Prepare Your Business for the New Tax Changes 

Six corporate planning ideas to discuss with your trusted advisor

April 5, 2018

For small businesses and professional corporations alike, the 2017 tax proposals represented the most substantive changes to the Income Tax Act in the last 40 years. The Liberal Government presented these as an attempt to remedy perceived tax advantages in the current tax system. After much anticipation and speculation, late fall announcements and the recent 2018 Federal Budget delivered on several, but not all, of the proposed tax changes announced last year.

Major Changes for Small Businesses and Professional Corporations:

  • Reduction of the small business tax rates – 10% for 2018, and 9% for 2019.
  • Reduction to the Small Business Deduction (SBD) limit when passive income exceeds $50,000.
  • New Refundable Dividend Tax On Hand (RDTOH) accounts – Eligible and Non-Eligible.
  • New rules to minimize income sharing – Tax on Split Income (TOSI).
For more detailed information about these changes, ask your Richardson GMP Advisor for a complimentary copy of our Federal Budget 2018 education article. 

Am I Impacted?

The Federal Government anticipates only a small number of corporations will be impacted by higher tax rates. Small businesses, including professional corporations, are expected to benefit from a lower small business tax rate. Holding companies are expected to be largely unaffected by these changes since all, or substantially all, of the income earned by a holding company is considered passive income and ordinarily would not qualify for the SBD.

Strategies and Planning Options

  • Revisit your personal and corporate investment strategy
  • Permanent Life Insurance within the corporate structure
  • Corporate Class Funds
  • Establish an Individual Pension Plan (IPP) or Retirement Compensation Arrangement (RCA)
  • Review your corporate structure
  • Review your income distributions from the corporation to family members

Interested in reading the full article?
Contact your Richardson GMP Advisor for our Tax and Estate Planning education article: Prepare Your Business for the New Tax Changes. We also have articles that take a deeper dive into the 2018 Federal Budget, Selling a Business and Capital Gains Exemptions.  
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