Canadian Payroll Reporter

May 2018

Focuses on issues of importance to payroll professionals across Canada. It contains news, case studies, profiles and tracks payroll-related legislation to help employers comply with all the rules and regulations governing their organizations.

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2 Canadian HR Reporter, a Thomson Reuters business 2018 News May 2018 | CPR rise from $9,382 to $10,392. A year later, it would increase to $11,402. Friesen did not an- nounce changes to any other tax credits claimed on the form. When the government first announced 2018 budget consul- tations, it said it was considering whether to include health-care premiums in the budget. How- ever, after Manitobans spoke out against the idea in a pre-budget survey, Premier Brian Pallister said the government would not introduce premiums in its first term in office. Newfoundland and Labrador In this year's budget, tabled on March 27, Newfoundland and Labrador Finance Minister and Treasury Board President Tom Osborne proposed changes that would affect the amount em- ployers pay for the province's Health and Post-secondary Edu- cation Tax. He said the government would increase the threshold used to determine which employers must pay the payroll-based tax from $1.2 million to $1.3 million, beginning Jan. 1, 2019. The tax rate would remain two per cent on annual payroll exceeding the threshold. Budget documents stated that the threshold increase would re- move 50 employers from the ob- ligation to pay the tax and would reduce the tax payable by up to $2,000 a year for employers sub- ject to it. Ontario The Ontario budget, which Fi- nance Minister Charles Sousa released March 28, proposed sig- nificant changes to the province's personal income tax system. The government wants to in- crease the number of personal income tax rates and income brackets from five to seven and eliminate a surtax that applies on basic provincial tax payable exceeding a specified threshold ($4,638 for 2018). The income tax changes would apply as of the 2018 tax year. For payroll deduction purposes, they would be imple- mented on July 1. The new income tax rates would be 5.05 per cent, 9.15 per cent, 11 per cent, 13.5 per cent, 17.5 per cent, 19 per cent, and 20.53 per cent. The highest rate would continue to apply to an- nual taxable income exceeding $220,000. Both surtax rates — 20 per cent and 36 per cent — would be eliminated. Also proposed was a reduction to the number of employers ex- empt from paying the province's Employer Health Tax (EHT) by changing the eligibility rules for the exemption so that they follow the eligibility criteria for a federal Small Business Deduction. The change would mean that only individuals, charities, not- for-profit organizations, private trusts and partnerships, and Canadian-controlled private corporations would be eligible for the EHT exemption. It would apply as of Jan. 1, 2019. Quebec The Quebec budget, which Fi- nance Minister Carlos Leitão released March 27, did not in- clude any rate changes affecting the Quebec Pension Plan (QPP) or the Quebec Parental Insur- ance Plan. The government has already announced that begin- ning next year, it will gradually increase QPP contribution rates over seven years. The budget also didn't include changes to personal income tax rates or tax brackets, but it did propose changes to two tax credits that employees can claim on a Source Deductions Return (TP-1015.3-V) that can affect their income tax deductions. Leitão announced that be- ginning with the 2018 tax year, the government would broaden the tax credit for persons living alone to include a grandparent or great-grandparent who allows an eligible grandchild/great- grandchild to live with them. To be eligible, the grandchild/ great-grandchild would have to be under 18 years of age or over 18 and enrolled in a recognized educational program. He also announced that the government would lower the age for the tax credit for experienced workers from 62 years to 61, as of the 2018 tax year. The tax credit encourages older workers to re- main in or re-enter the workforce by eliminating the amount of in- come tax that they have to pay on part of their eligible work income that exceeds the first $5,000. For workers aged 61 years old, the budget proposed that the maximum amount of eli- gible work income on which the tax credit is calculated be set at $3,000. It also proposed to increase by $1,000 the maximum amount of eligible work income on which the tax credit is calculated for workers over 61. As a result, the maximum would be $5,000 for workers 62 years old; $7,000 for those aged 63; $9,000 for work- ers 64 years of age; and $11,000 for those aged 65 and older. The change would apply as of the 2018 tax year. Another change would keep the rate of the tax credit for buy- ing shares in the labour-spon- sored fund Fondaction at 20 per cent for the next three fiscal years. Leitão also announced chang- es to Health Services Fund (HSF) contributions for small and mid- size businesses (SMBs). Employ- ers with Quebec employees are required to pay HSF contribu- tions based on their total annual payroll. The rate they use to calculate their contribution varies de- pending on the size of their pay- roll. Employers whose total an- nual payroll is at least $5 million, use the full rate of 4.26 per cent. The budget proposes to grad- ually raise the threshold used to determine whether an SMB is el- igible for the reduced rates from $5 million to $7 million between 2019 and 2022. Under the plan, the govern- ment would raise the thresh- old to $5.5 million in 2019, $6 million in 2020, $6.5 million in 2021, and $7 million in 2022. Beginning in 2023, the threshold would be indexed and automati- cally adjusted each year. Leitão also announced further HSF contribution reductions for SMBs with payrolls under the reduced-rate threshold. The re- ductions would replace those an- nounced in the 2016 budget that would have gradually reduced the contribution rate to 1.45 per cent for specified SMBs in the primary and manufacturing sectors and to two per cent for those in the service and construction sectors by 2021 if their payroll was no more than $1 million. Under this year's budget pro- posals, the government would reduce the HSF rate for speci- fied SMBs in the primary and manufacturing sectors whose total annual payroll is no more than $1 million from 1.5 per cent to 1.45 per cent for wages paid or deemed paid as of March 28. The rate would decrease to 1.4 per cent for 2019, 1.35 per cent for 2020, 1.30 per cent for 2021, and 1.25 per cent for 2022 and later years. For specified SMBs in the ser- vice and construction sectors whose total annual payroll does not exceed $1 million, the bud- get proposed to reduce the HSF contribution rate from 2.3 per cent to 1.95 per cent for wages paid or deemed paid as of March 28. The rate would decrease to 1.8 per cent for 2019, 1.75 per cent for 2020, 1.70 per cent for 2021, and 1.65 per cent for 2022 and later years. SMBs whose payroll is more than $1 million but less than the threshold would also see rate reductions, but they would be calculated using formulas that in- corporate the size of their payroll. Budgets in Alberta, New Brunswick, Northwest Territo- ries, Nova Scotia, and Yukon did not contain any payroll-related tax measures. And at time of writing, Nunavut, P.E.I., and Saskatchewan had yet to release budgets. As previously reported, Brit- ish Columbia's budget included proposals to eliminate Medical Services Plan premiums as of Jan. 1, 2020 and replace their rev- enue with other income sources, including a new employer health tax. It would take effect Jan. 1, 2019 and would apply to em- ployers with an annual payroll of more than $500,000. Tax changes could be ushered in through budgets from PROVINCIAL on page 1 A tax credit change in Quebec encourages older workers to remain in or re-enter the workforce.

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