Payroll professionals should look ahead to prepare for legislative changes
Year-end is the busiest time of year for a payroll professional. Besides preparing to accurately report taxable income, it’s important to be aware of federal and provincial legislative changes coming into effect in 2013.
The following is a set of key legislative updates payroll professionals should be aware of for next year.
New taxable benefit
One of the announcements in the 2012 federal budget was that, effective with the first pay run of 2013, employers providing accidental death and dismemberment insurance or critical illness insurance to employees must include a taxable benefit equal to the employers’ paid premium. Similar to life insurance, the value of the taxable benefit will include the provincial insurance taxes applicable in Manitoba (seven per cent), Ontario (eight per cent) and Quebec (nine per cent).
Temporary EI hiring credit for small business extended to 2012
The federal government has extended the temporary employment insurance hiring credit for an additional year. If an employer’s shares of EI premiums were $10,000 or less in 2011 and the premiums for 2012 have increased, it will be eligible for a refund of the difference up to $1,000. Employers are not required to do any calculations as the CRA will do the reconciliation on employers’ behalf.
New direct deposit option
Canada Revenue Agency (CRA) is now offering employers the choice to set up direct deposit to receive the EI hiring credit refund as well as refunds from GST/HST, payroll or corporate income tax. The organization must complete and file form RC366 to establish direct deposit.
Reduced EI premium rates set for 2013
Human Resources and Skills Development Canada (HRSDC) has released the reduced EI premium rates for 2013 for employers with registered wage-loss replacement plans.
For 2013, the following rates apply:
• category 1 plans: x 1.267 the employee premium (1.236 for Quebec employees)
• category 2 plans: x 1.203 the employee premium (1.157 for Quebec employees)
• category 3 plans: x 1.203 the employee premium (1.157 for Quebec employees)
• category 4 plans: x 1.187 the employee premium (1.137 for Quebec employees)
The category refers to the group to which HRSDC assigns the employer, based on the type of wage-loss replacement plan the employer has set up.
B.C. MSP premiums rising in 2013
Effective Jan. 1, B.C. will increase its medical services plan (MSP) premium rates. For a single person, the maximum premium will rise from $64 per month to $66.50. The maximum premium for a family of two will increase from $116 per month to $120.50 and for a family of three or more it will rise from $128 per month to $133.
Ontario WSIB coverage for construction to be mandatory
Workers’ compensation coverage will become mandatory for independent operators, sole proprietors, some partners in a partnership and some executive officers who work in the construction industry beginning Jan. 1. For more information on the new requirements, refer to the WSIB’s website at www.beregisteredbeready.ca
QST to be calculated without GST
Beginning Jan. 1, GST will no longer be included when calculating the amount of Quebec Sales Tax (QST). To ensure the total tax to be paid does not change, Quebec plans to raise the rate of the QST from 9.5 per cent to 9.975 per cent as of Jan. 1, which is the current QST rate when GST is included.
Increase in temporary contribution rate for compensation tax
The Quebec budget, released on Nov. 20, proposes to increase the temporary contribution rate for the tax paid by financial institutions that are not corporations from 0.5 per cent of the amount paid for wages and salaries to 0.9 per cent, beginning Jan. 1.
The overall rate for the compensation tax for these financial institutions is 1.5 per cent until Dec. 31, 2012, consisting of a one per cent base rate and a 0.5 per cent temporary contribution. The one per cent base rate will be eliminated as of Jan. 1, as a result of changes to the QST. The 0.5 per cent temporary contribution was to have been in place until March 31, 2014. The new 0.9 per cent rate would be in place until March 31, 2019. The budget also proposes to change the temporary rates for the compensation tax that apply to financial institutions that are corporations.
2013 proposed income tax and health contribution changes for Quebec for 2013
Effective Jan. 1, Quebec is proposing to add a fourth income tax bracket and tax rate to its personal income tax system.
A new tax rate of 25.75 per cent would apply to taxable income of $100,000.01 and up. The third rate of 24 per cent would apply to taxable income between $82,190.01 and $100,000.00.
The government is also proposing to replace the flat-rate contribution for health care that individuals must pay with a graduated contribution, beginning in 2013. Employers would be required to deduct the contribution at source from employees. Under the flat-rate system, Quebec residents aged 18 and over must pay a $200 per year health contribution when they pay their personal income taxes. There are exemptions to the requirement.
Under the proposed change, the health contribution would be tied to an individual’s annual net income.
Individuals with an annual net income ranging from zero to $18,000 would not be required to make a contribution. Individuals with a net income ranging from $18,000.01 to $20,000 would required to contribute between the range of one cent and $100 (graduated increases at a rate of five per cent of the amount above $18,000). Individuals with a net income ranging from $20,000.01 to $40,000.00 will be required to contribute $100. Individuals earning between $40,000.01 and $42,000.00 would be required to contribute between $100.01 and $200 (graduated increases at a rate of five per cent of the amount above $40,000). Individuals earning between $42,000.01 and $130,000.00 would contribute $200. Individuals earning between $130,000.01 and $150,000.00 would contribute between $200.01 and $1,000 (graduated increases at a rate of 4 per cent of the amount above $130,000). Individuals earning in excess of 150,000.01 would contribute $1,000.
Revenu Québec has revised its income tax source deductions tables, as well as its formulas for calculating source deductions, to incorporate the fact that all adults are required to pay the health contribution, unless specifically exempted by law.
It has also revised the Source Deductions Return (TP-1015.3-V) to allow individuals to request their employer not deduct the health contribution because they are exempt from it or because they pay it in installments or it is deducted at source by another employer.
Annie Chong is manager of the payroll consulting group at Carswell, a Thomson Reuters business, which publishes the Canadian Payroll Manual and operates the Carswell Payroll Hotline.
