“Nothing is impossible, the word itself says 'I'm possible'! ”

Audrey Hepburn

“Education is what remains after one has forgotten what one has learned in school.”

Albert Einstein

“A creative man is motivated by the desire to achieve, not by the desire to beat others. ”

Ayn Rand

“The only place success comes before work is in the dictionary”

Vidal Sassoon

“Coming together is a beginning. Keeping together is progress. Working together is success.”

Henry Ford

“Hard work without talent is a shame, but talent without hard work is a tragedy.”

Robert Half

“Though no one can go back and make a brand-new start, anyone can start from now and make a brand-new ending.”

Carl Bard

“I can't change the direction of the wind, but I can adjust my sails to always reach my destination. ”

Jimmy Dean

“It's better to look ahead and prepare than to look back and regret”

Jackie Joyner-Kersee

“If you are willing to do more than you are paid to do, eventually you will be paid to do more than you do.”

Anonymous

“Fools learn what they must. Wise people learn when they can.”

Duke of Wellington

“A person who never made a mistake never tried anything new.”

Albert Einstein

Business Advisory, Personal and Corporate Taxes, Business Start-Up, Bookkeeping

News You Need to Know

The 2018 Federal Tax Changes and How They Will Affect You

Posted November 9, 2017

The Federal Liberal Party unveiled the Fall Economic Update at the end of October, after much speculation, debate, and anger regarding their proposed changes to small business taxes over the summer. The package that has been officially released was significantly changed from the original proposal, with the Liberals backing down on several of their ideas after public outcry. But the changes will still have an impact on your personal taxes and your business.

Here is a summary of the key points and how they will affect you:

Decrease in the small business tax rate

The central piece to the tax changes is an announced reduction in the business tax rate for incorporated small businesses. The rate will drop to 10 percent from the current 10.5 percent at the start of 2018 and will further drop to nine percent in 2019. This change should result in a modest reduction in taxes paid by small business for the 2018 year and a more substantial reduction in 2019, both good news for small business.   

Income Sprinkling

When the original tax plan was announced in July, one of the "loopholes" the federal government said they were planning to close was income sprinkling. The intention was to prevent the wealthy from avoiding taxes by paying family members who haven't actually done any work. The overwhelming response, however, was that this was a move that would make a negligible impact on the rich, but which would do substantial harm to the middle class.

The plan has been changed since the outcry and the Trudeau government has instead decided to impose a ‘reasonableness’ test on the payment of wages and dividends to family members. This test will require family members to keep a log of their hours and the type of work they’re doing in order to avoid having to pay income tax at the highest rate possible. While this is an improvement from the July proposal, it also means that many family run businesses will need to be much more diligent in documenting their day-to-day activities, which means a substantial investment of time and effort.

Passive Income

Another key piece of the July proposal was to close a different "loophole" allowing small businesses to accumulate passive income, or investment income left in the company for future use that is not reinvested into the company. Again, the intention was to prevent wealthy business owners from hiding money. However, many small business owners rely on these investments to pay for things such as sick leave, parental leave or retirement. Consequently, the response from small business owners was loud and singular in protesting this plan.

As a result, the government has changed this piece of the tax puzzle. They now allow for $50,000 in passive investment income each year before the higher tax rate kicks in, with the intention of narrowing the focus onto only the top earners. The draft legislation that will implement this change will be released for consultation as part of Budget 2018 in the spring.     

Capital Gains

A final element of the tax reform plan announced over the summer was to eliminate the ability of small business owners to use the lifetime capital gains exemptions to reduce taxes when transferring assets between two small businesses in which they hold shares. This would have had major consequences for family owned and operated businesses—most particularly family farms—as it would have made it significantly more expensive to sell the farm to a family member compared to an unrelated third party. This is because the sons and daughters that are interested in taking over the family farm are often shareholders in their parents’ small business. 

Again, there was a massive outcry in opposition to this plan and the government responded by announcing that they are not going to move forward with this plan. Instead, they plan to consult over the next year with farmers before coming back with a new proposal.  

Conclusions  

The initial tax reform proposal rolled out in July has been regarded by most as being a bad idea, with several elements that would have put a significant tax burden on the middle class without really having much of an effect on the intended target, the rich. Thankfully, the Liberal government has chosen to soften the tax bill significantly. Nevertheless, it is still being criticised.

