With the New Year now upon us, we thought it would be helpful to start a new budget post to share all of the changes that impact Canadian Payroll. We’ll update this throughout 2016 whenever there is something new announced from the Federal or Provincial governments.
So make sure you subscribe for updates, if you haven't already.
This post will keep you informed when changes are scheduled to take effect and provide helpful links so you have a quick reference to the best source of information in each jurisdiction and you can be sure you're compliant and ready to meet new requirements.
Federal Updates
FEDERAL FINANCE MINISTER ANNOUNCES NEW TAX CHANGES
On Monday, December 7, 2015 the Federal Finance Minister Bill Morneau announced changes to the federal income tax rate for the middle income tax bracket and a new 33% tax bracket for earnings over $200,000.00.
As a result, the changes to the federal personal income tax withholding rates, effective on January 1, 2016, are:
| Annual taxable income | Withholding Income Tax Rate *Effective January 1, 2016 |
| Up to $45,282 | 15% (no change) |
| On income between $45,282 and $90,563 | 20.5% (reduced from 22%) |
| On income between $90,563 and $140,388 | 26% (no change) |
| On income between $140,388 and $200,000 | 29% (no change) |
| On income over $200,000.00 | 33% (new tax bracket and rate) |
TFSA MAXIMUM TO CHANGE FROM $10,000 TO $5,500 EFFECTIVE JANUARY 1, 2016
Another change the government announced was that the TFSA maximum will be decreased from $10,000 to $5,500 effective January 1, 2016.
This change will not affect TFSA contribution limits for 2015.
CRA Updates
2016 INDEXING RATES AND PERSONAL EXEMPTION AMOUNTS
The T4127—JAN Payroll Deductions Formulas for Computer Programs—103rd Edition—effective January 1, 2016 is now available and can be referenced here.
In addition to the new federal rates, the indexing rates for Alberta, New Brunswick, Northwest Territories, Nunavut, Saskatchewan and Yukon have been set at 1.3%. British Columbia has set its rate at 0.9%, Newfoundland and Labrador at 0.4%, and Ontario at 1.5%.
The Québec (provincial) rate has been set at 1.09% however, in order to arrive at the new basic exemption amount, employers must take the old exemption amount of $11,425 using the new rate. Revenu Québec (RQ) rounds the amount to the nearest $5.00, resulting in a basic exemption amount of $11,550.
Manitoba, Nova Scotia and Prince Edward Island will have no indexing applied for 2016.
The basic exemption amounts and indexing rates are as follows:
| Province or Territory | Indexing Rates |
Basic Exemption | TD1 Form / TP-1015.3-V |
| Federal | 1.3% | $11,474 | Federal TD1 |
| Alberta | 1.3% | $18,451 | Alberta TD1 |
| British Columbia | 0.9% | $10,027 | British Columbia TD1 |
| Manitoba | No indexing for 2016 | $9,134 | Manitoba TD1 |
| New Brunswick | 1.3% | $9,758 | New Brunswick TD1 |
| Newfoundland and Labrador | 0.4% | $8,802 | Newfoundland and Labrador TD1 |
| Nova Scotia | No indexing for 2016 | $8,481 | Nova Scotia TD1 |
| Northwest Territories | 1.3% | $14,081 | Northwest Territories TD1 |
| Nunavut | 1.3% | $12,947 | Nunavut TD1 |
| Ontario | 1.5% | $10,011 | Ontario TD1 |
| Prince Edward Island | No indexing for 2016 | $7,708 | Prince Edward Island TD1 |
| Québec | 1.09% | $11,550 | Quebec TP-1015.3-V |
| Saskatchewan | 1.3% | $15,843 | Saskatchewan TD1 |
| Yukon | 1.3% | $11,474 | Yukon TD1 |
Looking for the 2015 Budget changes? Click here.
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