Overview
Recently, Canada Revenue Agency introduced special legislation under Section 152.01 of the Employment Insurance Act for a self-employed person to claim Special Benefits under the Employment Insurance Act.
Special Rules
A self-employed person is an individual who:
- Is engaged in a business; or
- Is employed but does not have insurable employment by reason of Paragraph 5(2)(b) of the Employment Insurance Act (the person controls more than 40% of the voting shares of the corporation).
Self-employed Canadians would be able to voluntarily opt into the Employment Insurance Program and receive special benefits if theydo not work for a prescribed reason (i.e. maternity). The special benefits for self-employed individuals would mirror those currently available to salaried employees under the Employment Insurance program such as:
- maternity benefits (15 weeks maximum) available to birth mothers and cover the periods surrounding birth (a claim can start up to eight weeks before the expected birth date);
- parental/adoptive benefits (35 weeks maximum) available to biological or adoptive parents while they are caring for a newborn or newly adopted child, and may be taken by either parent or shared between them;
- sickness benefits (15 weeks maximum), which may be paid to a person who is unable to work because of sickness, injury or quarantine; and
- compassionate care benefits (6 weeks maximum), which may be paid to persons who have to be away from work temporarily to provide care or support to a family member who is gravely ill with a significant risk of death.
Self-employed Canadians would be required to opt into the Program at least one year prior to claiming benefits. They would makepremium payments starting with the tax year in which they applied to the Program. With a Program start date of January 1, 2010 (unless Royal Assent occurs after that date), claims could be made as early as January 1, 2011.
To access Employment Insurance Benefits, self-employed individuals would need to have earned a minimum of $6,000 in self-employed earnings over the preceding calendar year.
The self-employed could opt-out of the Employment Insurance Program at the end of any tax year, as long as they have never claimedbenefits. If they have claimed benefits, they would have to contribute on self-employed earnings for as long as they are self-employed.
Self-employed Canadians who opt into the Program would pay the same Employment Insurance premium rate as salaried employees (maximum $747 for 2010). He/she would not be required to pay the employer portion of the premiums.
The Act notes that this applies in respect of every self-employed person who is a Canadian citizen or a permanent resident.
In addition, the Act notes that a “self-employed person” qualifies for benefits if:
- at least twelve months has expired since the day on which the person entered into an agreement;
- the agreement has not been terminated or deemed to have been terminated;
- the person has had an interruption of earnings from self-employment; and
- The person had, during their qualifying period, an amount of self-employed earnings that is equal to or greater than $6,000.
The Act also notes that the qualifying period of a self-employed person is the year immediately before the year during which their benefit period begins.
The Act further notes that a self-employed person must file a return of the person’s self-employed earnings for the year.
The Coming Into Force provisions notes that the proposed Employment Insurance rules generally come into force on the later of the day on which the Act receives Royal Assent and January 1, 2010.
The Employment Insurance premiums will be payable on the individual’s balance-due day for a calendar year which is generally considered to be April 30 of the following year or, if an individual is required to pay instalments, on or before the day when the instalments are payable (March 15, September 15 and December 15). The calculation of the instalments is similar to the income tax instalments.
The person will be required to file a return of self-employment earnings for that year which includes an estimate of the amount of premiums to be paid. The return will be due on or before the day that the personal income tax return is due.
Self-employed residents of Quebec will continue to receive maternity and paternal payments under the Quebec Parental Insurance Program. However, self-employed Quebec residents can also choose to take advantage of the above-mentioned federal program.
Additional information is available at www.actionplan.gc.ca.
Conclusion
The new Special Benefits available under the Employment Insurance Act offers self-employed individuals the opportunity of applying for special benefits.
However, there are advantages and disadvantages of the plan that extend beyond the scope of this article.
If you have any questions regarding the above new rules and regulation, please do not hesitate in calling Joseph A. Truscott at 905 528-0234 or e-mailing Joe at [email protected].
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