Documents tabled in B.C., Quebec and Saskatchewan will affect workplace
With provinces and territories across Canada releasing their annual budgets this winter and spring, payroll professionals in some jurisdictions will be busy implementing tax and legislative changes this year and next. Here is a look at payroll-related announcements in budgets released up to the end of March:
British Columbia:
The 2017 British Columbia budget, which Finance Minister Michael de Jong delivered Feb. 21, proposed changes to the province’s Medical Services Plan (MSP) that, if implemented, will affect employers with group MSP plans.
The government is proposing to reduce MSP premium rates by 50 per cent for B.C. households with annual net incomes of up to $120,000, as of Jan. 1, 2018.
De Jong said the reduction is the first step towards eventually eliminating premiums.
To receive the 50 per cent reduction, households would first have to register with the government; however, it would automatically make the change for individuals and families who receive MSP premium assistance.
Employees who pay premiums through their employer’s group plan or whose employer pays their premiums for them as a taxable benefit would have to register for the premium reduction with their group plan administrator.
The finance ministry said this is necessary to ensure that employers withhold the proper amount for deductions or report the correct amount for taxable benefits.
Budget documents advised employees to discuss the registration with their group plan administrator in the coming months so that they will receive the reduction in January. The ministry also suggested that employers who pay premiums for employees as a taxable benefit discuss with employees how to share the benefit from the 50 per cent reduction.
The budget also proposed eliminating an education tax credit that individuals claim on a British Columbia Personal Tax Credits Return (TD1BC), as of Jan. 1, 2018.
The budget did not contain any adjustments to personal income tax rates or tax brackets or to the provincial sales tax rate. It is the last budget for the current Liberal government before a provincial election May 9.
Quebec:
The 2017-2018 Quebec budget, which Finance Minister Carlos Leitão released March 28, revealed the government is increasing the basic personal amount that employees claim on a Source Deductions Return from $11,635 to $14,890 for 2017. The other amounts claimed on the form will also rise. Beginning in 2018, the amounts will be automatically indexed each year.
Leitão also announced that the government is changing the way it calculates personal tax credits in order to make the income tax system simpler. Currently in Quebec, tax credit amounts are calculated using the tax rate that applies for the second taxable income bracket, which is 20 per cent.
“Using the rate applicable to the second taxable income bracket of the personal income tax table makes the Quebec tax system more complex for taxpayers, since a factor of 1.25 must be applied to each amount granted for the purpose of calculating personal tax credits, in order to determine the taxable income to which it corresponds,” budget documents stated.
To simplify the calculation, this year the government plans to begin using the tax rate for the first taxable income bracket, set at 16 per cent. This is the method that other Canadian jurisdictions use to calculate amounts for their personal tax credits.
For 2017, individuals will see these tax changes when they file their personal income tax return. As a result, the budget stated that payroll professionals will not need to incorporate the changes in their income tax source deduction calculations this year. Revenu Québec will include the changes in its payroll deduction tables in 2018.
Other items of interest to payroll announced in the budget include:
• The government is making its elimination of a mandatory health contribution retroactive to 2016 for individuals whose income does not exceed $134,095. Last fall, Leitão announced that the government would eliminate the health contribution for all contributors in 2017, a year earlier than previously planned. The 2017 elimination date still applies for adults with incomes over $134,095. Employees affected by the change who paid the contribution through source deductions at work will receive a refund after they file their 2016 personal income tax return.
•The government is delaying its planned elimination of a compensation tax that applies to financial institutions until March 31, 2024. The tax, which is calculated on amounts paid as wages and on insurance premiums, was to be abolished as of March 31, 2019. The government is also delaying planned rate reductions for the tax until March 31, 2022. They were to have been put in place as of April 1.
• The deadline for applying for a Health Services Fund tax holiday for large investment projects in the province is extended to Dec. 31, 2020. The deadline was supposed to be Nov. 20 of this year.
• The government plans to extend current tax measures to support new corporations in the financial sector until the end of 2022. One of the measures allows foreign specialists working at a new financial services corporation to take advantage of a five-year income tax holiday that would reduce their taxable income.
The budget also highlighted initiatives Revenu Québec is taking to improve its service, including implementing a program this year to offer guidance to small and mid-size businesses in order to help them fulfill their tax obligations.
Saskatchewan:
Payroll professionals with Saskatchewan payrolls will have to implement personal income tax rate changes for July 1.
The provincial budget, which Finance Minister Kevin Doherty tabled March 22, announced that the government would reduce all three provincial personal income tax rates by a half point on July 1.
The government also plans to lower the rates by another half point on July 1, 2019.
“Every Saskatchewan taxpayer at every income level will see a decrease in their income taxes, and those whose income is too low to pay income tax will see an increase in the Saskatchewan Low-Income Tax Credit they receive,” Doherty said.
The budget also proposed to temporarily halt annual indexing of the province’s personal income tax system, beginning in 2018. The change would affect provincial taxable income brackets and personal amounts employees claim on a Saskatchewan Personal Tax Credits Return (TD1SK).
Doherty said the suspension would remain in place until the province’s finances improve.
The budget also included another proposal that would affect the TD1SK. Effective July 1, the government plans to eliminate post-secondary education and tuition tax credits claimed on the form. It is expected that the CRA will update the form to incorporate the proposed changes.
To help the government deal with a deficit, the budget also raised the provincial sales tax (PST) rate from five per cent to six cent, as of March 23. The change affects employers who provide taxable benefits that are subject to the PST.
The government also announced that it was eliminating a number of PST exemptions, including those for restaurant meals and insurance premiums. Beginning April 1, restaurant meals are subject to PST.
As of July 1, the tax is set to apply to insurance premiums, including life, accident, and health insurance. Budget documents stated that the PST would apply on insurance premiums that are due on or after that date, regardless of when the insurance policy was issued.
Governments in Alberta, New Brunswick, the Northwest Territories and Nunavut have released budgets recently, but they did not include any payroll-related proposals.
