Demystifying MER’s (Management Expense Ratio)

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Investing in a fund requires a good understanding of its associated costs, including the Management Expense Ratio (MER). In this article and infographic, we’ll break down the different components of the MER.

Understanding the Management Expense Ratio

The Management Expense Ratio is a percentage of the total assets in an investment fund that covers the cost of managing and operating the fund. It’s essential to remember that the MER is deducted from your investment returns. Therefore, a higher MER means lower net returns for you.

For instance, if a fund’s expenses added up to 2% of its assets, its MER would be 2%. It’s essential to keep in mind that your returns are reported after the MER is deducted. Therefore, a higher MER can lead to lower net returns for you. Understanding a fund’s MER is important in making informed investment decisions and ensuring you’re getting the most value for your money.

Components of the Management Expense Ratio

There are several components of the MER, including:

Investment Management Fee

The investment management fee is the cost of professional investment management, fund administration, and support services. Investment fund managers and analysts conduct research and analysis of current and potential holdings for the fund, providing investors access to their expertise, education, and experience.

Trailing Commission

The trailing commission compensates the investment dealer and financial advisor for selling the fund and providing ongoing financial advice and service to the investor. The commission also covers trade confirmation, account openings and closing, issuance of statements and communications, and regulatory compliance activities.

Operating Expenses

Operating expenses are essential for the smooth operation of the investment fund, and they ensure that investors receive the information they need to make informed investment decisions. These expenses cover day-to-day costs, including record-keeping fees, accounting and fund valuation costs, custody fees, audit and legal fees, reports and prospectuses, and filing fees.

Taxes

Investment funds are required to pay taxes on their management and administration fees. In addition, they must also include GST/HST in their fees.

It’s essential to comprehend the different factors that comprise the Management Expense Ratio to make informed investment decisions and maximize your investment’s value.

To obtain further details, please do not hesitate to contact us.

First Home Savings Account (FHSA): What You Need to Know

The First Home Savings Account (FHSA) is a savings plan designed for first-time home buyers in Canada, which allows them to save up to $40,000 tax-free. Contributions to an FHSA are tax-deductible, similar to Registered Retirement Savings Plans (RRSP). Additionally, income and gains earned inside the account and withdrawals are tax-free, like a Tax-Free Savings Account (TFSA).

In this article and accompanying infographic, we will provide you with the necessary information you need to know about FHSA, including eligibility requirements, contributions and deductions, income and gains, qualifying investments, withdrawals, and transfers.

Eligibility Requirements

To be able to open an FHSA, you need to meet all the following eligibility requirements:

  1. Residency: You must be an individual who is a resident of Canada.

  2. Age: You must be at least 18 and not reach 72 in the current year.

  3. First-time Home Buyer: You must be a first-time home buyer, which means that neither you nor your spouse had owned a qualifying home that was your principal residence at any point during the calendar year or the preceding four calendar years before the account was opened.

Contributions and Deductions

There are limits to the amount you can contribute to your FHSA.

  • The annual contribution limit is $8,000.

  • The lifetime contribution limit is $40,000.

If you do not contribute the full amount each year, the contribution room carries forward to the following year. However, carry-forward amounts only start accumulating after you open an FHSA for the first time, and they do not automatically begin when you turn 18.

Any excess contributions are subject to a penalty of 1% per month.

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Tax Deductions

By claiming contributions made to FHSA accounts as a deduction against all taxable income sources, the amount of taxable income for the year can be reduced, resulting in a decrease in the amount of taxes payable.

Suppose you choose not to claim the FHSA deduction in the year. In that case, you can carry forward the unused contribution amounts indefinitely and claim them as a deduction later, like RRSP deductions.

Qualifying Investments

Qualifying investments for an FHSA are like those allowed in RRSPs and TFSAs, including mutual funds, segregated funds, ETFs, stocks, bonds, and GICs.

Incomes and Gains

The income and capital gains earned in an FHSA are not included in your annual income for tax purposes and therefore are not deductible. This means that the investment can continue to grow and compound within the FHSA tax-free like a TFSA.

Qualifying Withdrawals

Withdrawals from an FHSA are subject to specific rules and conditions. Qualifying withdrawals made to purchase a home are tax-free but must meet specific criteria:

  • The person making the withdrawal must be a first-time home buyer and a Canadian resident.

