As we enter the last quarter of 2018, more than a year after the proposed federal tax changes that impact entrepreneurs and business owners, a reminder of the changes is helpful especially for those that have an investment implication. These impacts include:
- After the 2018 tax year, the small-business deduction limit will be reduced by $5 for every $1 of investment income above the $50,000 threshold, which is equivalent to $1 million in passive investment assets at a 5% return.
- The small-business deduction limit will be reduced to zero at $150,000 of investment income, which is equivalent to $3 million in passive investment assets at a 5% return.
- Income-splitting rules came into effect on Jan. 1, 2018. A tax on split income now applies to dividends paid out of a private corporation to family members.
For a fulsome review, the Investment Executive Article offers a number of resources HERE.
Inflation is the thermometer of economic activity in Canada, which is heating up. Our partners at NBF Economics point out that inflation is rising in Canada led by food prices. These particularly impacts retirees and working families the hardest as they have rising expenses and/or fixed income lags the increases in inflation. May’s 2018 Canadian economic growth measured by Gross Domestic Product (GDP) results were better than expected, with solid headline growth and broad based gains. The dispersion of output gains, meaning the broad participation across the economy was actually the best since 2004 (See chart). The only sector seeing a decline was utilities, although a giveback was always in the cards there after colder-than-normal temperatures had boosted the prior month’s output.
Enjoy the detailed discussion and analysis from our team at NBF Economics
Trade wars and tariffs, and many other aliments don’t seem to be impacting Canada’s business owners, but? Gross Domestic Product (GDP) crept up mildly by .1% or 10 basis points with the Friday, June 29 Statistics Canada announcement. Results were modestly in-line with Canada’s economic expectations for April 2018. These results coincided with Bank of Canada (BoC) survey taken BEFORE the G7 June kerfuffle which also offered positive sentiment from private business, as outlined by Investment Executive Canada.
How have trade talks impacted business sentiment?
While we have no formal data yet, the Globe and Mail offer an opinion that Canada’s outlook would be rosy “if it wasn’t for that U.S. trade war.” Before the ‘Trump’ tariff and trade friction, a focus towards full-employment and hiring had increased substantially. As outlined by the NBF Economics chart below Canadian firms were eager to hire at the expense of investment. However, the business outlook has weakened.
“Despite an upbeat outlook, the balance of opinion on investment moved downward and that even though “almost all interviews” were conducted before the announcement of tariffs on steel and aluminum imports from Canada by the U.S. Business optimism likely took a subsequent dive, especially after the disastrous G7 meeting of June 8th/9th when Canada-U.S. trade relations took a turn for the worse.”
It may have become ‘Oh, Oh’ Canada as business sentiment survey before the G7 meetings enjoyed some of the most positive sentiment since 2011. What is next? For a fulsome discussion on how the recent geopolitical trade wars may impact our future economic outlook, enjoy the detailed discussion from our partners at NBF Economics, HERE.
Trade wars and counter measures never result in positive outcomes with the exception of local sourcing. Here’s a quick review of the potential provincial impacts from CTV News. As consumers we may wish to spend your summer travels and vacation supporting local producers to the benefit of many.
Selling a private family-owned business is an exciting and a trying business. The challenge to transition a family business or wealth created from it to the next generation is significant. As Forbes states “Less than one third of family businesses survive the transition from first to second generation ownership. Another 50% don’t survive the transition from second to third generation.”
Approximately 80% of all businesses in Canada are family-owned. Family-owned businesses are responsible for about 60% of Canada’s GDP per year. In the United States, family businesses generate over 50% of the US Gross National Product (GNP). Therefore you are likely working for a family business or you are in the family business! Hampton Securities advises and guides entrepreneurs on building their businesses, assisting in their financing needs and counselling owners through the exit strategies. This can include generational wealth transfer, estate planning, business valuations and financing.
To consider the challenges and the process of selling a family business enjoy this two part series from Wealth Management.com.