Canada payroll - get ready for midyear tax changes

[Former Member]

In previous years, some SAP customers have opted to not apply the April HRSP/CLC in hopes that the midyear July 1 tax changes would be minimal and could be achieved through manual table updates.

July 1, 2015 tax updates will include table changes (New Brunswick: new tax brackets, Quebec: Tax credit rate for Fondaction share purchase, other budgets to come), however it will likely include a new tax engine as well. 

On March 26, Alberta's budget included the introduction of a new Health Care Contribution Levy.  The new Levy will be paid through the personal income tax system as an at source withholding and be administered by the CRA.

More information on the new Alberta Health Care Contribution Levy on the Alberta website at www.alberta.ca/budget.cfm    

[Former Member]

Hi Kim,

After application of Mid Year Tax update note, when we go back before 1st July and pay some amount, its not being considered for Tax.

You would know any one with such issue?

Thanks,

Srikant

[Former Member]

Hi Friends,

SAP Released the new note on AB Tax changes.

Note no :2205555 – TAX: Tax update effective October 1, 2015

Thanks,

Srikant

[Former Member]

Hi Kim,

Any update on Alberta changes?

Thanks,

Srikant

[Former Member]

Hi Srikant,

Alberta's new NDP government did not move forward with the former Conservative government's proposed Health Care Contribution Levy.  They have however, introduced a series of new tax brackets.  Whereas the Alberta provincial portion of income tax was a single table at 10%, there will now be five different tax levels.

Due to the late date of the Throne Speech, (June 15) these income tax changes become effective on October 1, 2015.  For 2015, the announced rates will be implemented at 1/4 of the annual increase due to the fact that they will only be in effect for 3 months in 2015.  The rates will increase to their full amounts for the first pay of 2016.

Kim

[Former Member]

Kim,

Would this a new tax engine for everyone? or just NB and QC.

For Ontario we are assuming that changes would be manual.

Ann

[Former Member]

Hi Ann,

My thoughts regarding the new tax engine were related to the Alberta Health Care Contribution Levy.  That situation is currently in flux as on April 7th, Alberta premier called an election for May 5.  As a result, the budget is effectively "dead", with it the Health Care Contribution Levy.

Once the election is completed and the governing party is determined, a new budget will be introduced.

In my opinion, if the PCs get back into power, they will likely reintroduce this levy in their new budget, however the timing will likely mean that it may not be in place for July 1.

In summary, I think the NB and QC changes will be handled by table updates but the Alberta change will require a new tax engine.

I suggest you contact SAP to be sure though so that you are properly prepared for mid year changes.

Kim LaPierre

PAYattention Consulting Inc.

www.payattentionconsulting.com

[Former Member]

Hi All,

As per the Mid year SAP Note#2151299,must apply the January 2015 CLC for your release.

But we do not want to implement CLC HRSP for mid year changed, can we skip this January 2015 CLC HRSP? any thoughts?

Thanks and Regards,

Prasad

[Former Member]

Hi Prasad,

The reason that SAP provides two methods for system preparation readiness for midyear tax changes is to ensure that your system will not be "out of synch" with the SAP development systems in which midyear changes are developed and tested.  If the midyear tax changes are minimal or table only updates, the risk of being out of synch is minimal.  The issue is that, as the federal and provincial budget "season" often lasts until April (or even May as it will be this year), SAP is unable to predict the extent of changes that will be required.

In you note above, you asked whether you can skip the January 2015 CLC however you don't mention the HRSP/CLC level your system is currently at.  In the January CLC option prescribed by SAP in the midyear note, they list the relevant notes that have been released since the January CLC that you would need to apply to your system if you had applied the January CLC.  Given that you have not applied the January CLC, you would need to apply all those note AND any previous Canadian tax relevant notes since your previous HRSP/CLC.  Since SAP does not provide that list, you would have to determine it for yourself.

Having said all that, if the midyear tax update is achieved through table updates only, you may not have an issue as no coding updates would be required. 

I believe the determination of whether the midyear tax updates will require coding changes will largely depend on the outcome of the Alberta election happening today (May 5).  If the previous government gets back into power and reintroduces their Healthcare Contribution Levy, that would required a new tax engine (coding changes).

Kim LaPierre

PAYattention Consulting Inc.

www.payattentionconsulting.com

[Former Member]

The Alberta Conservative party did not win re-election and so with the NDP holding a majority of seats, we will have to wait until they deliver their budget to see if the midyear tax update will contain any payroll related changes for Alberta.

Kim

[Former Member]

Kim:

Thank you

Do we know when this (budget delivery) may be?

If its still approved, will it be possible to stay with the current tax engine for July and process the change later in the year

Ann

[Former Member]

Hi Ann,

To my knowledge, no date has been communicated for the Alberta NDP budget delivery. 

When you say; "if its still approved", do you mean the Alberta Health Care Levy?  Is so, there is no approval pending as it was contained in the previous government's budget which "died" as a result of dissolving the previous parliament.  Therefore, unless it is reintroduced in the NDP budget, it is a non-issue.

CRA has committed to delivering the T4127 tax calculation guide by May 15 and so we will know for sure at that point the extent of changes that will be effective on July 1. 

I hope this helps.

Kim

[Former Member]

Kim,

Do you have any update of the July 1 tax changes?

Ann

[Former Member]

Hi Ann,

CRA published the July 2015 T4127 tax calculation guide on Friday (May 15).  For July 1, there are table changes required for BC,  New Brunswick, Newfoundland & Labrador and Yukon.  Given that the new Alberta Health Care Levy is not happening, it appears that all July 1 tax changes can be handled by table changes only.

One interesting wrinkle is that the Yukon eliminated their surtax of 5% on income over $6,000 for 2015.  This change is coming into effect on July 1, 2015 and so if an employee has had this surtax deduction as part of their tax calculation in the first six months of the year, they will have it refunded when they file their personal T1 tax return at yearend. CRA has not made it clear in the guide how to deal with the retroactive elimination of this surtax, however they have confirmed this approach via email.

Kim

[former_member185000]

Hi Kim,

Can you please guide on the Mid year Tax changes for 2015. We are currently at HRSP level 87 and the new Mid Year change note 2137043 : Tax Update effective July 1,2015 can be implemented alone?

As these are table updates, can we go ahead and implement them or are there any pre requisites?

Thanks

Madhav.

[Former Member]

Hello Madhav,

As the July 1, 2015 tax changes can be achieved through manual table updates and do not require program changes, you can go ahead and implement them.

Kim.

[former_member185000]

Thank you Kim.