  • They must also intend to use the property as their primary residence within one year of purchasing or building it.

  • The home being purchased must be in Canada, and a written agreement to buy or build the home must be in place before October 1st of the year following the withdrawal.

It is not possible to restore FHSA contribution limits by making withdrawals or transfers.

Transfers

Unused funds in an FHSA account following a qualifying withdrawal can be transferred tax-free to an RRSP or Registered Retirement Income Fund (RRIF) until the end of the following year from the year of the first withdrawal. Transfers do not affect the available RRSP contribution room, but the transferred funds will be taxable when withdrawn from the account.

It’s important to remember that there are limitations on how long you can keep your FHSA account. You must close your FHSA after you’ve held it for 15 years or by the end of the year in which you turn 71, whichever comes first.

If you’re considering opening an FHSA or saving for a home, we can help; contact us.

Tax Tips You Need To Know Before Filing Your 2022 Taxes

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Tax Tips You Need To Know Before Filing Your 2022 Taxes

This year’s tax deadline is May 1, 2023, as April 30 falls on a Sunday this year. It’s important to make sure you’re claiming all the credits and deductions you’re eligible for. In this article, we’ll provide you with tips to help you maximize your tax refund and ensure you’re taking advantage of all the available tax benefits.

Canada Workers Benefit

The Canada Workers Benefit (CWB) is a refundable tax credit designed to help low-income working families and individuals. The credit is made up of two parts:

  • The basic amount

  • A disability supplement (if you qualify).

To determine whether you qualify for the tax credit, you’ll need to consider your net income and where you live. The CRA website provides full details about the net income qualification amounts.

The maximum amounts you can qualify for are as follows:

  • The maximum basic amount is $1,428 for single individuals and $2,461 for families.

  • The maximum amount for the disability supplement is $737 for single individuals and $737 for families.

Claiming Home Office Expenses Due To COVID-19

You can still claim home office expenses if you’re not self-employed but worked from home due to the pandemic. You can:

  • Claim the temporary flat amount if you worked more than 50% of the time from home for at least four consecutive weeks in 2022. You can claim $2 for each day worked from home, up to a maximum of $500. No paperwork or forms are required!

  • Use the detailed method and claim the actual amounts. In this case, you’ll need supporting documentation, plus a completed and signed T2200S form from your employer. You can claim various applicable expenses, including home Internet access fees.

The Tax Deduction for Zero-Emissions Vehicles

A capital cost allowance (CCA) is a tax deduction that helps cover the cost of an asset’s depreciation over time. The CRA created two new capital cost allowances, which apply to zero-emission vehicles bought after March 18, 2019.

They are as follows:

  • Class 54. This class is for motor and passenger vehicles, excluding taxis or vehicles used for lease or rent. It has a CCA rate of 30%. For 2022, capital costs will be deductible up to $55,000, plus sales tax. This amount will be reassessed every year.

  • Class 55 is for leased and rented vehicles or taxis. The CCA rate is 40%.

Return Of Fuel Charge Proceeds To Farmers Tax Credit

You may be eligible for this tax credit if you are either self-employed or part of a farming partnership in Alberta, Manitoba, Ontario and Saskatchewan.

This tax credit aims to help farmers offset the high cost of the carbon tax.

Eligible Educator School Supply Tax Credit

You can claim up to $1,000 of eligible supplies and expenses if you qualify for the educator school supply tax credit.

The tax credit rate for the 2022 tax year is 25%, with a maximum credit of $250.

Need help?

Do you qualify for a credit or deduction? Call us – we’re here to save you money on your taxes!

Salary vs Dividend

As a business owner, you have the ability to pay yourself a salary or dividend or a combination of both. In this article and infographic, we will examine the difference between salary and dividends and review the advantages and disadvantages of each.

When deciding to pay yourself as a business owner, please review these factors:

  • How much do you need?

  • How much tax?

  • Other considerations including retirement and employment insurance.

How much do you need?

Determine your cash flow on a personal and corporate level.

  • What’s your personal after-tax cash flow need?

  • What’s your corporate cash flow need?

How much tax?

Figure out how much you will pay in tax. Business owners understand that tax is a sizeable expense.

  • What’s your personal income tax rate?

