2023 December Tax News

Table of Contents

Changes to the Canada Pension Plan starting January 1, 2024 (December 2023)

December 20, 2023

Everyone in Canada who earns a salary or wages is familiar with the deduction taken from each paycheque for contributions to the Canada Pension Plan (CPP). The CPP is one of the two major government-sponsored retirement income programs in Canada – the other being the Old Age Security program.

While the Old Age Security program is financed out of general federal government revenues, the CPP is self-funded by means of contributions made by employees, together with matching contributions made by their employers. (Self-employed individuals pay both the employee and employer portions of CPP contributions).

Several years ago, it was determined that changes were needed to the CPP, to ensure that CPP retirement benefits replaced a greater percentage of working income than was then the case. Those changes to the CPP began in 2019, when the required annual contribution to the CPP began to increase. It was increased each year thereafter, and now stands at 5.95% of annual earnings.

The basic structure of the CPP provides that everyone who is between 18 and 69 years of age and earns more than $3,500 per year must make CPP contributions equal to 5.95% of their income between $3,500 and a specified income ceiling. That income ceiling is known as the Year’s Maximum Pensionable Earnings (YMPE) and is set at $68,500 for 2024.

Beginning in 2024, however, the CPP will change from a single-tier to a two-tier contribution structure, with higher-income individuals required to make an additional CPP contribution. Specifically, individuals who have annual income of less than the 2024 YMPE of $68,500 will continue to make Tier 1 CPP contributions of 5.95% of earnings between $3,500 and $68,500. However, those whose earnings exceed the $68,500 income ceiling must pay 4% of those additional earnings (Tier 2 contributions) up to a second earnings ceiling. That second earnings ceiling – to be called the Year’s Additional Maximum Pensionable Earnings, or YAMPE – is set at $73,200 for 2024.

The effect of the upcoming changes is that individuals who will have income of more than $68,500 during 2024 must pay both the 5.95% contribution on earnings between $3,500 and $68,500 (Tier 1 contributions) and 4% of earnings between $68,500 and $73,200 (Tier 2 contributions).

There are no tax or financial planning steps to be taken in response to the upcoming changes – having CPP contributions deducted from one’s income and remitted to the federal government by one’s employer is mandatory, and there is no ability to “opt out” of making either Tier 1 or Tier 2 contributions.

Individuals who earn less than $68,500 during 2024 will see no change to the CPP contributions deducted from their paycheques, but those earning more than that amount will see increased deductions made for CPP beginning January 1, 2024. It should be noted as well that 2024 is something of a phase-in year for Tier 2 contributions. Those contribution amounts will increase in future years, as the upper income limit (or YAMPE) for such Tier 2 contributions, which is set at $73,200 for 2024, will increase significantly in 2025 and later years.

No one likes to see additional deductions being taken from their paycheque but those who are affected by the increased contribution requirements at least have the satisfaction of knowing that their higher contributions will eventually be reflected in an increase in CPP retirement benefits to which they will be entitled.

Detailed information on the upcoming changes to the CPP (including changes planned for years after 2024) can be found on the federal government website at https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/payroll-deductions-contributions/canada-pension-plan-cpp/cpp-enhancement.html.

Final individual income tax instalment for 2023 due on December 15

December 16, 2023

Individual taxpayers who pay income tax for the year through instalment payments do so by four prescribed deadlines each year. The fourth and final instalment payment for the 2023 tax year must be made on or before Friday December 15, 2023.

Taxpayers who make instalment payments of tax will generally have received an Instalment Reminder, which sets out the suggested payment amount and the payment calculation options. More information on those options, as well as available payment methods, can be found on the Canada Revenue Agency website at https://www.canada.ca/en/revenue-agency/services/payments-cra/individual-payments/income-tax-instalments.html.

Old Age Security payments to increase by 0.8% for first quarter of 2024

December 16, 2023

Employment and Social Development Canada (ESDC) has announced that Old Age Security (OAS) payments for the first quarter (January to March) of 2024 will increase by 0.8%. OAS benefit amounts are adjusted quarterly, based on changes to the Consumer Price Index.

The latest change means that the maximum OAS benefit for individuals aged 65 to 74 will increase from $707.68 to $713.34. The maximum OAS benefit for those aged 75 and over will increase from $778.45 to $784.68.

The announcement of the increase can be found on the federal government website at https://www.canada.ca/en/services/benefits/publicpensions/cpp/old-age-security/payments.html.

New T4 and T4A reporting requirements for 2023

December 2, 2023

The Canada Revenue Agency has issued a Tax Tip reminding employers and pension plan administrators of a change in T4 and T4A reporting rules, beginning with the 2023 tax year.

All issuers of T4s and T4As must indicate on such information slips for 2023 whether, on December 31, 2023, a payee or any of their family members were eligible to access dental insurance, or dental coverage of any kind through their current or former employment.

For purposes of the new reporting requirement, new boxes will be added to the T4 and T4A forms. Details of how to complete T4s and T4As to comply with the new requirements are outlined in the CRA Tax Tip, which can be found at Employers and pension plan administrators: Changes coming to T4/T4A reporting – Canada.ca.

CRA announces indexation adjustment for 2024 personal tax amounts

December 2, 2023

Annual changes in personal income tax brackets and tax credit amounts are based on changes in the Consumer Price Index. The Canada Revenue Agency has announced that, for the upcoming 2024 tax year, such personal tax amounts will be increased by 4.7%.

The announcement of that increase, together with a detailed listing of personal income tax brackets and personal tax credit amounts for 2024, can be found on the CRA website at Indexation adjustment for personal income tax and benefit amounts – Canada.ca.