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[H&R Block Insight - November 2009]
[GST/HST credit - not everyone gets it]

The Goods and Services Tax/Harmonized Service Tax credit (GST/HST) has been available for many years and yet many Canadians are not familiar with it. And they don't understand how they qualify to receive it or why they don't.

The GST/HST credit is a tax free payment that helps individuals and families with low and modest incomes to offset all or part of the GST or HST that they pay. The credit is paid quarterly in July, October, January and April based on the information provided on your tax return. For example: the information on your 2009 tax return will be used to calculate the credit paid July and October 2010 and January and April 2011.

To be eligible for this credit, you must be a resident of Canada and at least one of the following applies. You:

  • are 19 years of age or older;
  • have a spouse or common-law partner; or
  • are a parent and live with your child.

For 2008, the GST/HST credit amount was $248 per eligible adult and $130 per child under 19 years of age. Single parents and single individuals are eligible for additional benefits. Household income will also affect whether or not you receive all or part of the GST/HST credit. If your income is above the thresholds, you will not receive the GST/HST credit. The income levels are:

  • For single individuals - $39,872
  • For single parents - $44,832 to $52,632 (dependent on the number of children)
  • For couples - $42,232 to $52,632 (dependent on the number of children, if any)

If you are eligible for the GST/HST credit, it is important that you file your income tax return on time each year to ensure the benefit keeps being sent - even if you don't have any income. Also if you turn 19 before April 1, 2011, you can apply for this credit on your 2009 tax return.

 

[Self employed... how is it different?]

With the unemployment rate at nine per cent, many Canadians who lost their jobs in 2009 have turned to self-employment to earn income. Whether you are setting up a retail shop or consulting from your home, self-employment brings a number of challenges. And it also impacts your tax situation.

For example, you still have to pay Canada Pension Plan (CPP) premiums when you are self employed. But CPP premiums are made up of equal amounts paid by the employer and employee. The employee portion is shown on your pay stub and is a non-refundable credit on the tax return, used to reduce your tax owing. The employer portion is remitted to the Canada Revenue Agency (CRA).

When you are self employed, you are considered the employer and you are responsible for the entire premium amount. This means when you file your tax return, you will claim the employee's portion as a non-refundable credit, and the employer's portion of CPP as a deduction against income. However you have to remit the full amount to the CRA. So you can probably expect a balance owing for CPP premiums on top of your income tax.

The good news for self employed people is they do not have to pay Employment Insurance (EI) premiums. EI is usually deducted from an employee's paycheque and in the event of loss of work, maternity leave, sick leave or compassionate leave, you are able to draw a reduce income for a time.

But self employed individuals can not apply for EI benefits so they do not pay any premiums. The federal government is currently proposing changes to the program that would allow for maternity or paternity benefits. But it is still just a proposal. So if you are self employed and having a baby, you will need to fund your maternity leave.

One of the biggest concerns for self employed Canadians should be their insurance needs. Many employers offer some kind of short term or long term disability benefit as well as life insurance. If you work for yourself, there is no safety net if you injure yourself and can't work. It is important to consider things like disability insurance, critical illness insurance and professional liability insurance.

For more information on being self employed, click here.