Federal Finance Minister Joe Oliver delivered the 2015 federal budget yesterday. The budget contains the following highlights that will be of interest to HR and payroll professionals:
Compassionate care leave to be extended: The budget proposed to extend the period for which eligible individuals may receive EI compassionate care benefits from six weeks to six months, beginning Jan. 1, 2016. The benefits are provided to eligible individuals who have to take a temporary leave from work to provide care or support to a family member who is gravely ill and who has a significant risk of death within 26 weeks.
New unpaid leaves under CLC proposed: The budget proposes to amend the Canada Labour Code to allow for new unpaid leaves for employees of federally regulated workplaces who have family responsibilities. It also proposed to increase bereavement leave under the code. Employees are currently entitled to three days of bereavement leave. Budget documents did not provide more information on the proposed changes.
No changes to CPP contribution rates: The budget did not propose any changes to the contribution rates for the Canada Pension Plan (CPP).
Budget reiterates plan to implement new EI rate-setting mechanism: The budget reiterated a previous government announcement that it plans to introduce a new mechanism for setting employment insurance (EI) rates in 2017. The new method would ensure EI premiums are no higher than necessary to pay for the EI program over time.
No changes to personal income tax rates/brackets: The budget did not propose any changes to personal income tax rates, tax brackets or personal tax credit amounts.
Quarterly remittances for new employers proposed: The budget proposed to allow new employers to send in remittances for CPP contributions, EI premiums and income tax source deductions to the Canada Revenue Agency (CRA) quarterly if their monthly withholdings are less than $1,000 and they maintain a perfect compliance record with their Canadian tax obligations. The measure would apply beginning in 2016.
Currently, new employers are required to send in remittances monthly for at least one year. After one year, they may be eligible for quarterly remitting if they have an average monthly withholding amount of less than $3,000 and have shown a perfect compliance record over the previous 12 months.
Under the proposal, remittances would be due on April 15 (for payments made from January to March), July 15 (for payments made from April to June), Oct. 15 (for payments made from July to September) and Jan. 15 of the following year (for payments made from October to December).
Changes to withholding requirements for non-resident employers proposed: The budget proposed to make certain non-resident employers exempt from withholding and remitting income tax source deductions from qualifying non-resident employees who are covered under a tax treaty. The proposed measure would apply to payments made in 2016 and later years.
Currently, employers are required to deduct income tax from non-resident employees and remit it to the CRA even if the employee is exempt from Canadian income tax under a tax treaty that Canada has signed with another country. Employers may obtain a waiver from the CRA for a particular employee, but the government said the waiver system is inefficient because it only applies to a specific employee and for a specific time period.
To qualify, a non-resident employee would have to be exempt from Canadian income tax for the payment because of a tax treaty and not be in Canada for 90 or more days in any 12-month period that includes the time the employer made the payment.
For an employer to qualify for the exemption, the employer (other than a partnership) must be resident in a country with which Canada has a tax treaty. Different rules would apply if the employer is a partnership. Employers would also not be allowed to carry on business through a permanent establishment in Canada in the fiscal period that included the time of the payment. In addition, at the time of the payment, the employer would have to be certified as exempt by the minister of National Revenue.
Exempt employers would still be responsible for reporting amounts paid to non-resident employees. They would also be responsible for collecting and remitting income tax from non-resident employees who did not qualify for the exemption (although they would not be penalized for failing to deduct income tax if they had no reason to think the employee did not qualify for the exemption when they made the payment).
The budget also proposed to amend the code to address violence and sexual harassment in federally regulated private-sector workplaces and to provide workplace protection for interns.
• EI pilot project to be extended: The government proposed to extend its EI Working While on Claim pilot project to August 2016. The project allows EI claimants to keep 50 cents of their EI benefits for every dollar they earn, up to 90 per cent of weekly insurable earnings used to calculate the benefits. The pilot project was expected to end on Aug. 1, 2015.
• TFSA limit to be increased: The budget proposed to increase the annual contribution limit for tax-free savings accounts (TFSAs) from $5,500 to $10,000, beginning in 2015.
• Rules for target benefit plans considered: The government said a number of provinces are developing target benefit plans, which combine features of defined benefit and defined contribution pension plans. In light of this, the government said it will consider changes to income tax rules to include the plans in the rules and limits for registered pension plans. It also said it is continuing to assess the possibility of allowing for a voluntary target benefit plan option for Crown corporations and federally regulated private-sector pension plans.
• Training measures proposed: The budget proposed a number of training-related measures, including the following proposals: i)The government would work with provincial and territorial governments to harmonize apprenticeship training and certification requirements. ii)The government would provide a one-time investment of $65 million over four years to help groups of employers and industry organizations work with post-secondary institutions that are interested in developing curricula and programs designed to meet specific skill needs in the labour market.
• Use of Business Number to be expanded: The government plans to expand the use of the Business Number (BN) beyond the CRA to make it easier for businesses to interact with the federal government. It proposes that businesses would only have to register with the government once, under the BN, instead of having to register separately for each federal service or program that they wanted to access. The government also proposed to give the ministers of Employment and Social Development and Labour the authority to collect, use and verify BNs to administer business-related programs.
• Red tape reduction measures announced: The government said it will create a Small Business Consultation Forum this year, involving the CRA and the Canadian Federation of Independent Business. The forum, which will meet twice a year, will provide the CRA with feedback from small and mid-size businesses on tax administration issues. To improve service, the government also announced that the CRA will implement a number of measures, including: continuing to improve its use of plain language in its communication; developing a plain-language guide to help businesses understand and prepare for CRA audits; setting up the CRA’s Liaison Officer Initiative (which helps businesses comply with tax requirements) as a permanent program; and working to ensure that taxpayers “can rely on written information” they receive in letters from the CRA and on its website.
More information on these proposals can be found on the Ministry of Finance’s website at www.fin.gc.ca.
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