The Government's Tax Changes and How They Impact Small Businesses
With the release of the Federal Budget, the Government has provided additional information and greater clarity regarding income sprinkling, holding passive investments in a private corporation and converting income into capital gains.
Going forward, a $50,000 threshold on passive income in a year (equivalent to $1 million in savings, based on a nominal 5-per-cent rate of return) would be available to business owners to hold savings for multiple purposes, including savings that can later be used for personal benefits such as sick leave, maternity or parental leave, or retirement.
Furthermore, access to the small business deduction will be limited based on a corporation’s passive income. Under the proposal, if a corporation and its associated corporations earn more than $50,000 of passive investment income in a given year, the amount of income eligible for the small business tax rate would be gradually reduced.
CADA will continue to track the Government’s small business tax changes as they move forward and will advocate for its members to ensure our interests are being represented at the Federal level.
If there are any questions regarding the government's small business tax changes, please contact Michael Hatch, CADA's Chief Economist, at 613.230.2079.