As a TRUE small business owner...

[Angry White Male]

There are three changes.



They are very simple.



They are being abused.



These three changes are simple.



I could attempt to explain them, but most posters here are too dumb to read and comprehend, so I will not bother.

[Anonymous]

You people don't even know what the changes are, yet disregard my posts.



Eat my shit!



Signed, small business owner that knows more than you.

Fuck you, you crybaby attention seeking effeminate douche. Nobody gives a shit about your dirt moving enterprise.

[Angry White Male]

I see attempting to discuss the changes in this forum was a bad idea, since the posters here don't actually know what the changes are...

[Angry White Male]

The masses always eat up the dirt, so to speak...  There is money in dirt!  Just ask me how I know...

[Anonymous]

The masses always eat up the dirt, so to speak...  There is money in dirt!  Just ask me how I know...

What part of nobody wants to  talk about you with you does not get through your beer soaked white pea-sized fucking brain.

[Angry White Male]

What part of nobody wants to  talk about you with you does not get through your beer soaked white pea-sized fucking brain.

Then stay the fuck outta my tax thread, bitch, unless you wanna speak taxes!



You think you're smart?  Then you should be smart enough to understand that!

[Anonymous]

It's a stupid, job killing cash grab. Combine this with rising interest rates on a country with one of the highest consumer debt rates, over reliance on rising house prices, a looming carbon tax, a lack of will to get pipelines to tide water in the ground and massive deficits does not bode well for the future.

It only affects small business owners that incorporate, isn't that right?



I was surprised how many small business do that.

That is correct.

[cc]

I'm not a huge follower of Canadian news.



Exactly what corporate rate are they  planning for small business?



And what specifically is going on in this whole regard of corp tax & owner personal tax. Corp tax is currently 15 in BC



and what stages is it all at?

[Anonymous]

This is what the federal government has in mind cc.



Income sprinkling



Some business owners sprinkle income to family members by way of salary or wages, or dividends, to reduce the family's overall tax burden. There are already rules in place to prevent unreasonable salary or wages from being paid to family members who are not truly earning the compensation they receive. There are even "kiddie tax" rules to prevent dividends paid to minor children from being taxed at their lower rates.



So, what's changing? The government wants to now restrict the ability to pay salary or wages, or dividends, to adult children between the ages of 18 and 24, by extending the "kiddie tax" rules – formally called the "tax on split income" (TOSI) – to them. The proposals will apply a "reasonableness test" that will assess the adult child's contributions to the business (both labour and capital) in determining whether amounts paid to that child should be taxed at his or her normal tax rates, or at the highest tax rate possible.



In the past, families have also taken advantage of the lifetime capital gains exemption (LCGE), which shelters from tax up to $835,716, in 2017, of capital gains on qualifying small-business corporation shares). Good tax planning has seen the LCGE of each family member used to shelter gains on the family business. The government has proposed to restrict this. Starting after 2017, capital gains realized by a family member can no longer be sheltered with the LCGE to the extent those gains accrued while the individual was a minor. Further, any capital gains accrued while the shares are held in a family trust, or gains subject to the TOSI would not be eligible for shelter using the LCGE.



Finally, in the past, the TOSI (which you'll recall is a special tax, at the highest rate going, that applies to certain income reported in the hands of children) has not applied to second generation income – that is, income on income. So, if a corporation paid, say $100 in dividends to a child, and the child paid the highest rate of tax (the TOSI) of, say, $40, there would be $60 left after taxes. That $60 could be invested and any income in the future on that $60 (income on the income) would not be subject to the high rate of tax (the TOSI). This will change if the new proposals are enacted. All future income (income on any income) will be subject to the same high rate tax (the TOSI). Confused yet?



Passive income



When a corporation generates income, it's eligible for a pretty attractive rate of tax (about 15 per cent, but it varies by province) on the first $500,000 (federally) of active business income. If a business owner doesn't need all of his earnings to support his lifestyle, it's common to leave the rest in the corporation to invest – perhaps in a portfolio earning passive income. For example, if you earn $100 in active business income and pay $15 of that to the taxman, you'd have $85 left to invest in the corporation. If you had earned that business income personally, and you're in the highest tax bracket (a marginal tax rate of about 50 per cent), you'd be left with just $50 to invest. So, there's an advantage to earning business income in a corporation if you earn enough that you won't spend it all.



