Proposed Tax Changes

September 8, 2017

How it could affect your business and why you should immediately engage with the public consultation

On July 18, 2017, the Department of Finance announced proposed changes to the Income Tax Act aimed at eliminating what it perceived as illegitimate tax strategies used by small business owners, including farmers. The portions of the Act that are to be amended deal with ways businesspeople, including farmers, share income with family members to reduce their tax payable and with the capital gains exemption. These changes are likely to have an effect on your farm or small business.

Income Splitting:

Existing rules, commonly called the “kiddie tax” rules, prevent business owners from sharing income with children under 18 through partnerships, trusts and through dividends or rent paid from the parents’ corporation. The new rules will apply to people over 18 and will expand the kinds of income that are caught to include capital gain from the sale of shares in a corporation or interests in a partnership. When a person receives income (other than salary which is controlled by different rules) from a business owned by a related party, or earns capital gain on the sale of shares of a... Continue Reading

Update on 2017 Federal Budget

April 28, 2017

Courtesy of Brown & Associates Law Office

  • Budget was expected to increase the Capital Gains Inclusion rate – this was deferred until at least fall – commentary suggests this was due to Donald Trump’s election and pledge to reduce taxes in United States.  The status quo of 50% of capital gains inclusion remains.  Now is the time to plan.
  • Professionals no longer able to defer their work in progress (WIP) – pay tax before you collect.  Currently, WIP can be excluded from the calculation of taxable income.  For taxation years that begin on or after March 22, 2017, affected professionals will not be able to use this accounting method, and will have to include WIP in their taxable income.
  • No change to Tax rates for personal or corporate.
  • Increase in money for education innovation and child care.
  • Government announced a consultation study on whether farmers should continue to be allowed to defer grain sales to the next taxation year – government suggests “no clear rationale to continue deferral option”.  Your views on this are required by May 24th, 2017 – send... Continue Reading

2015 Federal Budget Highlights

November 27, 2015

Changes for Farmers – Capital Gains Exemption Increased Effective April 21, 2015, Capital Gains Exemption increased to $1,000,000 for “qualifying farm property” – a great opportunity for farmers to tax plan.  Call us to see if your shares or farmland qualifies – if you last planned before 2007 there is $500,000 more available and you need to plan again.

Changes for Farms and Small Businesses – Decrease in Corporate Tax Rate Starting January 1, 2016 the federal small business tax rate will decrease 0.5% each year.  Today it is 11%, by 2019 it will be 9%.

Changes for Families Effective in 2015, required withdrawal amount for RRIFs were lowered.  Sometimes it makes sense to take out more than the minimum.  See us for strategies. Contribution limit for Tax Free Savings Accounts increased to $10,000 from $5,500 immediately. New Home Accessibility Tax Credit:

  • Home renovations that make a residence more accessible to seniors or those who qualify for the Disability Tax Credit
  • Tax credit is 15% of expenditures up to $10,000 per year
  • Applicable to work performed or goods acquired after January 1, 2016Compassionate Care – Effective January 1, 2016, EI benefits are extended from 6 weeks... Continue Reading

Tax Tips to Increase Your Savings

October 8, 2015

Remember inflation is higher than the Bank of Canada Prime Rate.

  • Maximize R.R.S.P. contributions: 18% of earned income. Money saved outside R.R.S.P. vs. inside R.R.S.P. The rate of return inside your R.R.S.P. over 25 years, assuming 4% interest, is more than double that outside. If you have contribution room from prior years, use it.
  • Maximize your Tax Free Saving Account (TFSA). For 2014 invest $5,500.00 per person; you can catch up on prior years too. R.R.S.P.’s are more beneficial if you are incorporated and have to pay tax to draw money out of your Corporation.
  • Maximize your C.P.P. contribution – if self-employed, you need a salary of $53,600.00 to maximize your C.P.P. which results in an annual contribution of $2,479.95.
  • Watch which investments are in which investment vehicle. Foreign investment dividends are not eligible for the dividend tax credit so it is best to have your Non Canadian portfolio in your R.R.S.P or TFSA.
  • Invest within your corporation or, personally outside your registered investments to receive Capital Gains and Eligible Canadian Dividends.
  • Better than all of the above – Invest in Real Estate or Businesses – especially farmland. If land is actively farmed it qualifies for the Capital Gains Exemption... Continue Reading