Jack Mintz, commenting in the Financial Post, thinks the changes will still make things worse. Says Mintz, "Taking into account the new surplus-stripping rules, small businesses with less than $10 million in assets would be more heavily taxed compared to now (45.4 versus 42.2 per cent). Larger small businesses will be taxed just above 50 per cent. So the tax wall gets higher: a firm doubling in size to $20 million in assets will see its effective tax rate on capital rise from 45.4 to 50.9 per cent."

Likewise, John Nicola feels that this tax reform doesn't make much sense, describing it as "wrong" on BNN.com.

It would seem that the experts are united in saying this tax reform plan will hurt middle class Canadians. So it is important, as a business owner, to seek the advice of your accountant to ensure that these changes have the least amount of negative impact on you. Contact Shaw & Associates Chartered Accountants where we work with you and our network of professionals to give you the advice and services that will take you from where you are to where you want to be.


Why Hire a Chartered Accountant?

Posted October 22, 2017

When is the absolute best time to enlist the services of a Chartered Accountant?

When you have a toothache, you go see the dentist. When your car isn't running properly, you call the mechanic. So when your business needs help with bookkeeping, filing your corporate taxes or preparing a budget, you need to call a Chartered Accountant!

There are a number of excellent reasons why you should hire a Chartered Accountant. As noted by The Globe and Mail, these reasons include:

  • Focus on why you started your business—When you try to handle everything yourself, you may start to lose focus on what got you started in the first place. Handing off critical tasks like accounting to a professional so you can keep your focus on managing the business will make you more successful.
  • Find work-life balance—By hiring a Chartered Accountant you can not only help free up time for other work tasks, you can also make more time for your personal life!
  • A professional reputation—a good accountant can help put your company in the best possible light in the eyes of banks and other key stakeholders.
  • It’s vital to a company’s success—Having an accountant to manage the finances is considered to be one of the top five most critical elements in the success of a business.
  • A new perspective—an accountant can provide a fresh set of eyes for the challenges of your company, which may present new opportunities and solutions.
  • They have reach—By bringing a wealth of experience to bear, an accountant can offer insight and best practices to you that you might not otherwise have access to.
  • Businesses need a plan—As Benjamin Franklin once said, "Benjamin Franklin: “If you fail to plan, you are planning to fail!” A Chartered Accountant can help you build a business plan that gives you the best chance to succeed.
  • Chartered Accountants understand tax—Tax laws are always changing and it is an accountant's job to stay on top of those changes, ensuring your business is properly protected at tax time.
  • Analyze data for growth and profitability opportunities—An accountant can analyze, track, and trend your financial picture, revealing opportunities for greater profit and reduced expenses.

At Shaw & Associates Chartered Accountants our designated professionals will help you with all aspects of your business—budgeting, cash flow, payroll, GST, personal and corporate taxes and any other business-related matters. Our accounting technicians will do your bookkeeping and then the Chartered Accountant will use that information to give you high-level advice, advice you cannot get from your average bookkeeper. Rather than going to one place to have your bookkeeping done and then taking that to another place for your financial statements and tax returns to be prepared, you can have it done all in one place at Shaw & Associates.

When you are starting up a new business, an accountant should be one of the first professionals you seek advice from for whether to incorporate or not, setting up your business number, determining the best software and finding out the best ways to pay the least amount of tax. The relationship you create at the start of your business will continue through the life of your business. You will meet with us on a monthly basis for a financial health check – to go through your reports and budget and ensure you are on the right track. We will celebrate the highs with you and be there for you to get through the lows. 

So what are you waiting for? Call Shaw & Associates Chartered Accountants today for your one-hour free consultation and find out what we can do for you and your business!


Federal Budget Commentary 2017

Posted March 24, 2017

On March 22, 2017 the 2017 Federal budget was presented. Here are a few key highlights:

  • No change to the personal and corporate tax rates, nor inclusion rate on capital gains
  • Elimination of the public transit credit and home relocation loan deduction
  • Expanding employment insurance benefits for caregivers and certain other groups
  • New investments of $7 billion towards early learning and child care over the next 11 years

Download the following PDF to read the entire commentary on the budget: