What's new and updated for payroll

Generally, if you pay directly or reimburse your employee for medical examinations or medical expenses, the payment is a taxable benefit. However, medical expenses paid under the terms of a private health services plan (PHSP) will not be taxable.

Content has been updated for clarity, completeness and plain language. No changes were made to the current CRA administrative policy.

Generally, if you pay premiums or you make contributions to insurance plans for your current employee, former employee or retired employee, the amount you paid for premiums may be a taxable benefit.

Content has been updated for clarity, completeness and plain language. No changes were made to the current CRA administrative policy.

Generally, trust accounts examinations are done to make sure that the information you provided on your information returns is correct, complete and you have met all your withholding and reporting obligations.

The focus of an examination is different from a tax audit because it is only related to your payroll and GST/HST reporting obligations.

Your employee may receive tips (directly or indirectly) as part of their employment duties with you. The tips are considered employment income for income tax purposes.

Depending on whether you control the tips or not, you may have to report the tips your employee received on a T4 slip and withhold payroll deductions.

Content has been updated for clarity, completeness and plain language. No changes were made to the CRA's treatment of tips received by employees.

If you are a payroll software provider or a company which develops its own in-house payroll solution, you can now consult the T4127 121st Edition effective July 1, 2025.

This guide has the formulas you need to determine federal, provincial (except Quebec), and territorial income taxes, Canada Pension Plan (CPP) contributions, and employment insurance (EI) premium deductions.

The CRA may send you a T216 - Accelerated remitter notification and questionnaire if you are a regular or quarterly remitter and the average monthly withholding amount (AMWA) was at least $25,000 in the previous year.

The T216 determines if the remitter type for your payroll accounts will change to an accelerated remitter for the next calendar year based on the AMWA of either:

• Your single payroll account
• All of your multiple or associated corporations payroll accounts

On October 23, 2024, the Government of Nova Scotia announced its intention to decrease the rate of the provincial part of the Harmonized Sales Tax (HST) to a rate of 9% effective April 1, 2025, resulting in an HST rate of 14% in Nova Scotia.

The Government of Nova Scotia released the proposed transition rules (available in English only) for the HST rate decrease in Nova Scotia effective April 1, 2025.

Learn more: Nova Scotia HST Rate Decrease – Questions and Answers on General Transitional Rules for Personal Property and Services.

Generally, if you make annuity payments to a person, you have to report the payments and income tax deductions on a T4A slip. Depending on the type of annuity payment or the situation, you may need to fill out a T4RSP, T4RIF, T4-RCA or NR4 slip instead.

Content has been updated for clarity, completeness and plain language. No changes were made to the CRA's treatment of annuity payments.

Under the new CRA administrative policy, for the reporting of security options benefits and related deductions which occurred during the period from June 25, 2024 to December 31, 2024, if:

• You have not updated your payroll system to use the new codes 90, 91 and 92: You can use code 38 to report the benefit, and report the deduction as 1/2 of the value reported in code 38 using either code 39 or 41
• You have updated your payroll system to use the new codes 90, 91 and 92:
  • You can use the new code 90 to report the benefit, and report the deduction as 1/3 of the value reported in code 90 using either code 91 or 92
  • You can use the code 38 to report the benefit, and report the deduction as 1/2 of the value reported in code 38 using either code 39 or 41

This policy was introduced to reduce the burden on employers and payroll service providers as a result of the proposed changes which were to take effect June 25, 2024, but that will now become effective on January 1, 2026.

Generally, if you provide a free or subsidized meal, an allowance, or a reimbursement for meals to your employee, the benefit is taxable. Depending on your situation, the benefit you provide may not be taxable under the CRA's administrative policy.

Content has been updated for clarity, completeness and plain language. No changes were made to the current CRA administrative policy.

The content has been updated to include the recently announced changes to the prescribed limits and rates used in calculating taxable benefits for automobiles and motor vehicles, effective January 1, 2025.

Learn more: Government Announces the 2025 Automobile Deduction Limits and Expense Benefit Rates for Businesses

The content has been updated to include the payroll deductions tables that are effective January 1, 2025.

