or less (level 1)
  • Reduced to $175 (from $200) for incomes of $41,265 to $134,095 (level 2)
  • Maintained at $1,000 for incomes over $134,095 (level 3)

For 2017, the maximum health contribution will be:

  • Reduced to zero for level 1 incomes
  • Reduced to $70  for level 2 incomes
  • Reduced to $800 for level 3 incomes

For 2018, the personal health contribution will be completely eliminated for all income levels.

Reduction to the Québec Health Services Fund (QHSF)
Effective January 1, 2017, the QHSF contribution rate will be further reduced by 2021 for organizations with a payroll of $1 million or less:

  • 1.45% (from 1.6%) for the primary and manufacturing sectors;
  • 2.0% (from 2.7%) for the service and construction sectors.

Reduction in the HSF contribution rate for Québec SMBs
image credit: Finances Québec

Extension of the Eligibility for a Tax Credit for Experienced Workers
In an effort to discourage early retirement, Budget 2016-2017 announced that the eligibility age for the tax credit for experienced workers will be lowered to age 62. Effective 2018, this new category of workers will be eligible for tax relief on earnings in excess of $4,000 for the year. Eligible employees may claim this credit on the TP-1015.3-V Source Deductions Return Form.

Adjustment of maximum eligible work income above the first $5,000 based on age (Québec)
image credit: Finances Québec

For more information on the Budget, visit the Finances Québec website.

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About the Author

Marlo Hertling

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.

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