Federal Finance Minister Jim Flaherty delivered the 2014 federal budget on Feb. 11, 2014. The budget contains the following highlights that will be of interest to payroll professionals:
No changes to CPP contribution rates announced
The budget did not propose any changes to the contribution rates for the Canada Pension Plan.
Budget reiterates 2014-2016 EI rates and estimates 2017-2018 rates
The budget reiterated a government announcement from last fall 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 five cents.
No changes to personal income tax rates/brackets announced
The budget did not propose any changes to personal income tax rates, tax brackets or personal tax credit amounts.
Remittance threshold changes announced
The budget proposes to change the threshold levels for accelerated remitters to reduce the frequency of remittances for small and medium-sized businesses. The thresholds are based on an employer’s average monthly withholding amounts in the previous two calendar years.
For threshold 1 remitters, the budget proposes to increase the lower threshold from $15,000 to $25,000 and the upper limit from less than $50,000 to less than $100,000. The change would mean that employers with average monthly withholdings of between $25,000 to less than $100,000 in the previous two calendar years would have to send in their remittances for CPP, EI and income tax to the Canada Revenue Agency (CRA) twice a month. The due dates would not change. For remuneration paid from the first to 15th of the month, the remittance would be due by the 25th day of the month. For remuneration paid after the 15th, the due date would be the 10th of the following month.
For threshold 2 remitters, the budget proposes to increase the threshold from $50,000 to $100,000. As a result, employers with average monthly withholdings of $100,000 or more in the previous two calendar years would have to send in their remittances to the CRA four times a month. The remittances would continue to be due by the third working day after the end of the following weekly periods: first to seventh of the month, eighth to 14th, 15th to 21st and 22nd to the end of the month.
Employers with average monthly remittances of less than $25,000 in the previous two calendar years would pay their remittances by the 15th of each month.
The changes would apply to amounts employers withhold beginning in 2015.
Tax credit for search and rescue volunteers announced
The budget proposes to introduce a non-refundable tax credit for eligible ground, air and marine search and rescue volunteers. The proposed tax credit would allow an eligible individual to claim a 15 per cent non-refundable tax credit based on an amount of $3,000. Individuals who claim the tax credit would not be eligible for the existing $1,000 exemption that applies to volunteer firefighters. Search and rescue volunteers who are paid honoraria for their duties and who are eligible for the proposed tax credit would be allowed to choose between the tax credit and the $1,000 exemption.
To be eligible for the proposed tax credit, individuals would have to carry out a minimum of 200 hours of search and rescue services a year. The services would have to be for one or more eligible ground, air or marine search and rescue organizations and the hours would mostly be used for responding to and being on call for search and rescue and similar emergencies, going to the organization’s meetings and taking part in mandatory search and rescue training.
If an individual does at least 200 hours of combined search and rescue and volunteer firefighting services in a year, she could choose whether to claim the new search and rescue tax credit or the existing tax credit for volunteer firefighters.
The Canada Revenue Agency may require individuals who claim the tax credit to obtain a written certificate from a search and rescue team president verifying the number of eligible hours.
The proposal would apply for 2014 and later tax years.
For more information on eligibility for the tax credit, please refer to the budget documents.
Administrative measures for small and medium-sized businesses: The budget outlines a number of initiatives that the CRA is taking to improve the way it provides services to small and medium-sized businesses. These include:
•allowing businesses to update their banking and direct deposit information online (April 2014)
•allowing a business representative to send in a representative authorization request electronically instead of submitting a paper form (April 2014)
•offering a free online pre-authorized debit option for tax payments for businesses registered with its My Business Account service (October 2014).
Pension transfer limits: The budget proposes to further change the rules that apply for calculating the amount that an individual can transfer tax-free from a defined benefit (DB) pension plan to a money purchase registered pension plan, registered retirement savings plan, registered retirement income fund or pooled registered pension plan when the individual leaves the plan and the plan is underfunded and is being wound up due to the employer being insolvent. The change would apply to payments made after 2012. For more information, please refer to the budget documents.
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. The aim is to come up with ways to enable apprentices to keep working while fulfilling the technical training requirements of their programs.
Canada Job Grant: The budget proposes new measures to launch a skills training program called the Canada Job Grant. It was announced in last year’s budget, but not implemented. 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 $10,000 would be provided by the federal government. Employers would be required to contribute about one-third of the total training costs. The federal government is still in negotiations with the provinces and territories on how to implement it. In jurisdictions where there is no agreement with the federal government, Service Canada will begin to deliver the grant in April 2014.
Outstanding tax measures: Budget documents state that the government plans to introduce legislation requiring the Finance Minister to table in Parliament each year a list of proposed tax measures that have not yet become law.
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