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After the fall harvest, Canadian farmers could face huge tax hit from new rules

Proposed new tax reforms by the Canadian government could affect highly paid professionals as well as farmers. About 25% of all farms are family owned, and the number has gone up in recent times due to tax advantages. The government states that the reforms are aimed at wealth tax avoiders. Something that will adversely affect farmers is limiting of capital gains exemptions allowed. This could significantly increase the tax burden on family farms which use family members to reduce capital gains tax when selling land to their children.

Trudeau’s Proposed Tax Changes Devastating for Small Businesses: A letter to the Department of Finance

The latest proposed Canadian tax laws could be devastating to small businesses. These laws paint these quaint businesses in the same light as larger, more shady business. In addition to treating businesses that were following the rules as if they were blatantly evading their taxes. If they become law, these kinds of regulations will be costly to businesses in terms of time and money as well as, in some extreme cases, the businesses altogether.

Key Takeaways:

The Canadian Finance proposals, while designed to make Canada more competitive in the global economy, will hinder Canada’s competitiveness.
The Finance Minister’s proposal will force small and large business to restructure to avoid a 73% tax, which will in turn reduce the revenue flowing to the government.
While the tax proposals are aimed at large corporations, the consequences will force all companies to claim more passive income, which will remove active income from the overall economy.

If you’re a small business, we highly recommend contacting your MP and share your concerns with them. If you follow the link to the original article below, there is a sample letter that you can use to address the issue or send to Bill Morneau at the Finance Department.

“The Finance department and the Federal Liberals are incorrectly casting small business owners as wealthy tax cheats.”

Canada: Sweeping Proposed Tax Changes To Private Corporations

The Canadian Department of Finance recently released a proposal that will eliminate income splitting strategies, a tactic many small businesses use. In the future, family members may be required to show that a dividend is reasonable, and the application of the reasonableness test will be even stricter if the person is 18 to 24 years old. As of right now family members, including minors, serve as beneficiaries of corporate trusts and pay a tax on the income. The new proposals will only allow adult beneficiaries to receive benefits, such as the lifetime capital gains exemption.

Your Neighbourhood Small Business Owner Isn’t A ‘Fat-Cat Tax Cheat’

While the Canadian government’s proposed tax changes may appear to target large businesses in the act of evading taxes or using questionable tax practices, the reality is that the new legislation would affect neighbourhood coffee shops, chiropractors, farmers and dry cleaners. These businesses have relied on legitimate small business tax rules from previous Liberal and Conservative governments to enable them to grow and expand. They have been following the rules, filing when they were supposed to and being lawful for the most part. However, all of this may change if some of the rules (that mitigate the higher risk of entrepreneurship for small businesses) are now being thought of as loopholes for these small business evildoers, which is not the case.

After Tax Proposals, Investors Need to Be Making the Most of Their TFSAs

In July, the Department of Finance proposed changes to the tax policy for small businesses. These changes are in part due to the increased number of temporary, part-time, and contract work, who operate as private corporations, in comparison to the traditional salaried worker. As a result, Canadians, especially non-salaried, should be taking advantage of their Tax-Free Savings Account (TFSA).

Key Takeaways:

Independent contractors, on-demand workers, remote workers, and other areas, make up 20-30% of the workforce today.
In light of these trends, it is no accident that the Canadian government is looking to close loopholes for small businesses.
Investing in stocks can provide growth and income for investors to boost tax-free capital growth.

“All Canadians should be taking advantage of the room in their Tax-Free Savings Accounts (TFSA), but for those in the gig economy, getting the most out of their TFSAs is crucial.”

Ready to buy a house? Here’s what it means for your taxes

If you’re ready to buy a house, then it’s important to know how home ownership will affect your taxes. The good news is that your home is potentially a tax break, through credits or exemptions on profits from selling your family home. First-time home buyers are eligible for a tax credit from the Canadian Revenue Authority (CRA), and you can also use some of your RRSP if needed, to purchase, although the money must be refunded to the account.

Key Takeaways:

If you’re a first-time homebuyer you’re eligible for the First-time home buyers’ tax credit. It is a $5,000 credit, which works out to a $750 tax saving. You can even split the credit with your significant other if you’re both first-time homebuyers.
Current homeowners, who are selling their house, will need to report this on Schedule 3, Capital gains when you file your income tax return. For one property per year and provided it is your primary residence, then you do not have to pay tax on the capital gain, thanks to the principal residence exemption.
While standard renovations don’t apply, you can claim up to $10,000 in expenses for renovations to your principal residence to add accessible for seniors or disabled persons.

“Before you make one of the largest and most important purchases in your life, here are some tax implications you should know.”

Everything you need to know about income tax brackets

Taxpayers are assigned brackets for taxation purposes, which depends almost solely on income. Those in the lowest bracket will pay 15% but those in higher brackets actually pay based on tiers. The portion of their income that is in the lower bracket gets taxed at that lower rate of 15%. The balance of the yearly income is taxed at a higher rate of 20.5% if total income falls within the second bracket. If income is higher than that, an additional tax is assessed for the balance that falls within a third bracket, and so on.

Key Takeaways:

Changes to your salary, such as a raise or termination pay, will add to your income and may potentially move you into a higher tax bracket.
Taxable employee benefits can also affect your income. In general, taxable benefits like trips, bonuses and personal use of an employer’s automobile, won’t be substantial enough to move you into a new bracket. But, one that might is an employee stock option.
Most taxable benefits will be included in your statement of employment.

“Knowing what contributes to your income and your income tax bracket is important, so there are no surprises when your T4 arrives in the mail.”

How to Incorporate your business

There are many financial and tax benefits to incorporating, but here are also some disadvantages to consider so you can decide when is the right time to do so. Ania takes you through the basic steps of why, how and when you should incorporate. She also explains the different tax rates and what happens after you incorporate. If you’re already running a successful business and are considering switching to an incorporated business, Ania explains a few of the extra steps you’ll need to take to make the change successfully.

Note: The information in this video is for Canadian small business owners, however many of these rules apply around the world. Make sure to check with your accountant on details for your specific needs.

Look At The Numbers: There’s No Justifying A Tax Hike On Employers

Bill Morneau has proposed looking at small businesses for new tax revenue and has missed the boat on what it takes to be a business owner. The paper does not take into account the fact that many self-employed people are small-business owners with overhead that offsets tax breaks. Furthermore, employees reap benefits such as paid leave types and retirement programs that owners do not receive. Small businesses that are forced to pay a higher tax rate will eventually offset that cost through the consumer.

Income tax in Canada turns 100: here’s how much money Canadians have paid since 1917

Income tax in Canada has now turned 100 years old. The bill which started income tax collection came into effect on July 26, 1917, and was originally created as a way to raise money during the First World War effort. In just the first year approximately $118.6 million was raised.

Money from income taxes is vital to government projects throughout Canada. In recent years, tax collection has grown to $148.5 billion, and personal income tax accounts for just under half of all federal government revenue.