Depending on the province you reside in and your income, make sure you also include income from other sources to determine your tax rate. (Example: old age security, pension, rental, investment income etc.)

If you decide to pay out in dividends, check if you will be paying out eligible or ineligible dividends. The taxation of eligible dividends is more favorable than ineligible dividends from an individual income tax standpoint.

  • What’s your corporation’s income tax rate?

For taxation year 2020, the small business federal tax rate is 9% . Please also remember, if you pay out salary, salary is considered a tax-deductible expense, therefore this will lower the corporation’s taxable income versus paying out dividends will not lower the corporation’s taxable income.

Other considerations

If you pay yourself a salary, these options are available.

  • Do you need RRSP contribution room?

As part of this, it’s worth considering ensuring that you receive a salary high enough to take full advantage of the maximum RRSP annual contribution that you can make.

  • Are you interested in contributing to the Canada Pension Plan?

This is unique to your circumstances and a cost-benefit analysis to determine the amount of contributions makes sense.

  • Do you need employment insurance (EI)?

For shareholders owning more than 40% of voting shares, EI is optional. There are situations worth careful thought such as maternity benefit, parental benefit, sickness benefit, compassionate care benefit, family caregiver benefit for children or family caregiver benefit for adults.

The infographic below summarizes the difference between Salary vs. Dividend.

We would also advise that you get in touch with your accountant to help you determine the best mix for your unique situation.

Federal Budget 2023 Highlights

On March 28, 2023, the Federal Government released their 2032 budget. This article highlights the following financial measures:

  • New transfer options associated with Bill C-208 for intergenerational transfer.

  • New rules for employee ownership trusts.

  • Changes to how the Alternative Minimum Tax is calculated.

  • Improvements to Registered Education Savings Plans.

  • Expanding access to Registered Disability Savings Plans.

  • Grocery rebate.

  • Deduction for tradespeople tool expenses.

  • Automatic tax filing.

  • New Canadian Dental Care Plan.

Amendments To Bill C-208 Intergenerational Transfer Introduces Two New Transfer Options

Budget 2023 introduces two transfer options associated with the intergenerational transfer of a business:

  1. An immediate intergenerational business transfer (three-year test) based on arm’s length sales terms.

  2. A gradual intergenerational business transfer (five-to-ten-year test) based on estate freeze characteristics.

For the three-year test, the parent must transfer both legal and factual control of the business, including an immediate transfer of a majority of voting shares and the balance, within 36 months. The parent must also transfer a majority of the common growth shares within the same time frame. Additionally, the parent must transfer management of the business to their child within a reasonable time, with a 36-month safe harbour. The child or children must retain legal control for 36 months following the share transfer, and at least one child must remain actively involved in the business during this period.

For the gradual transfer option, the conditions are similar to the immediate transfer, but with a few differences. The parent must transfer legal control, including an immediate transfer of a majority of voting shares and the balance, within 36 months. They must also transfer a majority of the common growth shares and the balance of common growth shares within the same time frame. As well, within 10 years of the initial sale, parents must reduce the economic value of their debt and equity interests in the business to 50% of the value of their interest in a farm or fishing corporation at the initial sale time, or 30% of the value of their interest in a small business corporation at the initial sale time. The child or children must retain legal control for the greater of 60 months or until the business transfer is completed, and at least one child must remain actively involved in the business during this period.

The extended intergenerational transfer now applies to children, grandchildren, stepchildren, children-in-law, nieces and nephews and grandnieces and grandnephews.

The changes apply to transactions that occur on or after January 1, 2024. If the election is made, the capital gain reserve period is extended to ten years, and the limitation period for assessing a return is extended to three years for an immediate transfer and ten years for a gradual business transfer.

New Rules for Employee Ownership Trusts

The employees of a business can use an employee ownership trust (EOT) to purchase the business without having to pay the owner directly to acquire shares. Business owners can use an EOT as part of their succession planning.

Budget 2023 introduces new rules for using ownership trusts (EOTs) as follows:

  • Extending the five-year capital gains reserve to ten years for qualifying business transfers to an EOT.

  • A new exception to the current shareholder loan rule which extends the repayment period from one to fifteen years for amounts loaned to the EOT from a qualifying business to purchase shares in a qualifying business transfer.

