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What’s coming in 2019: rate changes for CPP, EI, small business tax rate and more

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  • What’s coming in 2019: rate changes for CPP, EI, small business tax rate and more

With a new calendar year, there are going to be many changes to your tax bill – both good and bad. Here is a list of new rates you’ll pay at the federal level.

Small business tax rate 

Thanks to CFIB keeping up the fight, the government reinstated its promise to lower the federal small business tax rate to 9% in 2019! The rate reduction from 10.5% to 9% will mean annual savings of up to $7,500 per year for your business.

CPP / QPP

Premiums for the Canada Pension Plan and Quebec Pension Plan will start to increase in January from 4.95% of your employee's earnings (5.40% in Quebec) to 5.10% (5.55% in Quebec). We’ve fought these increases, which will keep going up for five years. While these increases will negatively affect your bottom line, it could have been much worse if had CFIB not been there. We are continuing to ask for compensation measures and will keep pushing for better retirement savings policies. 

How much will CPP hikes cost your business?

 2019202020212022202320242025
Earnings = $27,450$36$72$120$180$240$240$240
Earnings = $55,900$79$157$262$393$524$524$524
Earnings = $85,000$83$170$292$452$622$830$1,050

($ amounts per employee; amounts double for self-employed)

Employment Insurance (EI)

With the country facing relatively low unemployment, EI rates will actually go down next year! You will still be paying 1.4 times what your employees pay – so CFIB is keeping up the fight to bring more fairness to the EI system for your business!

EI RATES (per $100 insurable earnings)

 20182019
 QuebecCanadaQuebecCanada
Employee rate$1.30$1.66$1.25$1.62
Employer rate$1.82$2.32$1.75$2.27

Lifetime Capital Gains Exemption (LCGE)

The LCGE, the amount exempt from taxes when you sell your business, will be $866,912 next year. The exemption has been tied to inflation since 2015, thanks in large part to our advocacy!

There is one exception to the LCGE: farms and fishing businesses, where the exemption is $1,000,000 and not tied to inflation. We’re still fighting to have that larger exemption applied to all businesses. 

Passive Investment Income

If your business has significant passive investments (such as stocks, bonds, real estate, etc.), you may be hit with a higher tax bill starting in 2019. 

For every dollar of investment income above $50,000, the small business deduction limit will be reduced by $5. This means that if your business has more than $150,000 in annual passive investment income, you would pay the regular corporate tax rate of 15% on all your business income. We’re still pushing back against the tax changes and are urging the government to grandfather past investments, as they had originally promised they would do in the earlier proposal.

The chart below illustrates how this would look depending on the level of passive income you make annually. 

Reduction in Small Business Deduction limit, Budget 2018

Source: Department of Finance, Budget 2018

 

As you start planning for 2019, our business counsellors are always here for you if you have any further questions!