Several payroll-related measures proposed in 2017 federal budget
Beginning next year, the federal government says it will allow employers to issue T4s to employees electronically without first having to obtain their written consent.
The government made the announcement in its 2017 budget, which Finance Minister Bill Morneau tabled March 22. The proposal would apply to current, active employees and would require that employers “have sufficient privacy safeguards in place” before issuing electronic T4s.
Currently, employers may only give employees their T4s in an electronic format if the employees first consent to it in writing. Otherwise, employers must provide employees with two paper copies by the end of February each year by delivering them in person or mailing them to the employee’s last known address.
The budget stated that the Canada Revenue Agency (CRA) would specify the types of safeguards employers would need to put in place to issue e-T4s. Even if employers meet the criteria, they would still have to issue paper T4s if employees requested them.
Employers would also have to provide paper T4s if individuals did not have confidential access to view or print the electronic version. This could occur where employees are on a leave of absence or no longer work for the employer.
The Canadian Payroll Association (CPA), which has been calling for this measure for a number of years, said it was pleased with the announcement and the savings it would bring for employers.
“The CPA has been advocating for legislation enabling employers to provide e-T4s to employees as the standard delivery method, and we thank the CRA and the Ministry of Finance for making this best practice a reality,” said CPA President Patrick Culhane. “E-T4s are more secure and this change will save employers over $100 million annually considering the cost of administering a paper T4 is $5 per slip and over 20 million slips are never used.”
The budget also included other payroll-related proposals, including measures that would affect certain benefits and allowances that some employers provide. One proposal would eliminate a deduction that employees may claim for taxable home relocation loans that they receive from their employer, beginning next year.
Under current tax law, if an employer provides an employee or the employee’s spouse with a loan to buy a new home because of a work-related relocation and the employer charges an interest rate on the loan that is lower than a government-prescribed rate, there is a taxable benefit to the employee.
The employee may claim a deduction on the benefit that reduces his or her taxable income for the year if certain conditions apply. Although employees claim the deduction when they file their personal tax returns, their employer is required to report the deduction on their T4.
Another proposal would eliminate tax exemptions that apply for non-accountable expense allowances paid to members of provincial and territorial legislative assemblies and to certain municipal office-holders. As a result, the non-accountable allowances paid to these officials would have to be included in their income as of Jan. 1, 2019.
“In today’s workforce, many Canadians receive benefits — such as a daily food allowance or transit fare — which are counted as taxable income. Yet certain tax measures allow some individuals to pay less than their fair share of taxes on such benefits. These measures are unfair and they lack a strong policy rationale,” budget documents stated.
The budget also contained tax credit changes affecting amounts employees claim on a TD1, Personal Tax Credits Return.
The government proposes to replace the infirm dependant credit, caregiver credit and family caregiver tax credit with a new Canada caregiver credit. The change would apply for 2017 and later tax years.
The new non-refundable tax credit would allow employees to claim up to $6,883 (for 2017) for infirm dependants who are their or their spouse or common-law partner’s parents, grandparents, siblings, aunts and uncles, nieces and nephews, and adult children.
In addition, it would enable individuals to claim $2,150 (for 2017) for an infirm dependant spouse or common-law partner, an infirm dependant claimed as an eligible dependant or an infirm child under 18 years of age.
The credit would be reduced dollar for dollar by the dependant’s net income above $16,163 (for 2017). The credit amount and the income threshold would be indexed to inflation beginning in 2018.
The budget also proposed to expand the types of courses eligible for a tuition tax credit claimed on the TD1 to include occupational skills courses taken at a post-secondary institution in Canada, beginning this year.
It is expected that the CRA will update the TD1 to incorporate the proposed changes and that some employees may need to update their forms.
The government also announced in the budget that it would provide Employment and Social Development Canada (ESDC) with $12.1 million in the 2017-2018 fiscal year to “develop modern approaches to service delivery.” This would include implementing ways to speed up the application process for employment insurance (EI) benefits.
The budget did not specify how it would speed up the application process, but it is possible that ESDC will use some of the funding to investigate ways to allow employers to provide real-time payroll data to the department instead of issuing Records of Employment. A recent review of EI services recommended replacing the form with real-time payroll data.
For federally regulated workplaces, the budget proposed a number of changes to the labour standards provisions in the Canada Labour Code. Among the changes proposed:
•The rules for unpaid maternity and parental leaves would be harmonized with proposed changes to EI benefits. The budget proposed to make EI parental benefits more flexible by giving parents the option to receive them for a longer period of time at a lower benefit rate. Currently, EI provides parental benefits of up to 35 weeks, paid at a rate of 55 per cent of average weekly earnings. The budget proposal would allow parents to continue to receive EI parental benefits that way or choose to collect them for up to 18 months, paid at a rate of 33 per cent. The budget also proposed to allow women the option of claiming EI maternity benefits for up to 12 weeks before their due date instead of eight weeks as is now the case.
•New unpaid leaves for family responsibilities would be added. They would allow employees to take time off work to take part in traditional Indigenous practices, seek care if they are victims of family violence, and to care for an adult family member who needs “significant support” to recover from a critical illness or injury. The caregiving leave would harmonize the code with a new EI benefit announced in the budget that would provide up to 15 weeks of benefits for “a broader range of situations where individuals are providing care to an adult family member who requires significant support in order to recover from a critical illness or injury.”
•Bereavement leave would be more flexible.
•Employees would have the right to request more flexible work arrangements, such as when they start and stop work and the ability to work from home.
•Unpaid interns who are part of an educational program would be covered under labour standards protections, such as maximum hours of work, weekly days of rest and statutory holidays.
•Unpaid internships that are not part of a formal educational program would be eliminated.
•The code’s compliance and enforcement mechanisms would be strengthened to help employees more easily recover unpaid wages.
Other items in the budget that may be of interest to payroll professionals include proposals to:
•review federal tax expenditures to “eliminate poorly targeted and inefficient tax measures,”
•continue investing in measures to prevent tax evasion and improve compliance, and
•allow unemployed Canadians to pursue self-funded training while they receive EI benefits, as well as broaden eligibility for EI-funded skills training and employment supports under the government’s Labour Market Development Agreements.