  • Exempts EOTs from the 21-year deemed disposition rule that applies to some trusts. This means that shares can be held indefinitely for the benefit of employees.

Clean Energy Credits

The upcoming Budget 2023 is set to introduce a series of measures aimed at encouraging the adoption of clean energy. These measures include several business tax incentives such as:

  1. Clean Electricity Investment Tax Credit: This is a refundable tax credit of 15% for investments in equipment and activities for generating electricity and transmitting it between provinces. The credit will be available to new and refurbished projects starting from March 28, 2023, and will end in 2034.

  2. Clean Technology Manufacturing Credit: This tax credit is worth 30% of the cost of investments in new machinery and equipment for processing or manufacturing clean technologies and critical minerals. It applies to property acquired and put into use after January 1, 2024. The credit will be phased out starting in 2032 and fully eliminated in 2034.

  3. Clean Hydrogen Investment Tax Credit: It offers a refundable tax credit ranging from 15% to 40% of eligible project expenses that produce clean hydrogen, as well as a 15% tax credit for certain equipment.

  4. Clean Technology Investment Tax Credit: This tax credit will be expanded to include geothermal systems that qualify for capital cost allowance under Classes 43.1 and 43.2. The phase-out will begin in 2034, and it will not be available after that date.

  5. Carbon Capture, Utilization and Storage Investment Tax Credit (CCUS): The budget broadens and adjusts specific criteria for the refundable Investment Tax Credit (ITC) for CCUS. Qualified equipment now includes dual-purpose machinery that generates heat and/or power or utilizes water for CCUS and an additional process, as long as it meets all other requirements for the credit. The expense of such equipment is eligible on a proportionate basis, based on the anticipated energy or material balance supporting the CCUS process during the project’s initial 20 years.

  6. Reduced rates for zero-emission technology manufacturers: The reduced tax rates of 4.5% and 7.5% for zero-emission technology manufacturers will be extended for three years until 2034, with phase-out starting in 2032. The eligibility will expand to include the manufacturing of nuclear energy equipment and processing and recycling of nuclear fuels and heavy water for taxation years starting after 2023.

  7. Lithium from brines: Allow producers of lithium from brines to issue flow-through shares and expand the Critical Mineral Exploration Tax Credit’s eligibility to include lithium from brines.

Changes To How Alternative Minimum Tax Is Calculated

Budget 2023 proposed several changes to calculating the Alternative Minimum Tax (AMT), including the following:

  • The capital gains inclusion rate will increase from 80 percent to 100 percent, while capital losses and allowable business investment losses will apply at a rate of 50 percent.

  • The inclusion rate for employee stock option benefits will be altered to 100 percent, and for capital gains resulting from the donation of publicly listed securities, it will be modified to 30 percent.

  • The 30 percent inclusion rate will also apply to employee stock option benefits if any deduction is available because underlying shares are also publicly listed securities that were donated.

  • Certain deductions and expenses will now be limited to 50 percent, and only 50 percent of non-refundable credits (excluding a special foreign tax credit) will be permitted to reduce the AMT.

  • The AMT tax rate will increase from 15 percent to 20.5 percent.

  • The AMT exemption will rise from the present allowable deduction of $40,000 for individuals to an amount indexed to the fourth tax bracket, expected to be $173,000 in 2024.

  • The AMT carryforward period will remain unaltered at seven years.

Improving Registered Education Savings Plans (RESPs)

Budget 2023 introduces the following changes to RESPs:

  • As of March 28, 2023, beneficiaries may withdraw Educational Assistance Payments (EAPs) up to $8,000 (from $5,000) for full-time programs and $4,000 (from $2,500) for part-time programs.

  • Individuals who withdrew EAPs before March 28, 2023, may be able to withdraw an additional EAP amount, subject to the new limits and the plan terms.

  • Divorced or separated parents can now open joint RESPs for one or more of their children.

Expanding Access to Registered Disability Savings Plans

Qualifying family members, such as a parent, a spouse, or a common-law partner, can open an RDSP and be the plan holder for an adult with mental disabilities whose ability to enter into an RDSP contract is in doubt and who does not have a legal representative.

Budget 2023 announces the government’s intention to extend the provision that allows this until December 31, 2026. To further increase access to RDSPs, the government also intends to expand the provision to include adult siblings of an RDSP beneficiary.

