To make a payment to the Canada Revenue Agency (“CRA”) for taxes, you can use one of the following methods:
· Online Banking: You can use your financial institution’s online banking service to make a payment to the CRA. Simply add the CRA as a payee and select the type of tax you’re paying.
· My Payment: CRA’s “My Payment” service is a secure and convenient way to make payments directly to the CRA using your credit card or debit card. To use this service, you’ll need to have your social insurance number (SIN) or business number (BN). The My Payment option can be accessed from CRA’s website online.
· Pre-authorized debit: You can set up pre-authorized debit payments through your financial institution’s online banking or by completing the CRA’s authorization form.
· Mail: You can also make a payment by mailing a cheque to the CRA. Be sure to include your remittance voucher (and include your SIN or BN in the memo line of the cheque) with your payment and allow enough time for your payment to arrive and be processed.
· In-person: If you prefer to make a payment in person, you can do so at a Canadian financial institution that offers the Interac e-Transfer service.
It’s important to note that the deadline for making a payment to the CRA depends on the type of tax you’re paying and your payment method. Be sure to check the CRA’s website for more information on payment deadlines and methods.
As a supplementary blog to our previously posted “T2 Corporate Income Tax Return Filing Deadlines and Penalties”, it is also important to not only discuss filing deadlines but also discuss when corporate tax payments are due as well as answer any and all questions surrounding whether you are required to remit corporate tax instalments throughout the year.
Corporate tax filings are due 6 months after yearend, although if your corporation owes income tax, the balance of tax is generally due within two months after your fiscal yearend date. The balance of tax is due three months after the end of the fiscal tax year if conditions 1 and 2 that follow are met, as well as condition 3 or 4:
1. The corporation is a Canadian-controlled private corporation (CCPC) throughout the tax year
2. The corporation claimed the small business deduction for the current or previous tax year
3. The corporation’s taxable income for the previous tax year does not exceed its business limit for that tax year (if the corporation is not associated with any other corporation during the tax year)
4. The total of the taxable incomes of all the associated corporations for their last tax year ending in the previous calendar year does not exceed the total of their business limits for those tax years (if the corporation is associated with any other corporation during the tax year)
This can be difficult for some business owners as documents and corporate records might not be ready in time for tax preparation to meet these payment deadlines, therefore you may feel trapped with not knowing exactly what payment is required. To navigate this uncertain situation, here are a couple tips that might be helpful:
1) Keep your accounting records organized and up to date. By doing so, not long after your fiscal yearend has passed you can provide all the necessary documents to your accountant in a timely manner, who can then complete your corporate tax return and provide you with an exact balance due. OR;
2) Estimate your taxes. If corporate records are not available or completed, the CRA will allow you to estimate your corporate tax balance due and make the payment. If a payment was over-estimated the difference will be refunded, if your payment was under-estimated you will owe the difference and interest/penalties could apply.
Interest is assessed on late payments when: a balance is not paid on time and when late/insufficient instalments are made. Interest is currently charged at rates of up to 8% of the total balances owed (as of the first quarter of 2023) if not paid within the deadline period.
A corporation is required to make instalments for the current year if the taxes payable in the previous year was greater than $3,000. There are three methods to calculating tax instalments (based on the current year, prior year or a combination of the previous year and the year before the previous year), although commonly, instalments are calculated based on the previous year’s taxes payable divided by 12 (if you are required to pay monthly) or, divided by 4 (if you are paying quarterly). Please note, there are additional criteria which determines whether you are eligible for quarterly instalments instead of monthly instalments – your accountant can help you identify which instalment frequency would be applicable for you based on your exact situation.
As a general example, if your corporation had a tax payable in 2022 of $24,000, then in 2023, you are required to make monthly instalments of $2,000 due on the last day of each month. If you are eligible for quarterly instalments, you would be required to pay $6,000 due on the last day of each quarter of the fiscal year. Instalment interest involves a more complicated calculation – a link to a CRA example is here.
Keeping organized corporate accounting records could save you time and money in the long run, especially with rising interest rates. If you have any questions or concerns or are looking to keep cleaner records to avoid CRA interest and penalties, do not hesitate to contact us, as we would be happy to discuss further with you.
