Small business tax changes.
One of the many changes to small business taxation is on  passive income earned within a corporation.
The new rules come into effect for taxation years starting after 2018.
Essentially, for every dollar of investment income earned within a corporation, the small business limit will be reduced by $5. Currently, small businesses pay 10% federal income tax rate on the first $500,000 of active business income.  

Types of income included
The Proposals will apply to a new definition of investment income: adjusted aggregate investment income (AAII). This definition generally includes the following types of investment income:

  • Interest
  • Taxable capital gains in excess of allowable capital losses of the current taxation year from the disposition of passive investments
  • Rents
  • Royalties
  • Portfolio dividends
  • Dividends from foreign corporations that are not foreign affiliates

Also included in the proposed definition of AAII is income from savings in a life insurance policy that is not an exempt policy.

Specifically excluded from AAII will be gains or losses from the disposition of “active assets” such as from the disposition of shares of a company that is carrying on an active business. “Active assets” is a newly defined term in the Proposals. Also, when determining AAII under the Proposals, it will not be possible to reduce capital gains realized from non-active assets in the relevant taxation year with unused net capital losses (realized from the disposition of non-active assets) which are available for carryover from a previous or subsequent taxation year.

Dividends received from connected corporations will be excluded from this new definition.

Tax Alerts

Start your Income tax planning with the new rule as soon as possible.                   

Well here it is finally, a news letter to keep you informed .  Our first letter is, regrettably, regarding changes to business income tax laws that will see most of us scrambling to find ways to save our hard earned money from the clutches of our federal government's new harsh policy on taxation of small businesses.

Some have dubbed this as the "Death of Canadian Private Company Tax Planning" as the federal government is taking steps to eliminate all advantages of owning and operating a small business.

I have included the proposed changes below.  I am sure there will be many questions about what this means to you. I will keep you informed and will be holding information sessions in early September.

While there weren’t a great number of tax measures included in the 2018 Fall Economic Statement brought down by the Minister of Finance on November 21, 2018, the tax changes that were announced represented good news for Canadian businesses.

Most Canadians know that the deadline for making contributions to one’s registered retirement savings plan (RRSP) comes after the end of the calendar year, around the end of February. There are, however, some instances an RRSP contribution must be (or should be) made by December 31st, in order to achieve the desired tax result, as follows.

For individual Canadian taxpayers, the tax year ends at the same time as the calendar year. And what that means for individual Canadians is that any steps taken to reduce their tax payable for 2018 must be completed by December 31, 2018. (For individual taxpayers, the only significant exception to that rule is registered retirement savings plan contributions, which can be made any time up to and including March 1, 2019, and claimed on the return for 2018.)

The holiday season is usually costly, but few Canadians are aware that those costs can include increased income tax liability resulting from holiday gifts and celebrations. It doesn’t seem entirely in the spirit of the season to have to consider possible tax consequences when attending holiday celebrations and receiving gifts; however, our tax system extends its reach into most areas of the lives of Canadians, and the holidays are no exception. Fortunately, the possible negative tax consequences are confined to a minority of fact situations and relationships, usually involving employers and employees, and are entirely avoidable with a little advance planning.

Two quarterly newsletters have been added—one dealing with personal issues, and one dealing with corporate issues.

Getting a post-secondary education – or professional training – isn’t inexpensive. Tuition costs can range from as little as $5,000 per year for undergraduate studies to as much as $40,000 in tuition for a year of professional education. And those costs don’t factor in necessary expenditures on textbooks and other ancillary costs, to say nothing of general living expenses, like rent, transportation and food.

When the Canada Pension Plan was launched in the mid-1960s, both the working lives and the retirements of Canadians looked a lot different than they do in 2018. Fifty years ago, most Canadians were able to work at a single full-time job, often held that job for most or all of their working lives and, in many cases, benefitted from an employer sponsored defined benefit pension plan which guaranteed a certain level of income in retirement.

Most Canadians deal with our tax system only once a year, when preparing the annual tax return. And, while that return – the T1 Individual Income Tax Return – may be only four pages long, the information on those four pages is supported by 13 supplementary federal schedules, dealing with everything from the calculation of the tax-free gain on the sale of a principal residence to the determination of required Canada Pension Plan contributions by self-employed taxpayers.

Anyone who has ever tried to reduce their overall personal or household debt knows that doing so, no matter how disciplined one’s approach, can seem like a one step forward, two steps back proposition. It sometimes seems that, just as measurable progress is achieved in one area (an extra payment is made on the mortgage), unexpected costs in another area (a significant car repair bill) push up the level of debt elsewhere (e.g., credit card debt).