Waters & Meredith

Serving Niagara..

Client Information Newsletter: 1st Quarter 2003

CONTENTS

  • Canada Pension Plan
  • Employment Insurance
  • Workers Safety and Insurance Coverage
  • Automobile Deduction Limits For 2003
  • Interest Rates on Taxes - Subject to Change Quarterly
  • Corporate Tax Rate Reductions - Federal
  • Corporate Tax Rates - Small Businesses
  • Where Does The Money Go
  • RRSP
  • RRIF Minimum Withdrawals
    		•

    CANADA PENSION PLAN

    1. The contribution rate for 2003 has increased from 4.7% of insurable earnings to 4.95%.


    2. The new annual maximums are:
      3. (a) Insurable Earnings - $39,900 with a $3,500 exemption
      (b) Employee Contribution - $1,801.80 (up from $1,673.20)
      (c) Employer Matching Contribution - $1,801.80
      (d) Self-Employed Contribution - $3,603.60 (up from $3,346.40)
      (e) Self-employed persons will be able to deduct up to $1,801.80 from their income for the equivalent-to-employer portion of CPP for the 2003 taxation year

    Back to Contents

    EMPLOYMENT INSURANCE

    1. The contribution rate has decreased from 2.20% of insurable earnings to 2.10% for 2003.


    2. The new annual maximums are:
      3. (a) Insurable Earnings - $39,000 (unchanged)
      (b) Employee Contribution - $819.00 (down from $858.00)
      (c) Employer Contribution (1.4 times employee) - $1,146.60 (down from $1,201.20)

    Back to Contents

    WORKERS SAFETY AND INSURANCE COVERAGE

    1. The maximum annual insurable earnings for 2003 are $65,600 (up from $64,600).


    2. The average rate will be increased by 3% in Ontario.

    AUTOMOBILE DEDUCTION LIMITS FOR 2003

    1. The ceiling on the capital cost of passenger vehicles for capital cost allowance purposes is $30,000 plus applicable sales taxes.


    2. The limit on deductible leasing costs is $800 per month plus applicable sales taxes.


    3. The maximum allowable interest deduction is $300 per month for loans related to vehicle purchase.


    4. The taxable benefit relating to the personal portion of automobile operating expenses paid by employers is 17¢ per kilometre, up from 16¢.


    5. The limit for tax-exempt allowances paid to employees is 42¢ per kilometre on the first 5,000 kilometres driven and 36¢ for each additional kilometre.

    INTEREST RATES ON TAXES - SUBJECT TO CHANGE QUARTERLY

    1. The interest rate charged on overdue taxes, Canada Pension Plan contributions and Employment Insurance premiums will be 7%.


    2. The interest rate paid on overpayments will be 5%.


    3. The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans will be 3%.

    CORPORATE TAX RATE REDUCTIONS - FEDERAL

    1. The general federal corporate tax rate was reduced to 23% from 25% on January 1, 2003 for larger corporations.


    2. The rate for small business income remains as 12% under $200,000 and 21% between $200,000 and $300,000.


    3. The general federal corporate tax rate is scheduled to fall by 2% per year until it reaches 21% in January 2004.


    4. A federal surtax rate of 1.12% is in addition to these rates for all years.

    CORPORATE TAX RATES - SMALL BUSINESSES

    Federal Provincial Total
    2003 13.12% 5.50% 18.62%
    2004 13.12% 5.00% 18.12%
    2005 13.12% 4.00% 17.12%

    WHERE DOES THE MONEY GO

    1. When one looks at their gross pay and their net pay, it is not unusual to see over 20% less in the net cheque. For higher-income earners, the difference will be even greater.


    2. Employees Viewpoint - 2003
      3. Gross Weekly Payroll $500.00 $600.00 $1,000.00 $1,500.00
      Deductions:
      EI $ 10.50 $ 12.60 $ 21.00 $ 31.50
      CPP 21.42 26.37 46.17 70.92
      Tax 71.05 91.10 211.35 396.00
      $102.97 $130.07 $278.52 $498.42
      Net Take-Home Pay $397.03 $469.93 $721.48 $1,001.58
      ====== ====== ====== ======
      Annual Gross $26,000 $31,200 $52,000 $78,000
      Annual Net $20,646 $24,436 $37,517 $52,082
      % of Net to Gross 79% 78% 72% 67%


    3. These numbers do not take into account non-payroll taxes such as GST, PST, gasoline tax, property taxes.


    4. There are annual maximums on EI and CPP deductions, as noted earlier.


    5. Employers Viewpoint of Costs
      6. Gross Weekly Payroll $500.00 $600.00 $1,000.00 $1,500.00
      EI $ 14.70 $ 17.64 $ 29.40 $ 44.10
      CPP 21.42 26.37 46.17 70.92
      Group - 4% 20.00 24.00 40.00 60.00
      EHT- 2% 10.00 12.00 20.00 30.00
      WSIB - 3% 15.00 18.00 30.00 45.00
      Pension - 2% 10.00 12.00 20.00 30.00
      Vacation Pay - 4% 20.00 24.00 40.00 60.00
      $111.12 $134.01 $225.57 $340.02
      Actual Cost Weekly $611.12 $734.01 $1,225.27 $1,840.02
      ====== ====== ====== ======
      Base Cost Annually $26,000 $31,200 $52,000 $78,000
      Actual Cost Annually $31,778 $38,169 $63,730 $95,681
      Cost as % of Base 122% 122% 123% 123%


    6. There are annual maximums for EI, CPP and WSIB which would reduce the employer's weekly cost if the employee worked for the entire year. The cost reductions in these categories would likely be offset by higher costs for vacation pay and holiday pay.

    RRSP

    1. You may contribute to your RRSP for a 2002 income tax deductible claim as long as the contribution is made by March 1, 2003.


    2. Spousal contributions should be considered.

    RRIF MINIMUM WITHDRAWALS

    Age at start
    of year    		 RRIFs set up before
    the end of 1992    		 RRIFs set up after
    the end of 1992
    70 5.00% 5.00%
    75 6.67% 7.85%
    80 8.75% 8.75%
    85 10.33% 10.33%
    90 13.62% 13.65%
    94 or over 20.00% 20.00%

    We welcome comments you may have on this newsletter as well as suggestions for future topics.

    The information herein is provided for your general information and action should not be taken on the basis of this newsletter, but only on the advice of your own individual advisor, applying this advice to your individual situation. Please call if you have any questions.

    Waters & Meredith
    Chartered Accountants
    Telephone: 905-356-4324
    Fax: 905-356-0964
    E-mail: wm@watersmeredith.com

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