Get ready, accountants- the 2019 tax season is coming. The first day to file is Feb. 28, and most tax payments are due by April 30. As your firm gets ready for the busiest season of the year, it’s a good idea to learn about new tax laws in Canada.
Canada Tax Changes in 2019
The 2019 tax year doesn’t bring major changes for most accountants and residents in Canada. You can expect small shifts in pension plan and employment insurance contributions, but nothing that’s going to break the bank.
If you represent certain elected officials, however, the elimination of the non-accountable allowance exemption may have a significant impact on your client’s finances. Cannabis packagers also face a heavier reporting and payment burden, due to the new cannabis excise tax. In addition, accountants who work with employers in British Columbia should become familiar with changes to the province’s health insurance system that are likely to affect tax time.
Higher Maximum Contributions to the Canada Pension Plan (CPP)
Whether you handle taxes for individuals or employers, it’s important to note that the CPP contribution limits have changed for 2019. This is the first time the CPP limits have changed since 2003.
The maximum pensionable earnings for 2019 are $57,400, an increase from the 2018 limit of $55,900. The contribution rate for employees and employers increased to 5.1% in 2019, meaning the maximum contribution to the CPP is $2,748.90 each. If you work with self-employed clients, you can also expect higher CPP rates. Self-employed professionals can contribute up to 10.2% of the maximum earnings, which comes out to $5,497.80. This means that higher-earning clients can contribute a slightly higher amount of money to the CPP, which should increase their retirement income.
No More Non-Accountable Allowances for Elected Officials
Accounting professionals who work with elected officials often need to deal with non-accountable allowances—money your clients receive to help cover the costs of their work. In 2018 and years prior, some officials qualified for an exemption and didn’t have to include allowances in taxable income, if that amount represented less than half of their salary.
In 2019, that exemption disappears. Now, if your clients receive allowances, you must include the entire amount as part of their taxable income.
This change applies to:
- People who are elected to legislative assemblies
- Officers who are elected by popular vote to utilities boards, corporations, commissions, and other similar groups for municipalities
- School board members on public or separate boards
- Members of other bodies that govern school districts
Clients whose non-accountable allowances have been close to 50% of their income are likely to have a considerably higher tax bill. They may even fall into a higher income tax bracket, which drives taxes up even further. You can help them prepare by finding every possible deduction or figuring out ways to reduce those allowances.
New Cannabis Excise Tax
On October 17, 2018, the Canadian government legalized recreational cannabis. At the same time, it created new regulations and a cannabis excise tax. If any of your clients package and sell cannabis to consumers, distributors or retailers, these laws impact your tax preparation and payment schedule.
Before they can produce cannabis legally or deal with taxes, your clients must:
- Get a cannabis licence from Health Canada
- Get a cannabis licence from the CRA
- Buy and use excise stamps for any cannabis they sell
If your clients are registered and licenced to package cannabis, their tax burden increases—and so does your workload. When working on their behalf, you must calculate the excise duty for every transaction. The duty varies by sale and is either a flat rate duty or an ad valorem duty, whichever is higher. You’ll also need to file a cannabis duty and information return, and pay the duty at the end of every month. The CRA expects everyone with a cannabis licence to keep records of any cannabis that is:
- Thrown out
To streamline the filing and paying process, start educating your clients who are thinking about entering the cannabis packaging market. You can prompt them to get the necessary licences, and offer tax tips that help them understand the payment and reporting process. That way, they can set up their sales process to comply with CRA requirements.
British Columbia Employer Health Tax
Employers in British Columbia (B.C.) could be facing the new Employer Health Tax (EHT) in 2019. This tax, which goes into effect on January 1, 2019, is designed to replace the Medical Services Plan (MSP).
The EHT doesn’t affect all of your business clients in British Columbia. It depends on remuneration—the value of payments, benefits, and allowances paid to employees in B.C. Employers in the province need to register and pay, if they have a remuneration that totals $500,000.01 or more. The tax rates depend on the total remuneration. You can calculate EHT with the following formulas:
- Employers with a B.C. remuneration between $500,000.01 and $1,500,000: 2.925% x (B.C. remuneration – $500,000)
- Employers with a B.C. remuneration of $1,500,000.01 and higher:1.95% x total B.C. remuneration
For clients who are expecting to fall into the $500,000.01 or higher category, you can help them start planning now for the change in cash flow. Also note that B.C. wants to end individual MSP payments by 2020. At that point, your clients may need to start adjusting salaries or cutting costs to compensate for the new EHT payments.
2019 Employment Insurance (EI) Rates for Canada and Quebec
You may have clients who pay EI premiums every year. If so, you need to know that in 2019, the EI premiums are dropping. The 2019 rate is $1.62 for every $100 of insurable earnings, which is lower than the $1.66 rate for 2018. However, the insurable earnings limit is rising, and employers and employees must pay EI on earnings up to $53,100 in 2019. This is higher than the 2018 limit of $51,700. Since both changes are relatively small, there’s probably no need to worry about cash flow, but it is important to prepare your payroll systems for the new rates.
If you work with clients in Quebec, you can also expect different rates. Quebec residents are covered under the provincial Quebec Parental Insurance Plan (QPIP), which replaces the benefits that the federal government provides through the EI program. As a result, Quebec residents qualify for a reduced rate and pay lower EI premiums. In 2019, your clients in Quebec pay $1.25 per $100 of insurable income.
Generally, the 2019 tax season brings changes that are relatively easy for your accounting business to manage. However, if you’re representing special groups such as cannabis packagers or elected officials, changes to the tax law come with new rules and big financial implications. Begin adjusting your workflow now to stay on top of the new requirements. By preparing your accounting firm and your clients in advance, you can simplify the filing process in 2019. When you’re ready to get started, accelerate your year-end adjustment process and start saving time on corporate returns with QuickBooks Online Accountant. Sign up for free.