It also includes examples on how to manually calculate CPP contributions, CPP2 contributions, EI premiums and income tax deductions using the 2025 rates and maximum pensionable and insurable earnings.

Generally, if you pay administration fees or you make contributions to your employee’s savings or pension plan, the benefit is taxable.

Content has been updated for clarity, completeness and plain language. No changes were made to the current CRA administrative policy.

You, as the employer (the corporation or the mutual fund trust), may grant options to your employees to acquire securities of your corporation.

Beginning June 25, 2024, under proposed legislation, the security options deductions under paragraphs 110(1)(d) and 110(1)(d.1) of the ITA will also be reduced to 1/3.

As a result of this proposed change, your reporting obligations for employee security options for the 2024 calendar year and after have changed.

• Updated codes

  • Code 38 – Security options benefits - Before June 25, 2024
  • Code 39 – Security options deduction – 110(1)(d) - Before June 25, 2024
  • Code 41 – Security options deduction – 110(1)(d.1) - Before June 25, 2024

• New codes

  • Code 90 – Security options benefits - On or after June 25, 2024
  • Code 91 – Security options deduction – 110(1)(d) - On or after June 25, 2024
  • Code 92 – Security options deduction – 110(1)(d.1) - On or after June 25, 2024

These new and updated codes must be used for T4 slips filed for calendar year 2024 and after to report taxable employee security (stock) options.

If you are a payroll software provider or a company which develops its own in-house payroll solution, you can now consult the full version of the T4127 120th Edition effective January 1st, 2025.

This guide has the formulas you need to determine federal, provincial (except Quebec), and territorial income taxes, Canada Pension Plan (CPP) contributions, and employment insurance (EI) premium deductions.

Beginning June 25, 2024, under proposed legislation, the security options deductions under paragraphs 110(1)(d) and 110(1)(d.1) of the ITA will also be reduced to 1/3.

As a result of this proposed change, your reporting obligations for employee security options for the 2024 calendar year and after have changed.

• Updated codes

  • Code 38 – Security options benefits - Before June 25, 2024
  • Code 39 – Security options deduction – 110(1)(d) - Before June 25, 2024
  • Code 41 – Security options deduction – 110(1)(d.1) - Before June 25, 2024

• New codes

  • Code 90 – Security options benefits - On or after June 25, 2024
  • Code 91 – Security options deduction – 110(1)(d) - On or after June 25, 2024
  • Code 92 – Security options deduction – 110(1)(d.1) - On or after June 25, 2024

These new and updated codes must be used for T4 slips filed for calendar year 2024 and after to report taxable employee security (stock) options.

The CRA announced the maximum pensionable earnings, maximum additional pensionable earnings and maximum CPP and CPP2 contributions for 2025.

Learn more: Canada Revenue Agency announces maximum pensionable earnings and contributions for 2025

Free webinar on payroll responsibilities for employers

The Canada Revenue Agency (CRA) is hosting a free webinar to help employers with the key aspects of payroll management. Whether you're just starting out or need a refresher, we can help you navigate payroll correctly.

Topics to be discussed in the webinar include:

• Payroll obligations to CRA
• Deductions and contributions
• Tools for calculating types of pay and withholdings
• Books and records
• Remitting
• Reporting

This webinar is for you if you:

• Have a business with employees
• Regularly complete payroll
• Are unsure if you are paying your employees correctly while staying compliant

Registration closed The webinar is on Thursday, October 31, 2024, at the following times:

For Employment Insurance (EI) purposes, you may be considered a designated employer if you provide payments to a self-employed fisher.

Content has been updated for clarity, completeness and plain language. No changes were made to the current CRA administrative policy.

The Canada Employment Insurance Commission (CEIC) announced the new rates for 2025.

Learn more: Canada Employment Insurance Commission confirms 2025 Employment Insurance premium rate

For Employment Insurance (EI) purposes, you may be considered an employer of the self-employed taxi driver or driver of other passenger-carrying vehicles, even if you do not provide a payment to them.

