A roundup of payroll-related information from the federal budget
Payroll practitioners need to be aware of a number of items in the federal budget delivered by Finance Minister Ralph Goodale. While the budget contains no change to personal tax rates and no new taxes, there are a number of important changes for payroll.
No tax rate increases
The budget contains no changes to personal tax rates and no new taxes. For more information, please visit: www.carswell.com/payroll/updates/budget.asp
Remittances by employers of Canada Pension Plan contributions
The budget proposes to introduce legislation that would deem CPP contributions made or remitted by one employer in a year for a given employee to have been made or remitted by a second employer in cases where the employee becomes employed by the second employer as a result of a merger of the two employers or acquisition of all or a distinct part of the business activities of the first employer by the second employer.
This change would apply starting in 2004.
The amendments would also clarify the rules governing employer contributions in respect of current and previous years by making explicit the long-standing practice that the total amount an employer is required to contribute in a year for a given employee is the amount that the employer is required to remit at source for the employee.
Remittance by employers of Employment Insurance premiums
The budget proposes to introduce legislation that would deem EI premiums paid or remitted by one employer in a year for a given employee to have been paid or remitted by a second employer in cases where the employee becomes employed by the second employer as a result of a merger of the two employers or acquisition of all or a distinct part of the business activities of the first employer by the second employer.
This change would apply starting in 2004.
Education tax credit
Current rules prohibit individuals from claiming the education tax credit where they are pursuing a post-secondary education that is related to their current employment. The budget proposes to remove this restriction provided that no part of the costs of education is reimbursed by the employer.
This measure would apply to the 2004 and subsequent taxation years.
Tax relief for Canadian Forces personnel and police deployed to international high-risk operational missions
Starting Jan. 1, 2004, the employment income received by Canadian Forces personnel and police on high-risk international missions outside of Canada will be exempt from income tax.
Rate-setting regime for Employment Insurance premium
In the 2003 federal budget, the government announced plans to consult on a new permanent rate-setting regime for 2005 and beyond.
Interested parties were invited to provide submissions to the Government of Canada. The results of the consultations are now being reviewed. A summary of the consultations is available at http://www.fin.gc.ca. It is the government's intention to introduce legislation to implement a new mechanism that would be consistent with these principles, taking into account the views expressed during the consultations.
The government is attempting to ensure against the risk that such legislation may not be passed in time to set the rate for 2005, by proposing to give the Governor in Council the authority to set the rate for 2005 in the fall of 2004. In doing so, it would set the rate in a manner consistent with the new rate-setting mechanism.
For planning purposes, the Government has assumed an employee premium rate of $1.98 (per $100 of insurable earnings) for 2005, which is the rate expected to generate revenues sufficient to cover expected program costs, based on the economic assumptions used in this budget. At this time it is not known if the EI rate will, in fact, be set at this amount for the 2005 taxation year.
More information on these proposals can be found on the Ministry of Finance's Internet site at http://www.fin.gc.ca/budtoce/2004/budliste.htm.
Information courtesy Carswell PayrollSource. Carswell PayrollSource is the ultimate research tool for the Canadian payroll professional. For more information, visit http://www.carswell.com/payroll/
No tax rate increases
The budget contains no changes to personal tax rates and no new taxes. For more information, please visit: www.carswell.com/payroll/updates/budget.asp
Remittances by employers of Canada Pension Plan contributions
The budget proposes to introduce legislation that would deem CPP contributions made or remitted by one employer in a year for a given employee to have been made or remitted by a second employer in cases where the employee becomes employed by the second employer as a result of a merger of the two employers or acquisition of all or a distinct part of the business activities of the first employer by the second employer.
This change would apply starting in 2004.
The amendments would also clarify the rules governing employer contributions in respect of current and previous years by making explicit the long-standing practice that the total amount an employer is required to contribute in a year for a given employee is the amount that the employer is required to remit at source for the employee.
Remittance by employers of Employment Insurance premiums
The budget proposes to introduce legislation that would deem EI premiums paid or remitted by one employer in a year for a given employee to have been paid or remitted by a second employer in cases where the employee becomes employed by the second employer as a result of a merger of the two employers or acquisition of all or a distinct part of the business activities of the first employer by the second employer.
This change would apply starting in 2004.
Education tax credit
Current rules prohibit individuals from claiming the education tax credit where they are pursuing a post-secondary education that is related to their current employment. The budget proposes to remove this restriction provided that no part of the costs of education is reimbursed by the employer.
This measure would apply to the 2004 and subsequent taxation years.
Tax relief for Canadian Forces personnel and police deployed to international high-risk operational missions
Starting Jan. 1, 2004, the employment income received by Canadian Forces personnel and police on high-risk international missions outside of Canada will be exempt from income tax.
Rate-setting regime for Employment Insurance premium
In the 2003 federal budget, the government announced plans to consult on a new permanent rate-setting regime for 2005 and beyond.
Interested parties were invited to provide submissions to the Government of Canada. The results of the consultations are now being reviewed. A summary of the consultations is available at http://www.fin.gc.ca. It is the government's intention to introduce legislation to implement a new mechanism that would be consistent with these principles, taking into account the views expressed during the consultations.
The government is attempting to ensure against the risk that such legislation may not be passed in time to set the rate for 2005, by proposing to give the Governor in Council the authority to set the rate for 2005 in the fall of 2004. In doing so, it would set the rate in a manner consistent with the new rate-setting mechanism.
For planning purposes, the Government has assumed an employee premium rate of $1.98 (per $100 of insurable earnings) for 2005, which is the rate expected to generate revenues sufficient to cover expected program costs, based on the economic assumptions used in this budget. At this time it is not known if the EI rate will, in fact, be set at this amount for the 2005 taxation year.
More information on these proposals can be found on the Ministry of Finance's Internet site at http://www.fin.gc.ca/budtoce/2004/budliste.htm.
Information courtesy Carswell PayrollSource. Carswell PayrollSource is the ultimate research tool for the Canadian payroll professional. For more information, visit http://www.carswell.com/payroll/
