Joel Fransen, a dentist in the Lower Mainland, says the $50,000 threshold could impact his expansion and retirement plans in the future.
Small Business Week started with a bang with the announcement the federal government is reviving a campaign promise to drop the small business tax rate. It was part of a series of almost daily policy announcements this week to try to appease small business owners who were angered by a set of proposed tax changes aimed at private incorporated businesses announced in July. It's been a lot to digest, so here's a quick recap, with links to full stories below.
- The federal government will move forward on an election pledge to lower the small business tax rate to 9% from 10.5% by 2019
- Plans to stop allowing income splitting for family members not active in a business will move forward; Finance Minister Bill Morneau said the proposal will be "simplified"
- The government will not move forward with proposed measures to limit access to the Lifetime Capital Gains Exemption
- Proposed rules to discourage using corporations for passive investing will move forward, but a new threshhold will allow $50,000 in income a year to be exempt from the new higher tax. For example, that means $1 million held inside a corporation could earn a 5% rate of return and that income would be taxed under the old rules
- The government is scrapping proposed rules meant to curtail the conversion of income to capital gains, which caused concern in relation to intergenerational transfers and insurance policies held inside corporations
- Morneau promised incentives will be maintained for venture capitalists and angel investors. Consultations will be held on how this can be achieved
There are still a lot of details that have yet to be announced. Stay tuned for updates at globeandmail.com/smallbusiness and on Twitter at @GlobeSmallBiz - Sarah Efron, Globe and Mail Small Business Editor
Liberals set $50,000 a year threshold on taxing investments in corporations
The Liberal government is revising its proposed changes to small-business tax rules in a way that Finance Minister Bill Morneau says will better target Canada's wealthiest investors. The government intends to allow incorporated businesses to generate up to $50,000 a year in passive-investment income – equivalent to a return of 5 per cent on $1-million in savings – before controversial new rules aimed at curbing the use of corporations for personal savings would be applied. Full story
Revised passive-income rules discourage small-business growth, critics say
Ottawa's updated proposal for taxing passive investments made through private corporations is better than before but still doesn't go far enough, say some small-business owners and industry experts. Full story
Tax cut receives a lukewarm welcome from small-business owners
Patrick Kerrigan certainly isn't going to complain about Ottawa's plan to cut his corporate taxes, but he says the fight to protect his small family business from other, potentially punitive tax changes is far from over. Full story
Revised tax policy for small businesses hinders growth, economists say
Ottawa's decision to resurrect its small-business tax cuts is a case of shrewd politics trumping sound policy. While the political urgency behind the move had become glaring, the economic logic is sorely lacking, even contradictory. Full story
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