Grocery Rebate

The Budget 2023 will implement the Grocery Rebate, which will be a one-time payment managed through the Goods and Services Tax Credit (GSTC) system. The maximum amount that can be claimed under the Grocery Rebate is:

  • $153 for each adult

  • $81 for each child

  • $81 for a single supplement.

The implementation of the Grocery Rebate will be gradual and will follow the same income thresholds as the present GSTC regulations.

Deduction for Tradespeople’s Tool Expenses

Budget 2023 increases the employment deduction for tradespeople’s tools to $1,000 from $500. This is effective for 2023 and subsequent taxation years.

Automatic Tax Filing

The Canada Revenue Agency (CRA) will pilot a new automatic filing service for Canadians who currently do not file their taxes to help them receive certain benefits to which they are entitled.

The CRA also plans to expand taxpayer eligibility for the File My Return service, which allows taxpayers to file their tax returns by telephone.

Canadian Dental Care Plan

In Budget 2023, the federal government is investing in dental care for Canadians with the new Canadian Dental Care Plan. The plan will provide dental coverage for uninsured Canadians with annual family incomes of less than $90,000, with no co-pays for those under $70,000.

The budget allows the CRA to share taxpayer information for the Canadian Dental Care Plan with an official of Employment and Social Development Canada or Health Canada solely to administer or enforce the plan.

Wondering How This May Impact You?

If you have any questions or concerns about how the new federal budget may impact you, call us – we’d be happy to help you!

Federal Budget 2023 Highlights

On March 28, 2023, the Federal Government released their 2032 budget. This article highlights the following financial measures:

  • New transfer options associated with Bill C-208 for intergenerational transfer.

  • New rules for employee ownership trusts.

  • Changes to how the Alternative Minimum Tax is calculated.

  • Improvements to Registered Education Savings Plans.

  • Expanding access to Registered Disability Savings Plans.

  • Grocery rebate.

  • Deduction for tradespeople tool expenses.

  • Automatic tax filing.

  • New Canadian Dental Care Plan.

Amendments To Bill C-208 Intergenerational Transfer Introduces Two New Transfer Options

Budget 2023 introduces two transfer options associated with the intergenerational transfer of a business:

  1. An immediate intergenerational business transfer (three-year test) based on arm’s length sales terms.

  2. A gradual intergenerational business transfer (five-to-ten-year test) based on estate freeze characteristics.

For the three-year test, the parent must transfer both legal and factual control of the business, including an immediate transfer of a majority of voting shares and the balance, within 36 months. The parent must also transfer a majority of the common growth shares within the same time frame. Additionally, the parent must transfer management of the business to their child within a reasonable time, with a 36-month safe harbour. The child or children must retain legal control for 36 months following the share transfer, and at least one child must remain actively involved in the business during this period.

For the gradual transfer option, the conditions are similar to the immediate transfer, but with a few differences. The parent must transfer legal control, including an immediate transfer of a majority of voting shares and the balance, within 36 months. They must also transfer a majority of the common growth shares and the balance of common growth shares within the same time frame. As well, within 10 years of the initial sale, parents must reduce the economic value of their debt and equity interests in the business to 50% of the value of their interest in a farm or fishing corporation at the initial sale time, or 30% of the value of their interest in a small business corporation at the initial sale time. The child or children must retain legal control for the greater of 60 months or until the business transfer is completed, and at least one child must remain actively involved in the business during this period.

The extended intergenerational transfer now applies to children, grandchildren, stepchildren, children-in-law, nieces and nephews and grandnieces and grandnephews.

The changes apply to transactions that occur on or after January 1, 2024. If the election is made, the capital gain reserve period is extended to ten years, and the limitation period for assessing a return is extended to three years for an immediate transfer and ten years for a gradual business transfer.

New Rules for Employee Ownership Trusts

The employees of a business can use an employee ownership trust (EOT) to purchase the business without having to pay the owner directly to acquire shares. Business owners can use an EOT as part of their succession planning.

Budget 2023 introduces new rules for using ownership trusts (EOTs) as follows:

  • Extending the five-year capital gains reserve to ten years for qualifying business transfers to an EOT.

