Sunday, September 17, 2017

Small Business Owners – Proposed Federal Tax Changes

A lot of people have been asking me -  “What can you tell me about the proposed federal tax changes announced on July 19, 2017 and their effect on small business”.

The federal government says that the Finance’s proposals in general, “improve the fairness of Canada’s tax system.”

While people such as Jesse Brodlieb, partner in Dentons’ taxation group in Toronto, disagree. “The average wage earner doesn’t have the same risk profile as the average small business owner, and the tax rates ought to reflect that,” he says.

One of the best letters I have seen on this subject, was written by Dr. Deepa Soni.  You can check it out here

Here is what you need to know:

First, these are only proposals.  You can check out the full document by clicking here.  
Second, they potentially affect anyone who owns a Canadian-controlled private corporation, including those who have a Professional Corporation (i.e. doctors, lawyers, dentists, financial planners, etc.).  FYI – this proposal also affects independent farmers.

Third, the proposal focuses on three main areas identified in Budget 2017:
·       Sprinkling income using private corporations (i.e. paying family members, when no work is performed)
·       Holding a passive investment portfolio inside a private corporation (i.e. neutralize the tax-assisted financial advantages of investing passively through a private corporation
·       Converting a private corporation’s regular income into capital gains (i.e. to prevent the surplus income of a private corporation from being converted to a lower-taxed capital gain, and stripped from the corporation

Fourth, several of the proposed measures are slated to be implemented as of January 1, 2018, a mere 91 days after October 2, 2017.

What you should do:
·       Write a letter to your Member of Parliament outlining your concerns. Click here to find their contact details.
·       The Government is accepting submissions on these proposals until October 2, 2017. Send your comments to -
·       Talk to you tax advisor to determine what necessary planning should be considered and what changes should be implemented should the proposed measures be finalized and passed into law