When you start a business, you’re typically your only employee and payroll is about as simple as it gets. But as you grow, you hopefully find yourself in the position of needing to take on more employees. Before you know it, what was once a very straightforward task becomes a giant undertaking that’s sucking up most of your time.
This is when it makes sense to outsource your payroll. While this is yet another cost to consider, it’s actually a great idea that easily pays for itself. Here are the ways outsourcing your payroll can help you:
1. Free up your time
In any small business, there is a lot of legwork that comes with running payroll. The percentage of time spent on it is quite large compared to the other aspects of your business. This is because it’s a complex task that needs to be done weekly/bi-weekly/monthly – forever. You may feel that payroll is never done and that’s because it truly never is.
Outsourcing your payroll is one of the easiest ways to free up more of your time, which can then be put into other tasks that actually help your business thrive. Once you reclaim this huge chunk of time, you’ll wish you made the switch sooner.
2. Reduce errors
Yes, there are the actual hours worked that you need to account for. That’s complicated enough. But add in sick days, holiday pay, other types of leave and other complications, and suddenly your payroll has become a daunting task that you would probably rather just ignore.
This is where the beauty of outsourced payroll comes in. Because you are paying a professional to worry about all of these little things, you no longer have to worry about all of the potential areas where you could make a mistake.
And the thing about a payroll mistake is that it typically takes even more time and energy to fix. Not to mention, you likely now have to assuage a disgruntled employee.
With outsourced payroll, this mammoth task is simply done for you, and done correctly. That’s good for you and good for your employees.
3. Reduce costs
While you may initially balk at the cost of outsourcing your payroll, it’s actually a money-saver. When you put a dollar amount on all of the time you spend struggling through, this is often enough in itself to pay for a pro to take it off your hands.
Not to mention, the cost of fines and penalties that can arise from mistakes. If you find yourself having to cough up money in these circumstances, you’ll wish you outsourced your payroll sooner.
4. Maintain compliance
We can’t all be payroll professionals. Chances are, if you’re running a business, you have an entirely different industry on your mind most of the time. So, it makes sense to hire someone who’s in the business of payroll to look after this for you.
Maintaining compliance with your region’s tax authorities is a challenge that has to be met every year. And tax laws and codes are always changing. The average person can’t be expected to stay on top of all of this information, so why not get someone who knows the ropes to take care of it for you? It could save you a lot of money come tax time.
5. Eliminate headaches
There is nothing more valuable than the feeling of being stress-free. When you hire a payroll professional, you can relax knowing that your business is in good hands, that your employees are getting paid correctly and on time, and that you’re doing everything right.
There are a lot of reasons why outsourcing your payroll just makes sense. By letting go of this time-consuming, finicky task, you will likely find that you’re enjoying your business more. Not only that, but you’ll be able to put your energies into other things, meaning your business is likely to grow.
If you’d like to discuss outsourcing your payroll and the different plans we offer, reach out and we’d be happy to chat!
Payroll is one of those things that starts out simply enough. You start your business, hire a few employees, and things tick along pretty well. It’s straightforward enough to keep everything in line at first, but what happens to most companies is… they grow!
This is a great thing, but it also means that payroll becomes more complicated. As such an important aspect of your business, it’s important that payroll runs smoothly. Getting paid is, after all, the primary reason that most people come to work.
Here are some tips to manage payroll effectively:
Payroll is one of those things that can be overly complex, and the importance of simplifying it can’t be overstated. Many companies, especially small and medium-sized ones, have their own quirks about how they manage their payroll. This can make it difficult for somebody else to step in, or for someone new to be trained.
Keep things as simple as possible wherever you can. One way to do this is by switching to direct deposit. This will drastically reduce the amount of work put into issuing and tracking payments.
At least once per year, and preferably more, it’s important that your payroll professional take some time to create a payroll calendar. This will allow them to highlight any dates that may cause a lag in your employees getting paid.
