The proposed tax changes by the federal government have been the main point of discussion among our clients. Back in July when the originally proposed tax changes were released it caused a lot of unrest among ourselves and our clients.
The proposed changes meant to affect only the “wealthy”. However, the backbone of our economy the small-business owners will be hit harder. As seen, this isn’t only affecting the large corporations, it is affecting the average local business owner. The family owned home builder, the incorporated trades etc.
These proposed tax changes took a slight turn for the better this week.
Proposed Tax Changes Updates
There are still more details that need to be disclosed, but here is where we are at this point:
- The Small Business Tax rate will be reduced to 10% on January 1, 2018, and then down to 9% the following year. The reinstatement of this is clearly a sign that the Liberals are feeling the pushback from the community.
- The new tax higher tax rate for passive income will only be applied to income over $50,000. With rates so low rate now and investments growing at a slower pace, this could come from passive income of $1 million to $2.5 million. This is still being discussed, so there still may be room for improvement.
- All past investments and the passive income earned will be protected, this is a win!
- The restrictions on income sprinkling will still come into play, however, ‘meaningful contribution’ by adult family members will be expanded beyond just day-to-day operations and also include investors.
- They have eliminated their proposed changes to the lifetime Capital Gains exemption aimed at private corporation owners, this is good news.
- Intergenerational transfer changes are bing pulled back and reconsidered.
With all these changes occurring to the original proposed tax changes, it is clear the government has heard our concerns. We seen some big wins with these changes however, there is still room for improvement.
Good job to everyone who helped this come, if we stick together our voice can be heard.
This is just a quick overview, read this Globe and Mail article for more.
If you found value in this post about the updates to the 2017 proposed tax changes, please share it with your friends and colleagues.
As always, if you need help with keeping your finances in order, or if you want to talk more please do not hesitate to reach out.
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