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Payroll deductions relating to long term disability premiums

RSTRecently, one of our subscribers was wondering how to deal with payroll deductions relating to long-term disability (LTD) premiums. They wanted to know if the amount they deduct from the employee’s paycheque must include the Ontario sales tax on the LTD premium?

The answer is yes; the amount that you have to deduct from employees includes Ontario Retail Sales Tax (RST) at eight percent on any share of LTD premiums that they pay.

Note, however, that RST only applies to the amount of any employee premiums paid by Ontario residents. In other words, there is no RST on the employee portion of LTD premiums paid by a person who is not an Ontario resident, but whose province of employment is Ontario. Because of this rule, there might also be situations where the employer portion of the LTD premium is subject to RST, but the employee portion is not.

Generally, where LTD coverage is provided through an insurance company, the monthly billings from that carrier should show which premiums are subject to RST and which are not.

Alan R. McEwen
Alan McEwen & Associates

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Alan McEwen

Payroll consultant at Alan McEwen & Associates
Alan R. McEwen‘s involvement in payroll spans over 20 years. As a practitioner, he has implemented and managed outsourced payroll operations for both large and small employers. As a consultant, he has worked with many organizations, public and private, on HR/payroll process re-engineering, strategic systems decisions and forensic payroll audits. Read more
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