  • A new exception to the current shareholder loan rule which extends the repayment period from one to fifteen years for amounts loaned to the EOT from a qualifying business to purchase shares in a qualifying business transfer.

  • Exempts EOTs from the 21-year deemed disposition rule that applies to some trusts. This means that shares can be held indefinitely for the benefit of employees.

Clean Energy Credits

The upcoming Budget 2023 is set to introduce a series of measures aimed at encouraging the adoption of clean energy. These measures include several business tax incentives such as:

  1. Clean Electricity Investment Tax Credit: This is a refundable tax credit of 15% for investments in equipment and activities for generating electricity and transmitting it between provinces. The credit will be available to new and refurbished projects starting from March 28, 2023, and will end in 2034.

  2. Clean Technology Manufacturing Credit: This tax credit is worth 30% of the cost of investments in new machinery and equipment for processing or manufacturing clean technologies and critical minerals. It applies to property acquired and put into use after January 1, 2024. The credit will be phased out starting in 2032 and fully eliminated in 2034.

  3. Clean Hydrogen Investment Tax Credit: It offers a refundable tax credit ranging from 15% to 40% of eligible project expenses that produce clean hydrogen, as well as a 15% tax credit for certain equipment.

  4. Clean Technology Investment Tax Credit: This tax credit will be expanded to include geothermal systems that qualify for capital cost allowance under Classes 43.1 and 43.2. The phase-out will begin in 2034, and it will not be available after that date.

  5. Carbon Capture, Utilization and Storage Investment Tax Credit (CCUS): The budget broadens and adjusts specific criteria for the refundable Investment Tax Credit (ITC) for CCUS. Qualified equipment now includes dual-purpose machinery that generates heat and/or power or utilizes water for CCUS and an additional process, as long as it meets all other requirements for the credit. The expense of such equipment is eligible on a proportionate basis, based on the anticipated energy or material balance supporting the CCUS process during the project’s initial 20 years.

  6. Reduced rates for zero-emission technology manufacturers: The reduced tax rates of 4.5% and 7.5% for zero-emission technology manufacturers will be extended for three years until 2034, with phase-out starting in 2032. The eligibility will expand to include the manufacturing of nuclear energy equipment and processing and recycling of nuclear fuels and heavy water for taxation years starting after 2023.

  7. Lithium from brines: Allow producers of lithium from brines to issue flow-through shares and expand the Critical Mineral Exploration Tax Credit’s eligibility to include lithium from brines.

Changes To How Alternative Minimum Tax Is Calculated

Budget 2023 proposed several changes to calculating the Alternative Minimum Tax (AMT), including the following:

  • The capital gains inclusion rate will increase from 80 percent to 100 percent, while capital losses and allowable business investment losses will apply at a rate of 50 percent.

  • The inclusion rate for employee stock option benefits will be altered to 100 percent, and for capital gains resulting from the donation of publicly listed securities, it will be modified to 30 percent.

  • The 30 percent inclusion rate will also apply to employee stock option benefits if any deduction is available because underlying shares are also publicly listed securities that were donated.

  • Certain deductions and expenses will now be limited to 50 percent, and only 50 percent of non-refundable credits (excluding a special foreign tax credit) will be permitted to reduce the AMT.

  • The AMT tax rate will increase from 15 percent to 20.5 percent.

  • The AMT exemption will rise from the present allowable deduction of $40,000 for individuals to an amount indexed to the fourth tax bracket, expected to be $173,000 in 2024.

  • The AMT carryforward period will remain unaltered at seven years.

Improving Registered Education Savings Plans (RESPs)

Budget 2023 introduces the following changes to RESPs:

  • As of March 28, 2023, beneficiaries may withdraw Educational Assistance Payments (EAPs) up to $8,000 (from $5,000) for full-time programs and $4,000 (from $2,500) for part-time programs.

  • Individuals who withdrew EAPs before March 28, 2023, may be able to withdraw an additional EAP amount, subject to the new limits and the plan terms.

  • Divorced or separated parents can now open joint RESPs for one or more of their children.

Expanding Access to Registered Disability Savings Plans

Qualifying family members, such as a parent, a spouse, or a common-law partner, can open an RDSP and be the plan holder for an adult with mental disabilities whose ability to enter into an RDSP contract is in doubt and who does not have a legal representative.

