Employers in five provinces prepare for July 1 changes
As budget season winds down across Canada, some payroll departments will be busy implementing tax changes.
Earlier this year, governments in British Columbia, New Brunswick and Quebec tabled budgets with July 1 changes for payroll. Recently, Newfoundland and Labrador and Prince Edward Island also released budgets with payroll-related changes.
Newfoundland and Labrador
In Newfoundland and Labrador, Finance Minister Cathy Bennett tabled a budget on April 14 that proposes to increase personal income tax rates in the province on July 1 and again next year.
Bennett also announced that on July 1 the government will implement a new tax on individuals with taxable incomes greater than $20,000 to help pay down the province’s deficit. The Temporary Deficit Reduction Levy, collected through payroll deductions for employees, will range from one cent to $900 a year.
Bennett said the levy is a short-term measure. The government would phase it out over three years, beginning in 2018.
The Canada Revenue Agency (CRA) is updating its payroll deductions tables and formulas to include changes. Payroll departments and service bureaus must update their systems by the first payroll cycle in July.
The budget also proposes to increase the rate of the Harmonized Sales Tax (HST) in the province to 15 per cent from 13 by raising the provincial portion of the tax to 10 per cent from eight as of July 1. The change would affect the value of taxable benefits that include the HST.
There could be more tax changes ahead for Newfoundland and Labrador. The government announced in the budget that it plans to undertake a review of the province’s tax system to find ways to make it simpler, fairer and more competitive.
Budget documents state that the review will occur after the federal government completes its own review of the Canadian tax system and after the province tables its 2017-18 budget.
In P.E.I., Finance Minister Allen Roach proposed increases to three non-refundable tax credits that employees claim on a TD1PE, Prince Edward Island Personal Tax Credits Return.
The basic personal amount would rise to $8,000 from $7,708. The spouse or common-law partner amount would increase to $6,795 from $6,546 and the eligible dependant amount would rise to $6,795 from $6,294. The changes would apply for 2016 and later tax years.
Roach also announced the government would raise the HST rate in the province to 15 per cent from 14 by increasing the provincial portion to 10 per cent from nine. The change would take effect on Oct. 1.
Once in effect, the HST rate in all four Atlantic provinces will be 15 per cent. It has been at that level in Nova Scotia since 2010. The New Brunswick government announced in its budget, tabled earlier this year, it would raise the provincial portion of the HST to 10 per cent from eight on July 1, increasing the overall rate to 15 per cent.
The New Brunswick government also plans to eliminate its top personal income tax rate of 25.75 per cent and reduce its second highest rate to 20.3 per cent. The rate will apply to all taxable income over $150,000, indexed beginning next year.
For payroll purposes, the CRA will implement the tax changes on July 1. The agency says it will prorate the new 20.3 per cent rate from July 1 to Dec. 31 to ensure payroll departments deduct the appropriate amount.
Quebec
Revenu Québec is revising its personal income tax tables and formulas to incorporate rate cuts to the province’s mandatory personal health contribution. Quebec Finance Minister Carlos Leitão announced the rate reductions when he tabled the province’s 2016-17 budget.
The government plans to lower the rates for the personal health contribution in 2016 and 2017 and eliminate premiums altogether in 2018. The proposed measure would speed up a planned phase-out of the health contribution.
Currently, provincial residents aged 18 and up pay the contribution (unless exempted) if their income exceeds $18,570 in 2016. Employees pay the contribution through income tax source deductions at work.
The proposed changes for 2016 would lower the maximum annual contribution to $50 from $100 for individuals whose annual income is between $18,570 and $41,265. For annual income between $41,265 and $134,095, the maximum annual contribution would be reduced to $175 from $200. The maximum yearly contribution would remain $1,000 for those with incomes exceeding $134,095.
For 2017, the budget proposes to exempt individuals from paying the health contribution if their net income is no more than $41,265 (all income ranges would be adjusted for indexation). For individuals whose annual income is between $41,265 and $134,095, the maximum annual contribution would be reduced to $70. For those with an income exceeding $134,095, the maximum contribution would drop to $800 from $1,000. As of Jan. 1, 2018, no one would pay the health contribution.
British Columbia
In British Columbia, as we reported in a previous issue, the government plans to change its tax reduction credit, which is included in income tax deduction calculations. The tax reduction credit is a non-refundable credit for individuals whose annual income is below a certain amount. For individuals with annual incomes of no more than $19,171, the tax reduction credit reduces income tax payable by up to $436. Individuals with an annual income between $19,171 and $31,628.14 are eligible for a partial reduction.
In this year’s budget, the government said it would raise the threshold for the maximum reduction to $19,400 and increase the factor used to calculate the credit from 3.5 per cent of net income to 3.56 per cent.
The changes would take effect for the 2016 tax year. It is expected the CRA will implement them on July 1, with amounts prorated to cover the entire year.
For employers in Alberta, Nova Scotia, Nunavut, Ontario and Yukon, there are no July 1 payroll-related provincial changes to implement. At the time of writing, governments in Manitoba, Northwest Territories and Saskatchewan had yet to release their budgets.
