On September 11, 2014, Finance Minister Joe Oliver announced the introduction of the new Small Business Job Credit (“SBJC”). The SBJC is a two year program effective January 1, 2015 that will help small businesses by lowering their Employment Insurance (“EI”) premiums. Small businesses that pay employer EI premiums equal to or less than $15,000 in 2015 and/or 2016 will be eligible for the credit in those years. The SBJC reduces the EI premium rate from $1.88 per $100 of insurable earnings to a rate of $1.60 for small businesses. As employers pay 1.4 times the legislated rate, this rate reduction effectively translates to a $0.39 reduction per $100 of insurable earnings for small businesses. This is expected to save small business more than $550 million over 2015 and 2016.
The Canada Revenue Agency will automatically determine eligibility for the 2015 and 2016 taxation year based on the T4 information filed for each of those years; no application forms or filings are required. If eligible, the credit will be automatically calculated and applied to any outstanding balance on payroll accounts. The excess will be refunded to the small business. In the year in which the small business receives the SBJC, the amount must be reported as income or as a reduction of the EI expense on the business’ tax return.
As an example, a small business that employs 11 full time employees, each earning the maximum insurable earnings of $48,600 per year, would normally be required to pay EI premiums of $14,060. As the EI premiums paid by the small business is under $15,000, the small business would be eligible for a SBJC refund of $2,085.
Learn more about the Small Business Job Credit on the Department of Finance Canada website.