It will also allow you to plan for any potential shortcomings or other issues that may arise from holiday closures or oddities in the calendar. Making a payroll mistake is a surefire way to lower employee morale, so it’s important to be aware of these dates ahead of time.
Once compiled, distribute the calendar to your managers so that they can communicate the information to their employees. This will keep everyone apprised of any potential delays in getting paid that may come up.
The computer can be your best friend. Finding the right software to help with payroll can automatically take care of simplifying and scheduling, freeing up valuable time for your payroll specialist.
It also eliminates the potential for human error in payroll processing, and creates a crystal clear picture of your finances. There are many options available these days that are easy to learn and straightforward to maintain.
4. Brush up
Payroll rules and regulations can change frequently and for any number of reasons. It’s important to stay informed on any changes in your region and proactively plan for them.
A lot of time can go into correcting a payroll error, so know what’s happening ahead of time to avoid this. With more and more employees being hired remotely, it’s also important to be aware of any regulations that may pertain to those that are geographically located in a different area from your business.
5. Get help
There comes a point for all growing businesses where they have to outsource their payroll processing. If this is you, congratulations! It is truly a milestone.
There are many options out there as far as hiring a payroll specialist is concerned, and many of them are available online. Choose the one best suited for you without leaving your desk. This takes the pressure off of you to know all of the nitty gritty details about payroll processing. By hiring an outside professional, you can be sure that your employees will be paid correctly and on time.
Payroll is most effectively managed when it’s simple, straightforward, and coordinated. When it starts getting tough to keep it that way, it’s likely a sign that your company has grown and you’re ready for more robust support.
If you’ve been considering making the move to a cloud-based accounting system, you’re not alone. Cloud technology has impacted many business functions, including making managing financial aspects of your business easier and more efficient.
Cloud-based accounting moves your accounting from being hosted on your computer’s hard-drive to an online platform. Cloud-based platforms like Xero offer important features that save you time and money, freeing you up to focus on other important business activities.
Here are 4 reasons to switch to a cloud-based accounting system (we recommend Xero!)
1. Efficient invoicing
If your business relies heavily on invoicing, an online accounting system like Xero makes invoicing incredibly efficient. You can email invoices to clients directly through your software and track how long it’s been since the invoice went out.
Clients can pay you through a link attached to the invoice, making the payment process easier for them, which increases the likelihood they’ll pay you sooner. If they pay through the system, your platform will mark the invoice as paid automatically. If their payment is late, the system alerts you.
Further, you can set up your software to send automatic reminders about late payments.
2. Paperless accounting
Managing your accounting through a cloud-based system enables you to move away from paper based accounting. You don’t have to go through boxes of files to find a receipt from two years ago, you can simply access the information through your computer.
It’s easy for you to share your records with your accountant, bookkeeper or anyone else who may need to collaborate on your accounting. You don’t have to mail them physical copies of your financial transactions and statements, you can email them the information or give them access to your software.
We recommend using Hubdoc which is a piece of software that essentially acts as an online filing cabinet, allowing you to share documents with your accountant/bookkeeper (integrates directly into Xero too!). Snap a photo of your receipts (keep the originals on hand) and upload to Hubdoc…easy as that! No more hard-copy files to drop off at your accountant’s office each month, saving you valuable time and money.
With a cloud-based accounting system like Xero, you don’t have to be in the office in front of your computer to access your financial information. You can see your ledgers and reports from anywhere, on any device. If you want to work from home one day, you can log in remotely to send invoices, check your reports, or manage expenses, etc.
4. Accurate reporting
An important component of running your own business is reporting. Accurate reporting enables you to better manage your finances and understand your profitability. It’s vital for making informed decisions about your business.
Cloud based accounting provides you with accurate reporting at the click of a button. Using systems like Xero you can easily access income and expense reports to keep a finger on the pulse of your business.
The information is available to you automatically–you don’t have to spend hours in front of a calculator (or working with error-prone spreadsheets) going through every invoice to see your numbers. Simply by keeping your records in a cloud-based system, you can easily generate accurate reports.
