New Federal Budget and Tax Time

The new Federal Budget dropped on March 19, 2019 during a time when many Canadians are thinking about their 2018 Tax Filing returns. What do you need to know?

A Number Of Perspectives

We offer a few different perspectives on the Budget features and proposed changes.

  • PWC provides a specific list of changes from a technical perspective: CLICK HERE.
  • CBC provides a fact check on the Federal Budget assumptions: CLICK HERE

It appears the Federal Budget was designed to appeal to struggling homebuyers, seniors, those needing job retraining and other targeted groups.

Grant Thornton’s Federal Budget Highlights March 2019

An Investor’s Perspective

From an investor’s perspective, the prospects of slower economic growth points to a focus on fiscal management and Debt to GDP ratios is a common benchmark. The current government use this “debt service ratio” as its fiscal anchor not a budget target. This can be interpreted to mean, similar to governments before, it does not aim to reduce debt but instead to maintain a stable rate of just over 30% of debt to GDP. It was not a budget to reduce debt.

Entrepreneurial Insights from Budget 2017

Entrepreneurs and those business owners who operate through a private corporation, known in tax lingo formally as a “Canadian-controlled private corporation” (CCPC), often do so for a variety of tax reasons. While the recent Federal Budget in March 2017 did not change the corporate tax rates or the tax treatment of CCPCs, the various tax strategies these structures rely upon may need to be re-examined proactively.

Tax Planning for Business Owners

Recent federal budgets introduced new legislation aimed at preventing the inappropriate multiplication of the small business deduction among multiple corporations. To date, no changes were made to the ability for a CCPC, including a professional corporation, to continue to be able to claim the deduction on active business income.

Often the decision for business owners is to determine how much income is left within the private corporation when compared to other tax strategies as income splitting. Make sure to refresh your approach with the new focus in recent budgets. The EY budget summary may also assist:  EY Tax Alert 2017

What does a private corporation mean?

For those that need a reminder of what the use of a Private Corporation can provide please consult a tax professional. Often CCPCs over a significant tax deferral advantage by leaving the after-tax corporate income inside the corporation as opposed to paying it out immediately. This deferral advantage ranges from a low of 35 per cent in Alberta, B.C. and Quebec to a high of just over 40 per cent in Nova Scotia.