We shouldn't be giving tax subsidies to some of the richest people in the country: CCPA
There are a number of new tax measures and reporting requirements Canadians should keep in mind when filing their 2023 returns this spring.
Here is a list of important tax changes and dates, with insights from a tax professional.
CPP, EI CHANGES
As of Jan. 1, many Canadian earners will start seeing a larger portion of their paycheques going toward Canada Pension Plan contributions after the federal government added a second earnings ceiling.
The CPP now has two maximum amounts.
Previously, everyone earning over the base amount of $3,500 contributed a set portion of their income, up to a maximum amount that increases slightly every year.
Like before, the first tier will see workers contribute a set portion of their earnings to CPP up to a government-set threshold.
For 2024, people earning $68,500 or less won't see any changes to their current contribution rates.
Anyone with annual earnings higher than $68,500 now falls into a second contribution level that tops out at $73,200.
People in this group will pay an additional four per cent on the amount of money they make between $68,500 and $73,200, with a maximum additional contribution amount of $188.
John Oakey, vice president of taxation with Chartered Professional Accountants of Canada (CPA Canada), told BNNBloomberg.ca that the change, paired with EI contributions, could create a significant tax burden for middle-income-earning employees, and for their employers.
“What this means for employers is if you were to hire somebody in 2024 and you were paying them $73,200, it's going to cost you 7.5 per cent for employment taxes,” Oakey said.
“And employees are paying seven per cent, so that's 14.5 per cent that's going to fund the CPP and EI between employees and employers … that’s a lot of tax to be paid, and a lot of administrative burden.”
In addition to CPP contribution changes, the maximum insurable earnings ceiling for EI has risen to $63,200, up from $61,500 in 2023 and $60,300 in 2022 – an increase Oakey said was “normal course of business.”
Starting this spring, Canadians will be required to disclose beneficial ownership information for trusts, including so called “bare trusts,” when filing taxes for the previous year.
Oakey said this could become a “big issue” for some taxpayers who may not be aware they are in a trust.
As defined by the federal government, a bare trustee simply has legal ownership of a property “but has no other duties, obligations and responsibilities with respect to the property,” which remains in the practical control of the beneficiary.
Oakey explained that bare trusts can be used for illicit purposes, which is the main reason why the government has chosen to require their reporting, but they can also arise from perfectly legal arrangements.
“A bare trust can be anything from someone holding a property on behalf of a gang because they don't want it in their name … that's obviously illicit activities,” Oakey said.
“But a bare trust can also be a completely simple situation where my kids inherited money from their deceased grandfather, but they are minors so I'm holding the money on their behalf. That's a bare trust as well.”
Oakey said the new reporting rules could cause confusion because some taxpayers may be unaware that they are involved in a bare trust.
CPA Canada urged the Canada Revenue Agency (CRA) to better define the new rules, he added, and this year, penalties will be waived for late filings in this area.
“The CRA did respond and is providing a blanket waiver of their automatic filing penalty,” Oakey explained, noting that there’s normally an automatic $25 per day fine for late trust returns, up to $2,500.
“They said that only for the 2023 taxation year and only for bare trusts, they would waive that automatic filing penalty for what we'll call innocent situations, where people have discovered they have a bare trust, and they eventually file.”
The federal government has said it plans to deny tax expensing of certain short-term rental operators who are not compliant with existing provincial or municipal rules starting in 2024.
As of Jan. 1, people operating short-term rental properties in jurisdictions where they are banned, or any operators whose short term rentals are non-compliant with local requirements, will not be able to claim any expenses on the property.
“It's a disincentive for people to use residential properties as a short-term rental instead of a long-term rental,” Oakey explained.
He said the change is well-intentioned, but it may create other issues by sending some short-term rental operations “underground.”
Feb. 29 is the deadline for making RRSP contributions for the 2023 tax year.
For employers, T4, T4A and T5 slips must be submitted by Feb. 29 and must be submitted electronically if there are more than five of them to avoid penalties.
The deadline to file T3 trust returns along with Schedule 15 beneficial ownership information is April 2.
The deadline to file personal income tax returns is April 30, while self-employed individuals have until June 17.
Oakey said that the one universal piece of advice he’d give Canadian taxpayers in 2024 is to file and pay any owed taxes by the deadline.
“You don't want to get hit with penalties,” he said. “File on time and make sure you pay your taxes on time.”
With files from the Canadian Press.
This is a corrected story. A previous version included an incorrect figure for the maximum additional contribution amount for Canadians with annual earnings of $68,500 and higher.