If you’re hosting your accounting information on your computer hard-drive, it’s worth looking into cloud-based accounting to see if you can benefit from the switch. Given the ease of invoicing and accurate recordkeeping, combined with the accessibility of a paperless system, you may find cloud-based accounting software (like Xero) is the right system for you.
If you’d like guidance or have any questions about moving to the “cloud” feel free to reach out – we’d be happy to help!
If you own a corporation in Canada, it is important to be aware of your T2 corporate income tax return filing deadlines to ensure that your company’s taxes are filed on time and to avoid any penalties or interest charges.
The due date for corporate tax returns in Canada is six months after the end of the fiscal year-end. For example, if your company’s fiscal year-end is December 31st, the due date for the corporate tax return is June 30th of the following year.
It is important to note that if your company’s tax return is filed late, penalties and interest charges will be applied. The Canada Revenue Agency (CRA) will charge a late-filing penalty of 5% of the balance owing, plus 1% of the balance owing for each full month that the return is late, to a maximum of 12 months. Additionally, interest will be charged on any outstanding balance owing (at rates of up to 8% as of the first quarter of 2023).
To avoid these penalties and interest charges, it is important to ensure that your company’s tax return is filed on time. If you are unable to file on time due to unforeseen events, you may be eligible under certain circumstances to apply for a filing extension by contacting the CRA (not a guarantee though).
If you have any questions or concerns about your company’s tax return or the filing deadlines, please do not hesitate to contact us. We would be happy to discuss further with you.
As a Canadian real estate rental property owner, it is important to understand how to properly handle your income and expenses on your tax return. Failure to report rental income or to claim allowable expenses can result in significant penalties and interest charges. Note that the following guidelines apply generally to rental properties owned personally (claimed on a T1 personal tax return) and corporately (claimed on a T2 corporate tax return).
First and foremost, it is important to report all rental income on your tax return. This includes any rent payments received, as well as any other income related to the rental property such as parking, laundry, security deposits or late fees. It is also important to keep accurate records of all rental income, including the date received and the amount.
On the expense side, there are a number of deductions that can be claimed to offset rental income. These include:
· Mortgage interest: If the rental property is financed with a mortgage, the interest paid on that mortgage can be claimed as an expense (Note: the principal portion of loan payments is never deductible)
· Property taxes: Property taxes paid on the rental property can also be claimed as an expense.
· Insurance: Insurance premiums paid for the rental property can also be claimed as an expense.
· Repairs and maintenance: Any repairs or maintenance expenses incurred to keep the rental property in good condition can be claimed as an expense.
· Utilities: Utilities such as electricity and gas can also be claimed as an expense, provided they are paid for by the rental property owner.
· Depreciation: The cost of the rental property and any improvements made to it can be depreciated over time, which can be claimed as an expense. Tax depreciation is known as “capital cost allowance” or CCA. CCA can be used to bring net rental income to zero, but cannot be used to create a tax loss from a rental property. CCA is what is known as a discretionary deduction, meaning it does not have to be claimed at all, and that the amount claimed as a deduction in any given year can range from zero up to the maximum allowable amount for the year per the tax rules in the Income Tax Act. Note that claiming CCA erodes the adjusted cost base of the property in question, which means there will be more tax to pay later on any eventual sale, assuming property values increase. For this reason, many rental property owners choose NOT to claim CCA. This is something that can be discussed with your chartered professional accountant, often on a year-to-year basis, for optimal results.
It is important to note that these are just a few examples of the deductions that may be available to rental property owners. It is always best to consult with a chartered professional accountant to ensure that you are taking advantage of all the deductions that are available to you.
In addition, it is important to keep accurate records of all expenses related to the rental property. This includes receipts, invoices, and bank statements. These records will be needed to support any deductions claimed on the tax return, especially in the event of a review or audit by the CRA.
In conclusion, as a Canadian real estate rental property owner, it is important to report all rental income and to claim all allowable expenses on your tax return. Accurate records and consultation with a chartered professional accountant can help ensure that you are taking advantage of all the deductions that are available to you. By following these guidelines, you can minimize your tax liability and maximize your income as a rental property owner.