Earlier this year, governments in British Columbia, New Brunswick and Quebec tabled budgets with July 1 changes for payroll. Recently, Newfoundland and Labrador and Prince Edward Island also released budgets with payroll-related changes.
Newfoundland and Labrador
In Newfoundland and Labrador, Finance Minister Cathy Bennett tabled a budget on April 14 that proposes to increase personal income tax rates in the province on July 1 and again next year.
Bennett also announced that on July 1 the government will implement a new tax on individuals with taxable incomes greater than $20,000 to help pay down the province’s deficit. The Temporary Deficit Reduction Levy, collected through payroll deductions for employees, will range from one cent to $900 a year.
Bennett said the levy is a short-term measure. The government would phase it out over three years, beginning in 2018.
The Canada Revenue Agency (CRA) is updating its payroll deductions tables and formulas to include changes. Payroll departments and service bureaus must update their systems by the first payroll cycle in July.
The budget also proposes to increase the rate of the Harmonized Sales Tax (HST) in the province to 15 per cent from 13 by raising the provincial portion of the tax to 10 per cent from eight as of July 1. The change would affect the value of taxable benefits that include the HST.
There could be more tax changes ahead for Newfoundland and Labrador. The government announced in the budget that it plans to undertake a review of the province’s tax system to find ways to make it simpler, fairer and more competitive.
Budget documents state that the review will occur after the federal government completes its own review of the Canadian tax system and after the province tables its 2017-18 budget.
In P.E.I., Finance Minister Allen Roach proposed increases to three non-refundable tax credits that employees claim on a TD1PE, Prince Edward Island Personal Tax Credits Return.
The basic personal amount would rise to $8,000 from $7,708. The spouse or common-law partner amount would increase to $6,795 from $6,546 and the eligible dependant amount would rise to $6,795 from $6,294. The changes would apply for 2016 and later tax years.
Roach also announced the government would raise the HST rate in the province to 15 per cent from 14 by increasing the provincial portion to 10 per cent from nine. The change would take effect on Oct. 1.
Once in effect, the HST rate in all four Atlantic provinces will be 15 per cent. It has been at that level in Nova Scotia since 2010. The New Brunswick government announced in its budget, tabled earlier this year, it would raise the provincial portion of the HST to 10 per cent from eight on July 1, increasing the overall rate to 15 per cent.
The New Brunswick government also plans to eliminate its top personal income tax rate of 25.75 per cent and reduce its second highest rate to 20.3 per cent. The rate will apply to all taxable income over $150,000, indexed beginning next year.
For payroll purposes, the CRA will implement the tax changes on July 1. The agency says it will prorate the new 20.3 per cent rate from July 1 to Dec. 31 to ensure payroll departments deduct the appropriate amount.
Quebec
Revenu Québec is revising its personal income tax tables and formulas to incorporate rate cuts to the province’s mandatory personal health contribution. Quebec Finance Minister Carlos Leitão announced the rate reductions when he tabled the province’s 2016-17 budget.
The government plans to lower the rates for the personal health contribution in 2016 and 2017 and eliminate premiums altogether in 2018. The proposed measure would speed up a planned phase-out of the health contribution.
Currently, provincial residents aged 18 and up pay the contribution (unless exempted) if their income exceeds $18,570 in 2016. Employees pay the contribution through income tax source deductions at work.
The proposed changes for 2016 would lower the maximum annual contribution to $50 from $100 for individuals whose annual income is between $18,570 and $41,265. For annual income between $41,265 and $134,095, the maximum annual contribution would be reduced to $175 from $200. The maximum yearly contribution would remain $1,000 for those with incomes exceeding $134,095.
For 2017, the budget proposes to exempt individuals from paying the health contribution if their net income is no more than $41,265 (all income ranges would be adjusted for indexation). For individuals whose annual income is between $41,265 and $134,095, the maximum annual contribution would be reduced to $70. For those with an income exceeding $134,095, the maximum contribution would drop to $800 from $1,000. As of Jan. 1, 2018, no one would pay the health contribution.
British Columbia
In British Columbia, as we reported in a previous issue, the government plans to change its tax reduction credit, which is included in income tax deduction calculations. The tax reduction credit is a non-refundable credit for individuals whose annual income is below a certain amount. For individuals with annual incomes of no more than $19,171, the tax reduction credit reduces income tax payable by up to $436. Individuals with an annual income between $19,171 and $31,628.14 are eligible for a partial reduction.
In this year’s budget, the government said it would raise the threshold for the maximum reduction to $19,400 and increase the factor used to calculate the credit from 3.5 per cent of net income to 3.56 per cent.
The changes would take effect for the 2016 tax year. It is expected the CRA will implement them on July 1, with amounts prorated to cover the entire year.
For employers in Alberta, Nova Scotia, Nunavut, Ontario and Yukon, there are no July 1 payroll-related provincial changes to implement. At the time of writing, governments in Manitoba, Northwest Territories and Saskatchewan had yet to release their budgets.
