The new BC Payroll Tax, also known as the BC Employer Health Tax, is in effect as of January 1st 2019. The BC Employer health tax is designed to assist the government in eliminating MSP premiums paid by employees scheduled for January 1st, 2020. Over the next calendar year there will be an overlap for employers who were already paying MSP premiums on behalf of their employees, as they will be paying both the premiums and the New BC Payroll Tax.
The new tax will only apply to employers with a payroll more than $500,000 annually. Here is quick breakdown to show how this new tax could affect your business:
|Payroll||Annual Tax||Percentage of Payroll|
|$500K or less||$0||0%|
|Over $1.5 million||$29,250 + 1.95% of amounts over $1.5 million||1.95%|
As you can see in the above table, the new BC Payroll Tax is capped at 1.95%. For smaller businesses the tax amounts to less than a percent of their overall payroll. While new taxes are never popular, other provinces like Quebec already have a payroll tax in place as high as 4.26% for some businesses.
What income is subject to the New BC Payroll Tax?
Payroll amounts subject to this new tax include all taxable employment income. Some examples include:
- Salaries and wages (and advances)
- Bonuses, commissions or other performance-based income
- Vacation pay
- Taxable allowances or benefits
- Employer-paid contributions to an RRSP
- Employer-paid group life insurance premiums
There are exclusions to the BC Employer Health Tax, these items are not subject to additional taxes:
- Registered pension plan contributions
- Private health services plan contributions
- Deferred profit-sharing plan contributions
- Retirement compensation arrangement contributions
- Supplementary unemployment benefit plan contributions
The New BC Payroll Tax requires online filing and payment. If your payroll is over $600,000, payments are to be made quarterly in the online system. Keep in mind, this tax only applies to employee renumeration, and payments made to independent contractors are not subject to this new tax. If you are a sole proprietorship or part of a business partnership, your compensation is treated as “business income,” and is not subject to this new tax.
DENT understands you will likely have many questions as to how this new tax affects your business, group benefits plan and overall financial outlook for 2019. We encourage you to contact us today to discuss the details and how we can assist in preparing your business for the future.
The information in this material is derived from various sources. Material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. This article is not a substitute for tax advice from a licensed accountant. Please contact your accountant for tax advice before acting on any of the ideas above. Before acting on any of the above, please contact us for benefit, pension and insurance advice based on your corporate or personal circumstances.