From making more to paying more: 2018 ushers in some new changes

By News Staff

Big changes are coming in 2018 that could have a big impact on the change in your wallet.

1. Minimum Wage

Ontario is increasing the minimum wage from $11.60 an hour to $14 per hour as of Jan. 1, 2018. Students under the age of 18 who work part-time will see a boost to $13.15 an hour and liquor servers will start earning $12.20 an hour.

2. CPP and EI Contributions

You may notice more deductions on your pay, depending on what you earn. The maximum pensionable earnings is climbing from $55,300 to $55,900 – so if you typically max out your CPP contributions, you’ll be paying about $30 more in 2018. The Employment Insurance rate is increasing from 1.63 per cent to 1.66 per cent, so if you max out your contributions (capped at $858.22 in 2018), that’s another $22 per year on top of that for $52, or a dollar a week.

3. Mortgage rules are tightening up

This could impact about 100,000 would-be home buyers. Under new rules, even buyers with a 20 per cent down payment will face a stress test (currently used for buyers with less than 20 per cent to put down).

The stress test means that financial institutions will vet your mortgage application by using a minimum qualifying rate equal to the greater of the Bank of Canada’s five-year benchmark rate (currently 4.99 per cent) or their contractual rate plus two percentage points. It means that many people will have to settle for less of a home – or at least a cheaper one.

For example, households with an annual income of $60,000, limited debts and a down payment of 20 per cent could qualify to buy a $325,000 home today. As of January 1, that number will drop down to $264,560. Families with household incomes of $100,000 will see that drop from a $556,000 home to $451,750.

4. Personal Emergency Days.

Recent changes to the Employment Standards Act guarantee workers in any provincially-regulated field 10 emergency leave days – two of which are paid – without fear of losing your job. That is, unless you work in the automotive sector. Earlier this week a CityNews exclusive revealed that cabinet signed off on an exemption for the approximately 100,000 people who work in auto and auto part manufacturing – giving them only seven, unpaid emergency days.

5. Income splitting

Small business owners and professional corporations – like accountants, lawyers and doctors – are seeing a tax loophole tighten. Right now, higher income earning owners and incorporated professional can redirect their income to other family members, generally through private company dividends.

But come January 1, 2018, those dividends will be taxed at the highest marginal tax rate unless the recipient can prove they’ve worked an average of 20 hours a week, every week at the place of business. There are a few exemptions, like persons who hold excluded shares, or the dividends are heading to your spouse. Its best to speak with an accountant about how these changes impact you.

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