No changes in tax brackets, rates
The federal budget had relatively few payroll-related announcements this year.
“With federal budgets, you’re always looking for tax increases or a reduction in taxes but basically in this years’ budget there was no announcements referring to any tax changes,” said Annie Chong, manager of the payroll consulting group at Carswell, a Thomson Reuters business.
The budget didn’t propose any further changes to previously announced EI premium rates. In the 2012 budget, the government announced EI premium rates would be set at 1.88 per cent for 2013, 1.93 per cent for 2014, 1.98 per cent for 2015 and 1.95 per cent for 2016.
There were also no changes announced to personal tax credits, personal income tax rates or tax brackets.
The budget did extend the small business hiring tax credit, she said.
The credit was originally announced as a temporary program in the 2011 budget and is for businesses that hire new workers. It is a one time credit for up to $1,000.
“This only applies to small businesses and small business owners,” she said, adding it applies to employers with EI premiums less than $15,000 in 2012, an increase from the previous threshold of $10,000.
There was a mention of some GST and HST proposals in the 2013 budget, said Chong.
This would impact parking taxable benefits. Right now some employers that provide free or subsidized parking to their employees would probably have to include a component of GST or HST in the calculation of the formula of the taxable benefit assessment, she said.
But there are certain sectors — such as some charities — that were previously exempt from the GST/HST component.
“What the budget has indicated this year is they’re going to be actually eliminating those people from the exemption,” said Chong. “So, in other words, they are going to be probably subject to the GST/HST moving forward.”
The 2013 budget has proposed that a federal tax credit for labour-sponsored venture capital corporations be phased out.
For 2013 and 2014, the budget proposed the tax credit would stay as it is, at $750 and 15 per cent “of the amount deducted or withheld during the year for the acquisition by the employee of approved shares of the capital stock of a prescribed labour-sponsored venture capital corporation,” according to Carswell’s payroll group.
The budget would see the credit reduced to $500 and 10 per cent in 2015, then to $250 and five per cent in 2016 and it would be eliminated by 2017.
“This is an area where an employee would enjoy a little bit of a tax break, but that’s something that’s built in to the tax tables and tax programs,” she said. “It’s not something people visually see on their paycheques, so I think its worth mentioning that this will gradually phase out by 2017. But, again, its not a huge impact to payroll.”
There are also proposed changes on the way registered pension plan administrators refund contributions to correct “reasonable errors.”
Right now administrators need Canada Revenue Agency (CRA) approval to do refunds.
“Budget documents describe reasonable errors as those where, for example, an employer erred in calculating a member’s or an employer’s contributions for a certain year,” according to the payroll consulting group.
The proposed change has stringent requirements though, including the timing of the error.
There are other proposed changes that may indirectly impact payroll, or that payroll should be aware of. These include the establishment of the Canada jobs grant, harmonization of apprenticeship programs with the provinces, changes to the government’s temporary foreign workers program and the creation of a Canadian Employers Disability Forum.
Another proposed change in the budget the Canadian Payroll Association (CPA) said will directly affect payroll groups is the move towards more efficient government operations at the CRA.
“The CRA will implement transformational changes to its compliance programs that will improve effectiveness and help to preserve the integrity of the tax system through targeting non-compliance in the highest-risk areas,” the CPA said.
Proposed improvements include increased use of data analysis to find those who are not complying with regulations and moves to make it easier to get information from the agency online.
The government is looking at ways to streamline its online presence “by making it easier for Canadians to find and access Government information on the web through a single entry point,” the CPA said.
“The CPA supports these and other steps already taken by government agencies and departments and continues to work with the government to move toward a more efficient and effective exchange of information for all stakeholders,” a statement from the CPA said.