Beginning in 2015, many employers in Canada will not have to remit as many source deduction payments as they do now, Finance Minister Jim Flaherty announced in this year’s federal budget.
The announcement was the chief payroll-related proposal put forward in the budget, which Flaherty presented on Feb. 11. The government proposes to increase the thresholds that apply for source deduction remittances to reduce the maximum number of payments employers have to send to the Canada Revenue Agency (CRA). They are based on an employer’s average monthly withholding amount two calendar years ago.
The changes would apply to amounts employers withhold beginning in 2015.
For threshold 1 remitters, the budget proposes to increase the threshold from $15,000 to $25,000. For threshold 2 remitters, the threshold would rise from $50,000 to $100,000. The change would mean employers with average monthly withholdings of between $25,000 to less than $100,000 would have to send in their remittances for CPP, EI and income tax to the CRA twice a month. Employers with average monthly withholdings of $100,000 or more would have to send in remittances four times a month. The due dates for remittances would not change.
Employers with average monthly remittances of less than $25,000 would pay their remittances once a month. Currently, only employers with average monthly withholdings of less than $15,000 in the previous two calendar years remit monthly.
The change will reduce the administrative burden for small and medium-sized businesses, says the Canadian Payroll Association (CPA).
"The world has changed dramatically since 1990 — the year the thresholds were implemented — and an average payroll remittance of $50,000 per month is no longer a large business," said CPA president and CEO Patrick Culhane.
While pleased with this proposal, the CPA is disappointed the budget did not include more payroll-related measures to reduce administrative requirements for employers. For instance, the association wanted the government to include a measure to allow employers to provide electronic T4s to all employees. It says this change would reduce the number of paper T4s and save employers more than $73 million a year.
Overall, the budget contained very few changes affecting payroll. There were no changes to CPP contributions or to personal income tax rates or brackets.
Budget documents did reiterate a previous government announcement that it would freeze EI premium rates for employees outside of Quebec at 1.88 per cent for 2014 and not set the rate any higher than 1.88 per cent in 2015 and 2016. In 2017, the government will implement a new process for setting EI premium rates called the seven-year break-even rate. Budget documents estimate this change will result in an EI premium rate of 1.47 per cent in 2017 and 2018. Future rate changes will be limited to adjustments of no more than five cents.
Other proposed measures include:
A non-refundable tax credit for search and rescue volunteers: This would be similar to an existing tax credit for volunteer firefighters. Eligible individuals would be able to claim a 15 per cent non-refundable tax credit based on an amount of $3,000 for their search and rescue volunteer work if they carried out a minimum of 200 hours of search and rescue services a year. Individuals who claim the new tax credit would also not be allowed to take the $1,000 tax exemption for honoraria that some governments, municipalities and public authorities pay to emergency services volunteers. The government proposes to implement the tax credit this year.
Apprenticeship training: The budget proposes to implement a new pilot project to test alternatives to the current methods used to train apprentices. The Flexibility and Innovation in Apprenticeship Technical Training pilot project would test training methods such as in-class simulators, e-learning modules and video conferencing.
Canada Job Grant: The grant would provide funding to help Canadians receive job training at community colleges, career colleges, trade union centres and with private trainers. It could provide up to $15,000 per person for training costs, of which the federal government would provide $10,000. Employers would be required to contribute about one-third of the total costs. Ottawa is still in negotiations with the provinces and territories on how to implement it.
In jurisdictions where it cannot come to an agreement, the government said would deliver the program on its own through Service Canada, beginning next month.
The provincial scene: A number of other jurisdictions have also released their annual budgets. In British Columbia, the only payroll-related change was an announcement that premiums for the Medical Services Plan would go up on Jan. 1, 2015. Premiums for a single person will rise from $69.25 per month to $72. The maximum premium for a family of two will increase from $125.50 per month to $130.50 and for a family of three or more, it will increase from $138.50 per month to $144.
In Quebec, the government announced it would change its payroll remittance thresholds to match the federal proposals. Quebec will implement the change once Ottawa revises its regulations to incorporate the new remittance thresholds. The Quebec government also said it would introduce a tax credit for search and rescue volunteers similar to the proposed federal one.
New Brunswick and the Northwest Territories also unveiled budgets, but they did not include any payroll-related changes.