Aug
28
By Fin MacDonald
BC Income Tax to Rise
As part of the end of the Harmonized Sales Tax on March 31, 2013 a number of changes to BC's tax and benefits systems will take place.
First, the tax increase. As part of the transition to the HST the Basic Personal Amount (the amount of taxable income you can have before having to pay BC Income Tax) which was $9,373 for the 2009 tax year was raised to $11,000 for the 2010 tax year and was $11,088 for 2011. Before this it had risen by the rate of inflation each year. For 2012 tax year it will be $11,354. In 2013 it will be lowered by a formula taking into account the three months the HST will be in place, and the inflation rate for 2012, based on $9,600 being the base for 2010.
This will result in a tax increase, for those who are taxable, of $30 to $50 in 2013 and of $50 to $70 for 2014.
Second, the HST Credit and PST credit. 2009 was the last year the Provincial Sales Tax Credit was available. It paid up to $75 for a single and up to $150 for a couple; with it disappearing completely at $17,250 of income for a single. The Credit was paid as part of the income tax refund. The Credit is being brought back for 2012 at the same rate of a maximum of $75 for a single and $150 for a couple.
The HST Credit replaced the PST Credit and was payable with the quarterly GST Credit cheques. For example, a single with an income of $11,000 in 2009 would have received a quarterly GST Credit of $78; in 2010 with the HST Credit added to the GST Credit the quarterly amount increased to $165. Starting with the GST Credit in July 2013 this will now be reduced to $82.
Changes to Canada Pension Plan
Two major changes to the Canada Pension Plan retirement pension have been introduced. They affect people who take the CPP retirement pension before age 65, or who defer it to an age up to 70. The first of these changes will not impact people who have their employment pensions integrated with the CPP (Public Sector employees being the largest group).
The first change affects the decrease/increase in the amount of pension received for early/late receipt. You are allowed to take your CPP retirement pension as early as your 60th birthday and as late as your 70th; this has not changed. Before 2012, for each month early/late the pension decreased/increase by 0.5%. This meant that if you took your CPP retirement pension at age 60, it would be 30% (.05% x 60 months) less than if you had taken it at age 65. An increase in the reduction is being phased in:
So, for example, you took your CPP retirement pension in 2013, when you turn 60 the reduction would be 32.4%, not the 30% it was for someone who took it before 2012.
Post Retirement Benefit
The second change to the CPP is the Canada Pension Plan Post Retirement Benefit. This affects people 60 to 70 years of age who are drawing the CPP retirement pension and who are employed or self-employed. Participation is mandatory for those under 65, optional for those 65 to 70.
The Post Retirement Benefit requires those who are receiving CPP and are working to contribute again. In return they receive an annual payment, commencing the following year for life. Here is an example for someone who is 63 in 2012:
Each year you work while receiving CPP retirement pension you will be required to make contributions. For an employed person making $20,000 the premiums would be $816.75 per year; for self-employed it would be $1,633.50. For this you would receive each year $113.96 if you were born in January; $108.01 if born in December, the payment commencing in 2013. In 2013, if you continued to work, you would have more contributions to make and another lifetime payment commencing in 2014.
Once you reach age 65 you can opt out.
For the self-employed, having to pay the full shot of the premiums will be less attractive than it will be for an employed person whose employer pays an equal amount. Talk to your tax advisor for strategies to lower your premiums.
The changes to the Provincial Income Tax/Benefit system and to the CPP are two of many that will continue to occur. "Helping you to keep more of your money" is the theme of these columns; I hope they are of assistance.
In the next issue of the Beacon: Disability Tax Credit and Other Supports for People With Disabilities.