Federal budget announced

New tax credits, EI relief for small businesses proposed

Federal Finance Minister Jim Flaherty delivered the 2011 federal budget on March 22, 2011. The budget contains the following items that will be of interest to payroll professionals:

No changes to personal income tax rates/brackets

The budget did not propose any changes to personal income tax rates or tax brackets.

No changes to CPP contribution rates

The budget did not propose any changes to the contribution rates for the Canada Pension Plan.

No changes to EI premium rates

The budget did not propose any new changes to employment insurance (EI) premium rates. It did reiterate a previous government announcement that EI rates would go up by no more than 10 cents per $100 of insurable earnings, beginning in 2012. The budget also noted that the government would soon release a consultation paper on ways to improve the EI rate-setting mechanism.

Temporary EI premium relief for small businesses that hire workers

The budget proposes to introduce a temporary hiring credit for small businesses that employ new employees. The one-time credit would be up to $1,000 and would apply against the increase in the employer’s employment insurance premiums in 2011 over what the employer paid in 2010. The proposal would apply to businesses with total EI premiums of no more than $10,000 in 2010.

Tax credit for volunteer firefighters proposed

The budget proposes to introduce a non-refundable tax credit for eligible volunteer firefighters. The proposed tax credit would allow eligible volunteer firefighters to claim a 15 per cent non-refundable tax credit based on an amount of $3,000. Individuals who claim the tax credit would not be eligible for the existing $1,000 exemption that applies to emergency volunteers. Volunteer firefighters who are currently paid honoraria for their duties and who are eligible for the tax credit would be allowed to choose between the tax credit and the $1,000 exemption. To be eligible for the proposed tax credit, individuals would have to carry out an annual minimum of 200 hours of volunteer firefighting services for one or more fire departments. They would also have to obtain written confirmation of the number of hours from the fire department. The proposal would apply for 2011 and later years.

Family caregivers tax credit proposed

The budget proposes to introduce a 15 per cent non-refundable tax credit for caregivers looking after dependants with physical or mental disabilities, including spouses, common-law spouses and children under age 18. The tax credit, which would apply beginning in 2012, would be based on an amount of $2,000. The $2,000 amount would be indexed starting in 2013.

Exam fees to be added to tuition tax credit

The budget proposes to add certain examination fees to the types of fees that qualify under the tuition tax credit. The exam fees would include those required to obtain a professional status that federal or provincial law recognizes or required to be licensed or certified to work in a profession or trade in Canada. They would also include fees and charges related to the exam, such as certain required study materials. The proposal would not apply to fees for exams taken to begin study in a profession or a field. The proposal would apply to exams taken in 2011 and later years. Budget documents did not confirm whether the TD1, Personal Tax Credits Return, would be revised to incorporate exam fees into the tuition tax credit claimed on the form.

FYI proposals

•Employment insurance best 14 weeks pilot project: The budget proposes to renew the best 14 weeks pilot project until June 2012. The project allows claimants in 25 regions that have higher unemployment to have their EI benefits calculated on their highest 14 weeks of earnings over the year before they made the benefits claim. It was originally scheduled to end this summer. The project requires the employers of workers who live in the affected regions to provide 53 weeks of pay period information on the record of employment.

•EI work-sharing program: The budget proposes to extend enhancements to its EI work-sharing program. The work-sharing program helps employers and employees avoid temporary layoffs by providing EI benefits to eligible workers who are willing to work a reduced workweek for a temporary period when, beyond the employer’s control, its business activities are reduced. The proposal would extend the program by up to 16 weeks for active or recently ended work-sharing agreements. The extension would be phased out by October 2011. The budget also proposes to simplify the program’s administrative procedures for employers signing new agreements. More information on the work-sharing program is available on Service Canada’s website at www.servicecanada.gc.ca/eng/work_sharing/index.shtml.

Employee profit-sharing plans: The budget proposes that the government review the rules for employee profit-sharing plans.

Mandatory retirement: The budget proposes to eliminate mandatory retirement for federally regulated employees, unless there is a bona fide occupational requirement for it.

New penalty structure: The budget proposes to have the Canada Revenue Agency review the penalty structure for late filing of information returns, especially for small businesses. Budget documents indicate that any changes to the penalties as a result of the review would be announced before the deadline for filing 2011 information returns.

Electronic responses: The budget proposes that by April 2012, the Canada Revenue Agency will introduce electronic answers to written questions from clients on its My Business Account website. The change is part of the agency’s efforts to improve services.

Wage earner protection program: The budget proposes to extend the wage earner protection program (WEPP) to cover workers who lose their jobs because their employer’s attempt to restructure takes more than six months, then fails and ends with the employer going bankrupt or into receivership. The WEPP pays workers up to $3,400 in 2011 for unpaid wages, vacation pay, severance pay and termination pay that they earned in the six months before their employer went bankrupt or into receivership.

More information on these proposals can be found on the Ministry of Finance’s website at www.fin.gc.ca/fin-eng.asp.


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