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Staying informed about payroll changes from the federal government is crucial for any business, especially when it comes to compliance and financial planning. These changes can encompass new tax regulations, adjustments to minimum wage, or modifications in reporting requirements, all of which directly impact how companies like KWB process employee compensation. Proactive monitoring and adaptation to these updates ensure that businesses remain compliant and avoid potential penalties, while also maintaining accurate and fair payroll practices for their workforce.
Overview
This article details how businesses can adapt to new federal payroll changes, covering essential steps for compliance and efficient operations. It includes a labeled real-world hypothetical about a small business owner, Sarah, facing these adjustments.
- Business Navigation: Learn essential steps for navigating payroll changes to ensure compliance and operational efficiency for your business.
- Common Questions: Find answers to frequently asked questions regarding payroll changes and their impact on businesses.
Navigating Federal Payroll Changes for Your Business
On October, 19, 2015, Canadians voted in new Liberal party Prime Minister, Justin Trudeau.
During the course of the election campaign, the party announced they would make certain changes related to income tax rate calculations. Although it is unclear when these changes will be enacted, they could be introduced soon after the new government takes office.
Some of the proposed changes announced are as follows:
- Tax cuts for the middle class: Taxable income between $44,700 and $89,401 taxed at a lower rate of 20.5% instead of 22%.
- Tax increases for high income earners: A new tax bracket of 33% for annual income over $200,000.
- TFSA limit decrease: The annual TFSA contribution limit would be decreased from $10,000 to the previous limit of $5,500.
- Elimination of income splitting: Currently, income splitting allows the higher-earning spouse in a family with children under 18 to transfer up to $50,000 of income to the lower-earning spouse so it can be taxed at a lower rate. It is anticipated that income splitting will be eliminated.
- New Canada Child Benefit to replace Universal Child Tax Benefit: The new government proposes a non-taxable child benefit calculated on a sliding family income scale.
- OAS age to remain at 65: The new government has stated that they will not proceed with plans to gradually increase the age of eligibility for Old Age Security by 2023.
- CPP Enhancement: The new government has discussed working with the provincial jurisdictions in order to enhance the Canada Pension Plan benefits. There is speculation this could provide the “solution” to the Ontario government’s concern about insufficient retirement savings, making the proposed Ontario Retirement Pension Plan no longer necessary.
PRESCRIBED INTEREST RATES FOR THE FOURTH CALENDAR QUARTER
On September 16, 2015, the Canada Revenue Agency (CRA) announced the prescribed annual interest rates that will apply to any amounts owed to the CRA and to any amounts the CRA owes to individuals and corporations. These rates are calculated quarterly in accordance with applicable legislation and will be in effect from October 1, 2015 to December 31, 2015. There have been no changes to the prescribed interest rates since last quarter with the exception of corporate tax payer’s interest on pertinent loans and indebtedness.
- The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance premiums will be 5%.
- The interest rate to be paid on corporate taxpayer overpayments will be 1%.
- The interest rate paid on overpaid remittances will be 3%.
- The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans will be 1%.
- Change: The interest rate for corporate taxpayers’ pertinent loans or indebtedness will be 4.52%.
ALBERTA BUDGET (OCTOBER 27, 2015)
The Honourable Joe Ceci, President of Treasury Board and Minister of Finance for the new government, tabled the Alberta Budget for 2015 in the Alberta Legislature on October 27, 2015.
The Budget resulted in no additional income tax increases to those which have been in effect since October 1, 2015; nor were there any other changes impacting payroll.
The government did announce it will incur additional expenses that would create a deficit; however the government decided to increase alcohol and tobacco taxes in order to assist with additional funding. They also indicated that the tax on insurance premiums will be increased by 1% effective April 1, 2016.
For more information on the Alberta Provincial Budget changes, view our September 1st blog article.
If you would like more information or have any questions, feel free to contact us at 780.466.6204, or click here to send us an email.
Thanks to Janet Crawford of KWB Chartered Accountants for providing this content.
FAQ
To help you navigate the complexities of payroll changes federal government initiatives can bring, we’ve compiled answers to some common questions regarding their impact on individuals and businesses in Edmonton.
| Question | Answer |
|---|---|
| How do potential federal government payroll changes specifically impact personal income in Edmonton? | Potential federal government payroll changes, including adjustments to income tax rates or new deductions, directly influence the net pay of individuals in Edmonton. These modifications alter the amount of federal taxes withheld from earnings, thereby impacting an Edmonton resident’s overall take-home income. |
| How do federal government payroll changes specifically impact net income for individuals and businesses in Edmonton, Alberta? | New federal government payroll changes directly impact individual net income in Edmonton by adjusting taxes withheld, including income tax rates or new payroll taxes. For businesses operating in Edmonton, these changes may alter payroll tax liabilities, affecting overall operating costs and profitability. |
| What economic or social objectives drive the federal government’s decisions to change payroll policies in Edmonton, Alberta? | The federal government implements payroll policy changes, impacting individuals and businesses in Edmonton, Alberta, to achieve economic or social objectives like stimulating the economy, funding government programs, or adjusting tax burdens. These changes are often part of broader fiscal policies aimed at specific goals. |
| How can KWB Accountants & Advisors clients in Edmonton, Alberta, proactively adjust their payroll withholding for upcoming federal policy changes? | Clients in Edmonton, Alberta, should proactively adjust their payroll withholding by reviewing and updating their W-4 form when new federal policies significantly change tax rates or deductions. This helps ensure accurate withholding throughout the year, preventing underpayment or overpayment of taxes. |