Payroll staff in some provinces may be busier than others
Location, location, location. That phrase, usually tied to real estate, also works for payroll professionals trying to determine if they will have to implement provincial budget measures this year.
Depending on the jurisdiction in which an employer has employees, payroll professionals may have a lot of changes to make, or little to none. To date, Ontario has proposed the most extensive payroll-related changes, although with a provincial election next month, it is impossible to know whether the proposals will be enacted.
Here is a look at payroll-related measures announced so far in provincial budgets:
Manitoba
The Manitoba budget, which Finance Minister Cameron Friesen tabled on March 12, included an announcement that the government would increase the basic personal amount that employees claim on a Manitoba Personal Tax Credits Return (TD1MB) by $2,020 over two years, beginning next year.
On Jan. 1, 2019, the basic personal amount would rise from $9,382 to $10,392. A year later, it would increase to $11,402. Friesen did not announce changes to any other tax credits claimed on the form.
When the government first announced 2018 budget consultations, it said it was considering whether to include health-care premiums in the budget. However, after Manitobans spoke out against the idea in a pre-budget survey, Premier Brian Pallister said the government would not introduce premiums in its first term in office.
Newfoundland and Labrador
In this year’s budget, tabled on March 27, Newfoundland and Labrador Finance Minister and Treasury Board President Tom Osborne proposed changes that would affect the amount employers pay for the province’s Health and Post-secondary Education Tax.
He said the government would increase the threshold used to determine which employers must pay the payroll-based tax from $1.2 million to $1.3 million, beginning Jan. 1, 2019. The tax rate would remain two per cent on annual payroll exceeding the threshold.
Budget documents stated that the threshold increase would remove 50 employers from the obligation to pay the tax and would reduce the tax payable by up to $2,000 a year for employers subject to it.
Ontario
The Ontario budget, which Finance Minister Charles Sousa released March 28, proposed significant changes to the province’s personal income tax system.
The government wants to increase the number of personal income tax rates and income brackets from five to seven and eliminate a surtax that applies on basic provincial tax payable exceeding a specified threshold ($4,638 for 2018).
The income tax changes would apply as of the 2018 tax year. For payroll deduction purposes, they would be implemented on July 1.
The new income tax rates would be 5.05 per cent, 9.15 per cent, 11 per cent, 13.5 per cent, 17.5 per cent, 19 per cent, and 20.53 per cent. The highest rate would continue to apply to annual taxable income exceeding $220,000. Both surtax rates — 20 per cent and 36 per cent — would be eliminated.
Also proposed was a reduction to the number of employers exempt from paying the province’s Employer Health Tax (EHT) by changing the eligibility rules for the exemption so that they follow the eligibility criteria for a federal Small Business Deduction.
The change would mean that only individuals, charities, not-for-profit organizations, private trusts and partnerships, and Canadian-controlled private corporations would be eligible for the EHT exemption. It would apply as of Jan. 1, 2019.
Quebec
The Quebec budget, which Finance Minister Carlos Leitão released March 27, did not include any rate changes affecting the Quebec Pension Plan (QPP) or the Quebec Parental Insurance Plan. The government has already announced that beginning next year, it will gradually increase QPP contribution rates over seven years.
The budget also didn’t include changes to personal income tax rates or tax brackets, but it did propose changes to two tax credits that employees can claim on a Source Deductions Return (TP-1015.3-V) that can affect their income tax deductions.
Leitão announced that beginning with the 2018 tax year, the government would broaden the tax credit for persons living alone to include a grandparent or great-grandparent who allows an eligible grandchild/great-grandchild to live with them. To be eligible, the grandchild/great-grandchild would have to be under 18 years of age or over 18 and enrolled in a recognized educational program.
He also announced that the government would lower the age for the tax credit for experienced workers from 62 years to 61, as of the 2018 tax year. The tax credit encourages older workers to remain in or re-enter the workforce by eliminating the amount of income tax that they have to pay on part of their eligible work income that exceeds the first $5,000.
For workers aged 61 years old, the budget proposed that the maximum amount of eligible work income on which the tax credit is calculated be set at $3,000.
It also proposed to increase by $1,000 the maximum amount of eligible work income on which the tax credit is calculated for workers over 61. As a result, the maximum would be $5,000 for workers 62 years old; $7,000 for those aged 63; $9,000 for workers 64 years of age; and $11,000 for those aged 65 and older.
The change would apply as of the 2018 tax year.
Another change would keep the rate of the tax credit for buying shares in the labour-sponsored fund Fondaction at 20 per cent for the next three fiscal years.
Leitão also announced changes to Health Services Fund (HSF) contributions for small and mid-size businesses (SMBs). Employers with Quebec employees are required to pay HSF contributions based on their total annual payroll.
The rate they use to calculate their contribution varies depending on the size of their payroll. Employers whose total annual payroll is at least $5 million, use the full rate of 4.26 per cent.
The budget proposes to gradually raise the threshold used to determine whether an SMB is eligible for the reduced rates from $5 million to $7 million between 2019 and 2022.
Under the plan, the government would raise the threshold to $5.5 million in 2019, $6 million in 2020, $6.5 million in 2021, and $7 million in 2022. Beginning in 2023, the threshold would be indexed and automatically adjusted each year.
Leitão also announced further HSF contribution reductions for SMBs with payrolls under the reduced-rate threshold. The reductions would replace those announced in the 2016 budget that would have gradually reduced the contribution rate to 1.45 per cent for specified SMBs in the primary and manufacturing sectors and to two per cent for those in the service and construction sectors by 2021 if their payroll was no more than $1 million.
Under this year’s budget proposals, the government would reduce the HSF rate for specified SMBs in the primary and manufacturing sectors whose total annual payroll is no more than $1 million from 1.5 per cent to 1.45 per cent for wages paid or deemed paid as of March 28. The rate would decrease to 1.4 per cent for 2019, 1.35 per cent for 2020, 1.30 per cent for 2021, and 1.25 per cent for 2022 and later years.
For specified SMBs in the service and construction sectors whose total annual payroll does not exceed $1 million, the budget proposed to reduce the HSF contribution rate from 2.3 per cent to 1.95 per cent for wages paid or deemed paid as of March 28. The rate would decrease to 1.8 per cent for 2019, 1.75 per cent for 2020, 1.70 per cent for 2021, and 1.65 per cent for 2022 and later years.
SMBs whose payroll is more than $1 million but less than the threshold would also see rate reductions, but they would be calculated using formulas that incorporate the size of their payroll.
Budgets in Alberta, New Brunswick, Northwest Territories, Nova Scotia, and Yukon did not contain any payroll-related tax measures. And at time of writing, Nunavut, P.E.I., and Saskatchewan had yet to release budgets.
As previously reported, British Columbia’s budget included proposals to eliminate Medical Services Plan premiums as of Jan. 1, 2020 and replace their revenue with other income sources, including a new employer health tax. It would take effect Jan. 1, 2019 and would apply to employers with an annual payroll of more than $500,000.
