Our perspective on recent developments affecting business, corporate and personal taxation
Special EI Benefits for the Self Employed
As of the beginning of this year the self-employed can elect to participate in the federal Employment Insurance program for special benefits. The special benefits that will become available to participating self-employed individuals are: • Maternity • Parental • Sickness, and • Compassionate care.
Maternity benefits are available to birth mothers for a maximum of 15 weeks.
Parental benefits are available to biological or adoptive parents for 35 weeks while they care for a newborn or a newly adopted child.
If someone is sick, injured or quarantined they can be covered by EI insurance for a maximum of 15 weeks.
6 weeks is available to someone who needs to be away from work to care or support a family member who is seriously ill with a significant risk of death.
In order for a self-employed person to make a claim he/she will have to have been participating in the program for at least one year. In addition they will need to have earned at least $6,000 in self-employed earnings in the preceding calendar year.
One advantage for the self-employed is that they will not be required to pay the employer portion of premiums, only the portion normally paid by employees.
Once a self-employed individual makes a claim they will be required to pay EI premiums as long as they are self-employed. Anyone who has not made a claim can opt out of the program at the end of any tax year.
Québec residents who are self-employed are already eligible for maternity and parental benefits through a provincial program. They are eligible for reduced rates if they are interested in participating in the federal program for sickness and compassionate care.
This blog entry highlights a few of the changes that were announced in the 2009 federal budget on January 27th.
First I should note that there were no new corporate rate reductions announced. However our finance minister did confirm that the government plans to make Canada more competitive by becoming the country with the lowest corporate tax rates among the major industrialized economies. As previously announced the general corporate tax rate is still scheduled to decrease from 19% to 15% by 2012.
The good news for small business was a $100,000 increase in the small business tax deduction. The annual business limit for Canadian-controlled private corporations eligible for the reduced small business tax rate increased from $400,000 to $500,000. This change is effective January 1, 2009 and is pro-rated for fiscal years straddling this date.
Consistent with the small business deduction change was the announcement that the phase-out range for investment tax credits for scientific research and experimental development is increasing by $100,000 so that the phase-out range is no longer $400,000 to $700,000 but $500,000 to $800,000.
More good news for manufacturers was that the temporary increase in the capital cost allowance rate for manufacturing and processing equipment to a 50% straight–line rate has been extended for eligible assets acquired in 2010 and 2011.
For eligible new computers and system software acquired in Canada after January 27, 2009 and before February 2011, a CCA rate of 100% applies with no half –year rule. That means that businesses can deduct 100% of most computer costs if they are incurred before February 2011.
There were also some changes on the administrative side. The government has increased the number of companies and situations where returns must be filed electronically (e-filed). Now all corporations with annual gross revenues over $1 million will be required to e-file their income tax returns. Additionally, tax information returns that include over 50 items (instead of 500) must be e-filed after 2009. So if your company has 51 T4’s to file next year you will need to do it electronically. To encourage everyone to follow the new rules, the budget also introduced a penalty for filing in an incorrect format.
There was some good news for individual taxpayers who own a home that is due for a renovation.
For 2009 a new, non-refundable temporary tax credit will be available to homeowners for improvements to a principal residence. The credit will apply to expenditures between $1,000 and $10,000, incurred for work acquired after January 27, 2009 and before February 2010. This credit can generate tax savings of up to $1,300 for homeowners.
Those are some of the 2009 budget highlights for businesses and individuals.