Content has been updated for clarity, completeness and plain language. No changes were made to the existing legislative requirement.

For Employment Insurance (EI) purposes, as the owner or operator of an establishment that offers barbering and hairdressing services, you may be considered an employer of the self-employed barber and hairdresser, even if you do not provide a payment to them.

Content has been updated for clarity, completeness and plain language. No changes were made to the existing legislative requirement.

If you are a payroll software provider or a company which develops its own in-house payroll solution, you can now consult the T4127 120th Edition effective January 1st, 2025.

This guide has the formulas you need to determine federal, provincial (except Quebec), and territorial income taxes, Canada Pension Plan (CPP) contributions, and employment insurance (EI) premium deductions.

Employers and payers have a legal obligation to report all income paid to and deductions withheld from First Nations workers (employees or self-employed workers) on a T4 or T4A slip regardless of whether the income is taxable or exempt.

Content has been updated for clarity, completeness and plain language. No changes were made to the current CRA administrative policy.

You may provide an automobile for your employee to use in performing their duties of office or employment. Generally, the benefit from personal driving of the employer provided automobile is a taxable benefit.

Content has been updated for clarity, completeness and plain language. No changes were made to the existing legislative requirement.

You may provide a motor vehicle to your employee to use in performing their duties of office or employment that is not an automobile. Generally, the benefit from personal driving of the employer provided motor vehicle is a taxable benefit.

Content has been updated for clarity, completeness and plain language. No changes were made to the existing legislative requirement.

You may provide an allowance or a reimbursement to your employee to compensate for the use of their automobile or motor vehicle in connection with or in the course of their office or employment duties.

Content has been updated for clarity, completeness and plain language. No changes were made to the existing legislative requirement.

We are seeking feedback through an online questionnaire, which is open to all businesses and organizations who hire another business or businesses to receive a service in exchange for payment.

We encourage you to participate in this questionnaire to help us learn more about:

• Appropriate methods and challenges with RFS reporting
• Invoicing practices for goods and services
• How to minimize the administrative burden
• How prepared businesses and organizations are to meet this reporting requirement
• How to minimize challenges and provide proactive support for businesses and organizations who need to meet this requirement

The questionnaire will close on July 22, 2024.

Generally, if an employer provides an allowance or a reimbursement to their employee to compensate for travel expenses (other than automobile or motor vehicle expenses), the benefit is taxable. Depending on the situation, the benefit may not be taxable.

Content has been updated for clarity, completeness and plain language. No changes were made to the current CRA administrative policy.

The following new codes were added:

• RPP contributions

  Code 94 – Indian (tax-exempt employment income) - RPP contributions

• Union dues

  Code 95 – Indian (tax-exempt employment income) - Union dues

These new codes must be used for T4 slips filed for calendar year 2024 and after to report RPP contributions or union dues relating to tax-exempt employment income you paid to your employee who is registered, or entitled to be registered under the Indian Act.

The content has been updated to include the payroll deductions tables that are effective January 1, 2024.

It also includes examples on how to manually calculate CPP contributions, CPP2 contributions, EI premiums and income tax deductions using the 2024 rates and maximum pensionable and insurable earnings.

Generally, if an employer provides a benefit such as special clothing, an allowance or a reimbursement for special clothing to their employee, the benefit is taxable. Depending on the situation, the benefit may not be taxable under the CRA's administrative policy.

Content has been updated for clarity, completeness and plain language. No changes were made to the current CRA administrative policy.

The following boxes were updated to provide clarity and completeness:

• T4 slip

  Box 45 – Employer-offered dental benefits

• T4A slip

  Box 015 – Payer-offered dental benefits

These new boxes must be used to indicate whether the employee/recipient or any of their family members were eligible, on December 31 of that year, to access any dental care insurance, or coverage of dental services of any kind, that an employer or payer offered.

Generally, event tickets an employer provides, pay or reimburse to employees are taxable. Depending on the situation, the benefit may not be taxable.

