DID YOU KNOW…

A recent report by the Auditor General found that there are  several issues with Canada Revenue Agency
call centres. There are nine such call centres across Canada. Of the 53.5 million calls made to call centres,
29 million did not go through, and it took callers on average 3 to 4 attempts to get through. Of greater
concern is that 30% of the answers given by these call centres were wrong.

EMPLOYMENT INSURANCE RATES REDUCED

The 2019 Employment Insurance (EI) Premium rate will be going down in 2018. The rate will be decreasing from $1.66 to $1.62 for every $100 of insurable earnings. This will be the lowest EI premium rate since 1980. The decrease in the effective rate for employers will be slightly greater, as employers pay 1.4 times the amounts paid by employees.

Nonetheless, total premium deductions will actually be increasing in the coming year, due to an increase in Maximum Insurable Earnings, from $51,700 in 2018 to $53,100 in 2019.

As a result, the maximum employee deduction will be increasing slightly to $860, and the maximum employer contribution will be rising to $1,204.

If an employee has net income over $66,375 in 2019, and they have received EI premiums for more that one week in the prior 10 years, they will have to pay back a portion of their EI premiums. This clawback rate will be 30% of the     amount that their net income exceeds $66,375.

CORPORATE TAX RATE DROPPING IN 2019

Corporate tax rates will continue to decrease in 2019 for small businesses.

The small business tax rate applies on the first $500,000 of active income that is earned by a qualifying small business corporation. The tax rate on this income in British Columbia will be reduced to 11%. This drop will represent the final annual decrease in the plan that was introduced by the federal government in 2016. For active business income over $500,000, the tax rate will remain unchanged at 27%.

To offset the decrease in corporate tax rates, the CRA has increased the personal tax rate on dividends paid to shareholders on the qualifying earnings of these corporations. As a result, the net after tax cash of a shareholder has dropped across all income levels on the receipt of dividends. Shareholders in many cases will now pay less cumulative taxes on wages as compared to dividends.

There have been discussions concerning the Canadian response to the drop in corporate income tax rates in the United States. Their federal corporate tax rate dropped from 35% to 21%. When combined with corporate tax rates charged by individual states, the average tax rate for companies in the United States is just under 26%.

Additional drops in corporate tax appear unlikely in Canada. However, the federal government may increase the rates with which capital purchases can be written off, which formed part of the tax cuts in the United States.

DID YOU KNOW…

If a taxpayer is a resident of Canada, and they receive United States Social Security benefits, they must report these benefits on their personal tax return in Canada. As a result of the tax treaty between Canada and the United States, a taxpayer only has to pay tax on 85% of the benefits they receive. If they started collecting those benefits prior to 1996, they only have to pay tax on 50% of the benefits.

TAXATION OF MUNICIPAL ALLOWANCES CHANGING IN 2019

Another change announced in prior years will become effective in 2019.

As of January 1, 2019, non-accountable allowances paid to elected members of legislative assemblies, certain municipal officers, and certain other individuals will be fully included in income. Allowances are considered to be non-accountable if the employee did not have to submit receipts in order to receive the allowance.

Currently, if the allowance is less than 1/2 of the income received from the above individual’s salary and other remuneration, the allowance is not included in income. As of January 1, the full amount of the allowance will be included in Box 14, and will be subject to income tax and Canada Pension Plan deductions. However, because amounts paid to elected or appointed officials are not subject to Employment Insurance, no Employment Insurance premiums will be deducted.

If eligible, the expenses can still qualify as employment expenses and be deducted on the personal income tax return. The taxpayer will have to meet the same requirements as other employees in order to qualify for the deduction.