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Canada Revenue Agency announces maximum pensionable earnings for 2016
11-17-2015
The Canada Revenue Agency announced that the maximum pensionable earnings under the Canada Pension Plan (CPP) for 2016 will be $54,900—up from $53,600 in 2015. The new ceiling was calculated according to a CPP legislated formula that takes into account the growth in average weekly wages and salaries in Canada.
Contributors who earn more than $54,900 in 2016 are not required or permitted to make additional contributions to the CPP.
The basic exemption amount for 2016 remains $3,500.
The employee and employer contribution rates for 2016 will remain unchanged at 4.95%, and the self-employed contribution rate will remain unchanged at 9.9%.
The maximum employer and employee contribution to the plan for 2016 will be $2,544.30 each and the maximum self-employed contribution will be $5,088.60. The maximums in 2015 were $2,479.95 and $4,959.90.
Quick facts
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The CPP applies in every province and territory in Canada with the exception of Quebec, where the Quebec Pension Plan (QPP) provides similar pensions and benefits.
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Every employed Canadian over the age of 18 must contribute to the CPP (QPP for those employed in Quebec) to qualify for a retirement pension.
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Contributions to the CPP end when a contributor turns 70.
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The CPP provides retirement, disability and survivor benefits and pensions to contributors and their families.
EI premium rate and maximum
Each year, we give the maximum insurable earnings and rate for you to calculate the amount of EI to deduct from your employees.
You have to deduct EI premiums from insurable earnings you pay to your employees. In addition, you must pay 1.4 times the amount of the employee's premiums. You may qualify for a reduction of the employer contribution if you give your employees a short-term disability plan.
Example
EI premiums you deducted from your employees for the month
$195.50
Plus: Your share of EI ($195.50 × 1.4)
$273.70
Total amount you remit for EI premiums
$469.20
You stop deducting employment insurance premiums when you reach the employee's maximum insurable earnings ($50,800 for 2016) or the maximum employee premium for the year ($955.04 for 2016). For Quebec, the maximum employee premium for 2016 is $772.16.
Note
The annual maximum insurable earnings ($50,800 for 2016) apply to each job the employee holds with different employers (different business numbers). If an employee leaves one employer during the year to start work with another employer, the new employer also has to deduct EI premiums without taking into account what the previous employer paid. This is the case even if the employee has paid the maximum premium amount during the previous employment.
Footnotes: Footnotes: This column is presented as a general source of information only and is not intended as a solicitation for business. It is always recommended that you consult a qualified tax professional beforeembarking on any of the suggestions outlined above. Mohammed Yasin, CGA, is the principal of M. Yasin & Co. Inc., Certified General Accountants and has offices in Vancouver & Surrey,B.C. For more information on this topic or any other taxation matters, please contact taxes@alameen.ca.
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