Determine which methods you can use to calculate deductions, get the CPP contributions tables, the CPP2 contributions tables, the EI premiums tables, the claim codes and the income tax tables and how to manually calculate the amount to withhold

If you are a payroll software provider or a company which develops its own in-house payroll solution, you can now consult the T4127 119th Edition effective January 1st, 2024.

This guide has the formulas you need to determine federal, provincial (except Quebec), and territorial income taxes, Canada Pension Plan (CPP) contributions, and employment insurance (EI) premium deductions.

The CRA and ESDC announced the new rates for 2024.

Learn more:

• Canada Revenue Agency announces maximum pensionable earnings and contributions for 2024
• Canada Employment Insurance Commission confirms 2024 Employment Insurance premium rate

Personal Services Businesses – Event hosted by the CRA

The CRA is hosting a free webinar to help incorporated individuals determine whether they meet the definition of a personal services business, and what that means in terms of tax obligations.

This webinar is for you if you are:

• Registered as a corporation and you're the only shareholder and employee of your corporation
• Doing work for one other corporation that would normally be done by an employee
• A worker who is considering incorporating for work

Registration closed The webinar is on Wednesday, October 25, 2023, at the following times:

The following new boxes were added:

• T4 slip

  Box 45 – Employer-offered dental benefits

• T4A slip

  Box 015 – Payer-offered dental benefits

These new boxes must be used to indicate whether the employee/recipient or any of their family members were eligible, on December 31 of that year, to access any dental care insurance, or coverage of dental services of any kind, that an employer or payer offered.

The following new boxes were added:

• T4 slip

  • Box 16A – Employee's second CPP contributions (CPP2)
  • Box 17A – Employee’s second QPP contributions (QPP2)

• T4 Summary

  • Box 16A – Employee's second CPP contributions (CPP2)
  • Box 27A – Employer’s second CPP contributions (CPP2)

These new boxes must be used to report the amount of CPP2 or QPP2 contributions.

Where a loan is received because of employment, the benefit will not need to be reported when:

• Total amount of all loans received is $10,000 or less per calendar year
• Term of the loan(s) is 60 days or less
• loan is not received because of shareholdings

Previously, the POE for full-time remote workers was determined by the location of the establishment of the employer that pays their remuneration.

Under the new policy, the POE for a full-time remote worker is determined by the location of the establishment of the employer to which they can reasonably be considered to be attached.

Indicators have been developed to assist employers in the determination of whether a worker is considered attached to an establishment.

Learn about Canada Pension Plan (including second additional CPP contributions), Employment Insurance and the income tax deductions, including the CPP, CPP2, EI and income tax rates, the CPP/EI maximums and the CPP exemptions.

Employers and payers can distribute T4, T4A, T5, T2202 or T4FHSA slips by email or using an employer or payer's secure electronic portal without obtaining written or electronic consent from the employees or recipients before distributing the slips unless an exceptional situation applies, or the taxpayer has requested the information return be provided in paper format.

The threshold for mandatory electronic filing of income tax information returns for a calendar year has been lowered from 50 to 5 for information returns filed after December 31, 2023.

Payers are required to report fees for services on a T4A, T5018 or T1204 slip, depending on who the payment was made to.

Content was rewritten and improved to provide guidance on indicators when a payment is made for a good or a service.

As of January 1, 2024, remittances or payments to the Receiver General of Canada should be made as an electronic payment if the amount is more than $10,000. Payers may face a penalty unless they cannot reasonably remit or pay the amount electronically.

Change allows certain gift cards to be used for providing long-service awards. Criteria for the gift cards able to be used for long-service awards is the same as for gift cards used in providing non-cash gifts and awards.

A new ratio has been provided to help simplify when a taxable parking benefit must be included in income in cases where a limited number of parking spaces are provided to employees by the employer.

A new category has been created for virtual social events. Virtual social events can be provided by an employer for its employees and not be considered to be a taxable benefit as long as the cost per employee is $50 or less when only hospitality is provided, or $100 or less where both hospitality and entertainment are provided. Where the event is both in-person and virtual, for administrative convenience, the current cost limit per person of $150 will apply.