Feel free to reach out if you’d like to discuss further – we would be happy to connect.
When starting a small business, owners often think about things like the storefront, branding, and displays. They think of smiling employees and happy customers. It’s not usually the image of the shelves and cupboards in the back stockroom that fill their heads.
But inventory is a critical component of your business. Sales are made and lost because of inventory control so it can’t be overlooked or left to sort itself out. Here are some tips for how to manage inventory for your small business.
Look back to look ahead
Forecasting is a vital activity when running a business, especially if you’re selling physical products. It’s imperative that you know how much of a product you can expect to sell and when.
If a customer comes to your store and you don’t have what they’re looking for, you’ll lose the sale. And if you have too much of something on hand that isn’t selling, you lose money right off the bat, both in what you paid for it and what it costs you to store it.
When you’re ordering your products, look back year over year to see what you sold and when. This will give you a better idea of how much you’ll need when ordering something new.
This can be tricky considering the last few years have been anything but normal as far as retail traffic goes. Do your best while keeping in mind what was going on at the same time last year, and what might be different about this year.
It is important to regularly do a physical inventory count and compare against your digital records. Certain setups might allow for spot checks throughout the year, with maybe more thorough counts on a quarterly basis. It really depends on the type of goods your business sells. Regardless, ensuring a full inventory count is completed at your fiscal year-end is important to ensure the inventory asset you are reporting on your balance sheet is accurate at that point in time. It is also important to ensure you adjust for any damaged or unsellable products by writing these items off (i.e. reducing the inventory asset and recording a corresponding expense for the spoiled goods on the income statement). Proper tracking and reporting of inventory is therefore critical to ensure your inventory asset on the balance sheet and corresponding cost of sales on the income statement are both accurate.
If you find a variance when checking physical inventory against what your system says, be sure to research what went wrong. You could have a case of theft – internal or external. You may have an employee who doesn’t understand how to ring something up correctly. Or there may be a faulty process resulting in too much or too little of something.
Whatever the case, you must know what happened. It’s the only way to correct the problem and get more accurate numbers going forward.
Implement POS software
Modern point of sale systems are true game changers in the retail industry. What used to be manual work – marking down sales, going back and comparing that against what’s in the register, and so on – is now all done for you.
With a good POS system and staff who are well trained on how to use it, you really only need to audit your inventory when something is amiss. This saves an enormous amount of time and energy.
It also makes it easier to forecast, which helps you make good decisions when ordering more products. It’s a win all around and is a must for every business with inventory to manage.
Preventing Spoilage or unsellable products
As new products arrive, it is important to ensure older inventory is not building up. Ensuring proper turnover keeps your inventory from spoiling, expiring, or becoming out-of-date. Electronic products may have depleted batteries if left on the shelf too long, resulting in a poor customer experience. Fabric products can gather dust or become unfashionable.
No matter what you’re selling, it’s a good practice to make sure you’re making your best efforts to clear out the older inventory first. It keeps everything fresh and you don’t run the risk of losing money on products becoming stale (literally or figuratively).
Consider designating an employee to manage stock control
If you find that your inventory management tasks are taking over your whole business, consider outsourcing the job. A stock controller manages all the day to day inventory movements of a business. Their entire job is to make sure you have what you need when you need it.
Owning and running a business with inventory can be fun and rewarding, but it’s not without challenges. Put in place some solid inventory controls and you’ll find yourself maximizing profits and pleasing customers.
As prices continue to rise, you’ve likely noticed that your cost of doing business has increased as well.
With that in mind, you may be considering raising your prices. After all, the main point of any business is to make money, and you can’t do that if you’re no longer breaking even.
Read on to discover some tips on how to determine if a price increase is required, and how to communicate this to your customers.
Monitor the health of your business
Understand what is costing you more.
It is important to regularly track and analyze your profitability. Check which products or services are making money, and which aren’t. Then take it a step further and pinpoint the breakeven position for each area.
You will then be able to decide how much more you need to make to be profitable. Evaluate all avenues – pricing, supplies, bills, rent and utilities, training, etc. By doing this regularly, you’ll see which areas cost you more over time and may perhaps be bringing down your overall profitability. Those areas that cost you more will likely benefit from a potential price increase (or review of input costs from suppliers).