The government thinks this is unfair, notwithstanding that you'll actually pay more tax over all if you invest inside the corporation and then eventually pay that income out to yourself as dividends later. That's right, corporate tax rates on passive income are high even under today's rules – don't let the government tell you otherwise. So, the only meaningful benefit is the larger amount to invest up front as noted in my example above. It appears that the government believes that having more money working for you today, if you have a corporation, is offensive (so much for helping Canadians save for the future).



The government is exploring how to limit the perceived benefit of leaving excess earnings inside a corporation to grow in a passive portfolio. Mr. Morneau is looking for comments from Canadians on a couple of primary options: (1) implementing a refundable tax that would apply to ineligible investments (the tax would be refunded once the capital is either paid out to you as taxable dividends personally, or is used in the active business), or (2) change the current refundable tax system on annual passive income so that the tax is no longer refundable if the investments were made with excess business income taxed at low rates. How does all of this simplify our tax system?



Converting income to capital gains



Some corporate owners have taken steps to convert what would otherwise be taxed as salary or dividends into capital gains. This has been done using a complex set of steps involving selling of some shares to another company related to the shareholder. The government proposes to close these opportunities by tweaking section 84.1 of our tax law, which was intended to prevent this type of planning but doesn't quite do the trick. On this one, I think the changes make sense.



If you're so inclined, read over the 63-page consultation paper that outlines these proposed changes (available on the Department of Finance website). In my view, what you'll find are a lot of changes that will do nothing but make our convoluted tax law even more complex.

https://beta.theglobeandmail.com/globe-investor/personal-finance/taxes/proposed-tax-changes-will-shake-the-small-business-world/article35754872/?ref=http://www.theglobeandmail.com">https://beta.theglobeandmail.com/globe- ... ndmail.com">https://beta.theglobeandmail.com/globe-investor/personal-finance/taxes/proposed-tax-changes-will-shake-the-small-business-world/article35754872/?ref=http://www.theglobeandmail.com&

[cc]

Thank Fash. You are correct - it is being made more and more complex



In another but related area, I wonder if Seoul knows status / plans re: the once in a lifetime tax exemption on   750,000 (may be a bit higher now) max for  sale of a Canadian business??



There was talk pre-election that he wanted to change this



There was talk pre-election that he wanted to change TFSA's

[Anonymous]

Thank Fash. You are correct - it is being made more and more complex



In another but related area, I wonder if Seoul knows status / plans re: the once in a lifetime tax exemption on   750,000 (may be a bit higher now) max for  sale of a Canadian business??



There was talk pre-election that he wanted to change this



There was talk pre-election that he wanted to change TFSA's

Do you mean the lifetime capital gains exemption(LCGE)?



In the past, families have also taken advantage of the lifetime capital gains exemption (LCGE), which shelters from tax up to $835,716, in 2017, of capital gains on qualifying small-business corporation shares). Good tax planning has seen the LCGE of each family member used to shelter gains on the family business. The government has proposed to restrict this. Starting after 2017, capital gains realized by a family member can no longer be sheltered with the LCGE to the extent those gains accrued while the individual was a minor. Further, any capital gains accrued while the shares are held in a family trust, or gains subject to the TOSI would not be eligible for shelter using the LCGE.



The Liberal government lowered the contribution limit to TFSA's from $10,000 to $5,500 two years ago.

[cc]

It may come under that act  .. amount is similar ... but I'm referring directly to the proceeds of sale of a Canadian developed company



On TFSA, I think you mean the Conservative  govt  ... I believe the 10,000 was a one year only thing  .. but still applies to total

[Anonymous]

It may come under that act  .. amount is similar ... but I'm referring directly to the proceeds of sale of a Canadian developed company



On TFSA, I think you mean the Conservative  govt  ... I believe the 10,000 was a one year only thing  .. but still applies to total

Yes, the Conservatives raised the maximum contribution to $10,000 their last year in office and the Liberals lowered it to $5,500..



Unused contribution room rolls over each year and there is still no lifetime cap on contributions..



I believe the proceeds of a sale of a Canadian corporation are covered under the LCGE that is likely to be changed.

[Anonymous]

A qualified small business corporation(QSBC) are eligible for the tax exemption that cc was talking about. It also applies to the sale of qualified farm and fishing property.

[cc]

Thanks out to both of you.