The B.C government will be implementing a new employer health tax (EHT) in January 2019. This tax notice is being implemented as part of the plan to eliminate Medical Services Plan (MSP) premiums.
For over a decade British Columbia has been the only province to maintain MSP fees and the move to the EHT plan is part of an effort by the B.C. government to make life more affordable for its residents. By moving to an EHT plan, families will save as much as $1,800.00 per year and individuals will save as much as $900.00 per year. As administration of MSP premiums is costly and inefficient the transition to the EHT will result in a savings of over $50 million annually.
The Ministry of Finance is structuring the employer tax levy using the following payroll criteria. Employers with a B.C. payroll costs below $500,000.00 annually will not be subject to the tax. Those with payroll above $500,000.00 but less than $1.5 million will pay 2.95 percent on the portion exceeding $500,000.00. Employers with payroll above $1.5 million will pay the tax rate of 1.95 percent.
The province noted that the new employer health levy will cover employment income and taxable benefits under the Income Tax Act such as salary and wages, bonus /commission payments, taxable allowances and benefits and employer paid contributions to an employee’s RRSP. Employer paid contributions to registered pension and deferred profit sharing plans, extended health benefits and retirement compensation arrangements will not be subject to the new tax.
For more information and a full listing of all employment income and taxable benefits that are subject to the tax, please see the link below.
Jennifer Roche / Payroll Specialist / PEO Canada