HOWEVER, before you can come to any potential conclusions…or even start your analysis for that matter…you need to have your bookkeeping records up to date and accurate. The go to bookkeeping software we recommend to our clients is Xero. This platform allows us to keep our clients’ books up to date on a monthly basis and allows them to access this information online from virtually anywhere.
Decide your approach
If costs have gone up across the board, a blanket increase would make sense. However, if you find that only some of your services now cost more to operate, it might be a good idea to increase only those prices. Your customers will appreciate only the necessary cost increases being passed on.
Being able to allocate costs to specific revenue streams and determine the profitability of each area is the key step here. This is where online bookkeeping software, like Xero, can help.
Being aware of what others in your market are charging for similar services is critical information as well. You want to ensure you are operating profitably, but don’t want to price yourself out of the market.
Accept that you have to do it
It’s a daunting task to consider raising your prices, as the danger of upsetting customers who might not understand the reasoning behind the increase will be front of mind.
But the bottom line is this: you cannot deliver quality service if you’re not charging enough and as a result not operating profitably. It’s that simple.
If you’re spinning your wheels trying to make up the difference, you won’t be able to deliver the great service you’re known for if you’re constantly overworked trying to find profits elsewhere by taking on more unprofitable work.
Raising your prices is part of doing business. It doesn’t make good financial sense to try to swallow the cost to appease your customers. With that in mind, know that you’re doing the right thing both for yourself and your clients.
Gauge the satisfaction level of your current customers and look for areas to improve
If you know that your clients are happy and believe they’re being provided great value, they’re going to be happy to continue paying for that and should understand where you are coming from. They won’t bat an eye when you inform them of your increase, assuming the increase is justified.
But, if they’re not currently satisfied, a price increase will simply upset them. This is where open communication with your clients is important to ensure they are getting the service or goods they need and at a price that accurately reflects the value being delivered. Understanding a customer’s pain points and finding a solution to this will show you care and help generate more value for them.
Open discussions with your clients will provide valuable feedback to you as well in terms of areas you can improve upon with service delivery or goods being offered. Determining what your customers value most may help shed some light on where you should be focusing your time and resources.
Give a lot of warning
Three months before your planned increase, contact your client base to let them know of your plans. State the reasons for raising your prices now and explain the logic behind it.
Explain the fact that this change is necessary to continue delivering the high-quality service that they’re used to. Giving enough notice to your clients so they have time to react and prepare shows you respect them.
Send a personal message or call long-time clients, or ones that hold significant accounts. This shows them that you care about their reaction, and gives you a chance to listen to their concerns.
Keep the communication lines clear
Most clients will be fine with your price increase and will understand your reasoning. Some will likely have questions, concerns, or even complaints. Focus on answering their questions.
This isn’t a hard sell – it’s a discussion.
It’s a great idea to provide options as well to ensure the optimal value is being provided to your customers. For example, you could offer to keep their prices the same, but trim the services included for that price or change the offering altogether to better align with their changing needs. This is the perfect opportunity to discuss and plan ahead.
Remember, if you’re already in regular contact with your clients, the conversation around rising prices (to cover rising costs) will be a lot less awkward.
Once you’ve done your research and informed everyone, go ahead confidently with your price increase. By doing so, you’ll be able to continue providing the excellent service your clients are used to.
Monitoring your costs and overall profitability on a regular basis is critical to the continued success of your business. However, as mentioned above, in order to monitor the health of your business effectively, it is critical your bookkeeping is up to date. We generally recommend completing internal reporting on a monthly basis. This will give you a live snapshot of where your operations stand throughout the year, rather than trying to pull everything together once a year at tax time. Simply put, the more time that passes, the less valuable the reporting becomes!
If you would like assistance analyzing your pricing / profitability and coming up with a plan, reach out and we’d be happy to chat about the different services and packages we offer.
The rules surrounding WSIB can be complex, but even more so for those operating in the construction industry.
