If you work in Canada, even as a working holidaymaker, then you’ll need to pay tax on the income you earn.
This includes federal and provincial tax for Ontario.
How much you pay depends largely on how much you earn as there are certain tax-free thresholds. The Canadian tax system is progressive so the more you earn, the more tax you’ll pay on your income.
As a working holidaymaker, you will also typically be considered a non-resident for tax purposes, however if you earn income from outside Canada in the same tax year, you must still declare this on your tax return. You’re obliged to file a tax return by the 30 April deadline each year. So, if you work in Canada in 2018, then you’ll need to file your tax return by 30 April 2019. However you can file from February of that year and the sooner you file the better.
How much tax will I pay?
As a non-resident, you only pay tax on your income sourced in Canada. You’ll need to pay federal and provincial tax on your income above a certain amount. This is applied to your tax return to reduce the amount of income you’re required to pay tax on.
So for example if you paid tax but earned under this amount, you may get a refund of all the tax you paid when you file your tax return.
The tax-free threshold for federal tax is $11,809 in 2018 ($11,635 in 2017), so you’ll need to pay federal tax on anything above this amount.
The rates are as follows:
You will also need to pay provincial tax over the Ontario Basic Personal Amount which has increased to $10,359 for 2018 from $10,171 in 2017.
The rates are as follows:
You will see exactly how much tax you pay on your payslip each time you’re paid. You may also see insurance and pension contributions. If you’ve overpaid tax on these then you can claim this back on your tax return. You can apply with our tax partner Taxback.com here to get a free estimate of any refunds due.
What happens when I start my new job in Canada?
When you start working in Canada for the first time, you’ll need to fill out a few forms. You will also need to supply a ”SIN” or Social Insurance Number. Without this number, you may get taxed at the highest rate.
You can even apply for your SIN before you arrive in Canada with our partner Taxback.com
What are TD1 forms?
A TD1 is federal or provincial personal tax credit form used to determine how much tax you should pay on your income. You will need to complete federal and provincial TD1 forms when you start your first job in Canada.
It’s important to remember that if you earned more than 10% of your income outside Canada, then you cannot claim the personal tax credits on these forms. So, if more than 10% of your income was earned outside Canada, then you should not claim the credits and make sure you enter 0 in box 13.
If you claim personal tax credits you’re not entitled to, you may end up with an underpayment of tax and will need to repay this to the Canada Revenue Agency (CRA).
Here are the forms for 2018:
What is a T4?
Your T4 or Statement of Remuneration Paid is a statement of how much you were paid during the tax year. The information on it can be used to file your tax return and find out if you’ve overpaid tax. It typically issued by employers in February. The best thing about your T4 is that you can use it to apply for a tax refund!
Want to claim a tax refund?
Can I claim expenses?
You may be able to claim certain expenses if you paid over the tax-free threshold.
Examples of eligible expenses include:
- Medical (for example – visit to the doctor, prescriptions, and surgery)
- Travel (for example – monthly transit passes until June 30, 2017)
- Tuition fees
- Union dues
- Business (for example – rent, supplies, travel, and professional fees)
If you intend to use expenses to lower your overall tax liability you will need to ensure that you have proper documentation for each cost. So keep any receipts you have safe!
Am I owed a tax refund from Canada?
If you overpaid tax, then you may be due a refund of tax. You can only reclaim this tax by filing a tax return at the end of the tax year which is in February. The quickest way to find out if you’re due tax back using Taxback.com for the free refund estimate we mentioned before.
How much you can claim depends on a number of factors, including:
- Your residency status
- How long you worked
- How many jobs you had
- Income you received from overseas
- How much tax you paid
- If a tax treaty is applicable
How do I file a tax return for Canada?
The deadline for filing your tax return and paying any balance of tax due is usually 30 April.
Of course, you can file your tax return directly with the Canadian tax authorities but if you’d rather do it the easy way, you can use our Taxback.com and they’ll do all the paperwork for you.
You will need your T4 and your SIN.
Check out this short video on getting a Canadian tax refund!
Where do I get my T4?
You’ll normally receive your T4 by the February following a tax year in which you worked in Canada. If you lose your T4 or didn’t get one, you should contact your employer directly. Alternatively, our tax partner Taxback.com can help you to track down missing tax documents including your T4.
If you have any questions related to tax, please contact our tax partner, Taxback.com here.
And don’t forget to sign up to our working holiday jobs kit here!