When setting up a Health Spending Account (HSA) and/or Wellness Spending Account (WSA) for a client in Ontario, it's crucial to understand the different taxes applied to administrative fees and claim amounts. Here's a detailed breakdown to help you navigate these costs.
Taxes on the Administrative Fee
For HSA claims, the administrative fee is subject to two taxes:
Harmonized Sales Tax (HST): 13%
Insurance Premium Tax: 2%
Total taxes on the administrative fee: 15%
Taxes on the Claim Amount
For the actual claim amount in HSA claims, the following taxes apply:
Retail Sales Tax (RST): 8%
Insurance Premium Tax: 2%
Total taxes on the claim amount: 10%
For clients, a straightforward way to understand the total cost, including taxes and fees, is to consider a standard 10% administrative fee. Under this scenario, the cost per claim (including the administrative fee and taxes) amounts to 21.5%.
WSA Claims in Ontario
It's important to note that the above tax rates are specific to HSA claims. For WSA claims in Ontario, only the HST of 13% is applied, making it simpler and less costly in terms of taxation.
To assist with more specific calculations, we've provided a tax calculator (linked below!) This tool allows you to input a custom claim amount and administrative fee, breaking down the charges for your client comprehensively.
P.S. The claim amount, admin fee and taxes are all tax deductible to the corporation!
If you have any further questions or need additional assistance, please feel free to reach out.