Unlike other industries, WSIB coverage is mandatory for everyone working in the construction industry (unless they qualify for an exemption). WSIB coverage is required for all workers as well as business owners in the construction industry.
Insurable earnings are calculated differently depending on which worker type category you fall into. These include:
- Workers in receipt of wages or salaries
This type of worker is straight forward and is considered the easiest to report. The insurable earnings for these workers are calculated based on the total amount of gross earnings (i.e. employment income – T4)
- Contractors who are workers of the principal (*see clearance certificates note below)
Without a contractor clearance certificate, the principal may be liable for the contractor’s payment obligations to the WSIB up to the value of the labour portion of the contract.
- Deemed workers
These are workers that are deemed to be insurable by the WSIB where insurable earnings must be reported, and premiums remitted. These types of workers can include independent operators (“IO”), sole proprietors, partners, and executive officers (“EO”) of a corporation.
The WSIB considers IO’s in construction as self-employed individuals, incorporated or not, who do not employ workers but are retained as an operator by more than 1 persons in an 18 month period. This holds true for both sole proprietors without workers AND single officer corporations without workers.
Filing a WSIB return for this type of worker includes the IO determining the labour portion of the contract that has been agreed upon. If the records are adequate to determine the labour portion of the contract (i.e. labour is broken out on the invoice), then this is straight forward. If the labour portion is not easily determined (inadequate records – i.e. labour not broken out on the invoice), then the calculation is a bit more complex and is determined by one of the following methods:
(i) If the records are not adequate to identify labour portion (as described above) AND there is no evidence that the operator supplied major materials or heavy equipment used in the construction work, the entire contract value (100%) will be included in gross insurable earnings;
(ii) If records are not adequate but there is evidence that the operator supplied major materials and/or heavy equipment used in direct performance of the construction work, the WSIB outlines to identify the labour portion using one of the following allowed percentages:
- Where operator provided labour and major materials, principal is to use 60% of the contract value as gross insurable earnings
- Where a operator provided labour and heavy constructions equipment, with or without materials, the principal is to use 33 1/3% of the contract value as the operators’ gross insurable earnings (please refer to WSIB’s definition of heavy construction equipment for further guidance).
Sole Proprietors with Workers, Partners and Executive Officers of a Corporation in Construction:
This section applies to the following workers in construction who do not operate their business alone as a single personal business entity:
- A sole proprietor with workers: insurable earnings = the individual’s annual self-employment business income from the proprietorship
- A partner or partnership with or without workers: insurable earnings = the individual’s annual self-employment business income from the partnership
- An executive officer in a corporation with workers: insurable earnings = employment income (i.e. income reported on a T4, T4A, T5, director fees, etc.)
Annual Minimum and Maximum Insurable Earnings
WSIB sets an annual minimum amount of insurable earnings for sole proprietors, partners, and executive officers of a corporation in construction: set at 1/3 of the annual maximum. For example 2022 maximum is $100,422; therefore the minimum is $33,474.
The annual maximum insurable earnings (which applies to all categories of workers) is adjusted each year by WSIB.
WSIB Clearance Certificates
Be aware if bringing a contractor on site, as you could potentially be deemed liable for WSIB insurance premiums owing in connection with the work or service being performed by the contractor. A WSIB clearance relieves a business (the principal) that retains a contractor of this liability for the contractor’s WSIB insurance premiums. Principals and general contractors must obtain a WSIB clearance certificate from all contractors before work begins. You are considered a principal if you hire a contractor or subcontractor.
Make sure you always request a clearance certificate before the work begins.
WSIB regulations and guidelines are constantly changing. The above article is a high-level summary based on our interpretation of the regulations in place as of July 2022. This article is not intended to provide professional advice but simply a general guideline to get you started in assessing your WSIB filing requirements. There are additional factors to consider which are not outlined in full above. WSIB can be a complex topic and it is important you speak with a professional or WSIB directly to assess your exact situation to determine any potential WSIB filing requirements.
If you are operating in the construction industry and would like assistance assessing your situation or need help filing your WSIB remittances, feel free to reach out and we would be happy to discuss with you.