MAJOR TAX CHANGES COMING FOR SMALL BUSINESS OWNERS

There has been much backlash over the proposed budget and specifically how it is targeting small businesses in Canada.  The budget, combined with increases to the minimum wage and Canada Pension Plan, not to mention recent increases to hydro rates in the Province (and the likelihood of future increases in the near future) and interest rates starting to climb has small business owners – the bulk of our clients – a little on edge.

2017 Federal Budget

The budget proposals affecting the small business owners, in summary format, are as follows:

  • Curtailing of ‘income sprinkling’, a method by which business owners shift a portion of their income to family members, either through salary or dividends.
  • More stringent rules on ‘passive investment income’ which the government describes as the investment of money left in a corporation for purposes other than to invest directly in growth.
  • Conversion of a corporation’s regular income into capital gains, which is taxed at a lower rate.

The 75 consultation ended October 2nd and we will likely see this budget passed without many changes.  Finance Minister Bill Morneau appears to be taking a firm stance on the budget despite a very vocal taxpayer voice appealing to the government that this, in general, is ‘too much, too soon.’

Changes to the Canada Pension Plan

Increases to the CPP are slated to occur in 2019 and, in summary, are as follows

  • increase the amount of the retirement pension, as well as the survivor’s and

disability pensions and the post-retirement benefit, subject to the amount of

  • additional contributions made and the number of years over which those

contributions are made;

  • increase the maximum level of pensionable earnings by 14% as of 2025 – the rate will increase from 4.95% to 5.95%;
  • provide for the making of additional contributions, beginning in 2019;
  • an increase the Working Income Tax Benefit; and
  • a deduction for additional employee contributions.

There is no doubt that our client base will feel this immediately, and be quickly forced to address their pricing models and the salaries being paid to employees.

We are actively working with our client base on the premise that this budget will indeed pass and taking a proactive approach to working with our clients as they manoeuvre this latest.

Please contact the office if you wish to discuss how the budget will affect your business.