As we approach the end of the year, 2022 changes need to be planned for. Here are some of the important changes that happen at year end being CPP/EI, RRSP, TFSA, and Ontario Minimum wages are changing and rules have been released for these items.
CPP Changes
The Canada Revenue Agency has announced that the maximum pensionable earnings under the Canada Pension Plan for 2022 will be $64,900, up from $61,600 in 2021.
The basic exemption for CPP in the amount for 2022 remains at $3,500.
Employee and employer CPP contribution rates for 2022 will be 5.70%, up from 5.45% in 2021, and the self-employed contribution rate will be double that. The increase in contribution rate is due to the continued implementation of the CPP enhancement.
The maximum employer and employee contribution to the CPP for 2022 will be $3,499.80 each and the maximum self-employed contribution will be double that or $6,999.60.
The 2021 maximums were $3,166.45 and self employed were $6,332.90, respectively.
EI Changes
Effective January 1, 2022, the maximum insurable earnings will increase from $56,300 to $60,300. This means that an insured worker will pay EI premiums in 2022 on insured earnings up to $60,300.
In 2022, the employee EI premium rate will be $1.58 per $100. This premium rate with the higher insurable earnings dollar amount means that insured workers will pay a maximum annual EI premium in 2022 of $952.74 compared with $889.54 in 2021.
Insured workers will pay EI premiums on all earnings up to the annual maximum salary of $60,300. This means a deduction of $1.58 will be made for every $100 of salary until the $60,300 for the year has been reached. For example, if an individual earns $65,000 a year, premiums are payable on the first $60,300.
RRSP Contribution Amounts Allowed
For the 2022 taxation year, the RRSP contribution limit would be a maximum of $29,210.
Thus, one would need a salary of $162,278 in 2021 to have the maximum RRSP room created to do the 2022 RRSP contributions.
The RRSP contribution limit for the 2021 taxation year is 18% of earned income you reported on your tax return in the previous year, up to a maximum of $27,830.
You can carry forward the RRSP contribution room that you are unable to use in any particular year. When you turn 71 years of age you will need to convert your RRSP account to RRIF.
The RRSP dollar limit, which is indexed, will be $30,780 for 2023 and $29,210 for 2022, up from $27,830 in 2021. So that means salary in 2022 will need to be $171,000 so that the maximum RRSP purchase can be made in 2023.
The TFSA (Tax Free Savings Account) limit Increase for 2022
The TFSA contribution limit is $75,500 and increases for 2022 by $6,000 and comes into effect January 1, 2022 to $81,500 maximum in total. Canadians 18 or older and residents of Canada receive the contribution room annually.
For someone born in 1991 that was 18 years old in 2009 and was a Canadian resident the entire period can contribute a maximum of $81,500 to their TFSA as of January 1, 2022 in total if they have not already contributed. The TFSA rules were established in 2009.
TFSA Contribution Limit by Year
The TFSA was created in 2009 with a $5,000 contribution limit. Since then, the TFSA
contribution limit has remained around $5,000, with occasional adjustments based on
inflation.
Significant penalties arise if the contribution limits are not adhered too. Please double
check your CRA account and your financial institution before making a TFSA purchase.
Ontario Minimum Wage Increases to $15 January 1, 2022
Ontario Provincial minimum wage rates were increased to their current rates on October 1, 2021. Just one month later, on November 2, 2021, Ontario announced that because the cost of living has increased considerably due to the pandemic, it would introduce legislation that, if passed, would amend the Employment Standards Act, 2000 (ESA) to increase minimum wage rates in the province effective January 1, 2022. On November 4, 2021, Ontario introduced that legislation, Bill 43, Build Ontario Act (Budget Measures), 2021 (Bill 43), which was carried at First Reading.1 The proposed changes to the minimum wage rates are:
Increase the general minimum wage from $14.35 to $15.00 per hour effective January 1, 2022;
Eliminate the liquor server minimum wage of $12.55 per hour and entitle liquor servers to the general minimum wage of $15.00 per hour;
Increase the minimum wage of students under the age of 18 who work 28 hours a week or less when school is in session, or work during a school break or summer holidays from $13.50 to $14.10 per hour;
Increase the minimum wage of homeworkers (i.e., those who do paid work out of their own homes for employers) from $15.80 to $16.50 per hour; and
Increase the minimum rate of hunting and fishing guides from $71.75 to $75.00 for working less than five consecutive hours in a day, and from $143.55 to $150.05 for working five or more hours in a day.
If any questions or comments arise, please contact Peter at 905-898-3355.
Dated : November 17, 2021
Copyright © 2021 By Peter Wiesner CPA, CA
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