Budget 2023 announces the government’s intention to extend the provision that allows this until December 31, 2026. To further increase access to RDSPs, the government also intends to expand the provision to include adult siblings of an RDSP beneficiary.

Grocery Rebate

The Budget 2023 will implement the Grocery Rebate, which will be a one-time payment managed through the Goods and Services Tax Credit (GSTC) system. The maximum amount that can be claimed under the Grocery Rebate is:

  • $153 for each adult

  • $81 for each child

  • $81 for a single supplement.

The implementation of the Grocery Rebate will be gradual and will follow the same income thresholds as the present GSTC regulations.

Deduction for Tradespeople’s Tool Expenses

Budget 2023 increases the employment deduction for tradespeople’s tools to $1,000 from $500. This is effective for 2023 and subsequent taxation years.

Automatic Tax Filing

The Canada Revenue Agency (CRA) will pilot a new automatic filing service for Canadians who currently do not file their taxes to help them receive certain benefits to which they are entitled.

The CRA also plans to expand taxpayer eligibility for the File My Return service, which allows taxpayers to file their tax returns by telephone.

Canadian Dental Care Plan

In Budget 2023, the federal government is investing in dental care for Canadians with the new Canadian Dental Care Plan. The plan will provide dental coverage for uninsured Canadians with annual family incomes of less than $90,000, with no co-pays for those under $70,000.

The budget allows the CRA to share taxpayer information for the Canadian Dental Care Plan with an official of Employment and Social Development Canada or Health Canada solely to administer or enforce the plan.

Wondering How This May Impact You?

If you have any questions or concerns about how the new federal budget may impact you, call us – we’d be happy to help you!

Ontario 2023 Budget Highlights

Ontario 2023 Budget Highlights

On March 23, 2023, Ontario’s Minister of Finance delivered the province’s 2023 budget. Here are some of the highlights.

No Changes To Corporate or Personal Tax Rates

Budget 2023 did not change Ontario’s corporate or personal tax rates.

Corporate Tax Credits

Budget 2023 introduces a 10% refundable Manufacturing Investment Tax Credit for Canadian-controlled private corporations (CCPCs). This tax credit applies to qualifying capital investments related to manufacturing or processing, with the goal of helping Ontario manufacturers lower their costs and become more competitive.

The budget confirms extending eligibility for Ontario’s film and television tax credits to productions distributed exclusively online.

Budget 2023 also confirms that the province will align with the federal government’s increase in the upper limit for the small-business deduction phase-out range from $15 million to $50 million. This change will take effect for taxation years beginning on or after April 7, 2022.

Consequently, the small-business deduction will only be reduced to zero once a Canadian-controlled private corporation (CCPC) and its affiliated companies have a combined taxable capital of $50 million or more.

Indirect Tax Changes

As of July 1, 2023, a single 12% tax will be applied to wine and wine coolers sold in off‐site winery retail stores. This includes wine boutiques. This tax will replace the four separate tax rates currently applied and is expected to result in an overall tax reduction of about $4 million per year.

Increasing Healthcare Options

Budget 2023 commits $200 million to help the healthcare workforce grow, including training more nurses and helping foreign-trained nurses and doctors attain accreditation in Ontario. In addition, $569 million will be spent to expand home care options.

To help address backlogs, an additional $72 million has been committed to providing OHIP-covered surgeries at community surgical and diagnostic centres.

Over three years, $425 million has been committed to mental health services.

Supporting Communities

The Guaranteed Annual Income System, designed to assist low-income seniors, is set to expand. With an increase in the private income threshold, approximately 100,000 more seniors will be eligible to benefit from the program starting July 2024. The Ontario 2023 budget includes plans to adjust the benefit annually to keep pace with inflation.

Budget 2023 contains $22 billion to build more schools and childcare spaces.

Supporting The Economy And Infrastructure

Ontario is investing an additional $3 million this year to help junior mining companies finance mineral exploration and development.

Budget 2023 commits $224 million to build and upgrade training centres in Ontario and $75 million to the Skills Development Fund over the next three years. The Skills Development Fund aims to help employers address challenges related to hiring, training or retaining workers.

Budget 2023 also includes funding to help ensure Ontario has the infrastructure it needs:

  • $27.9 billion will be spent to support highway expansion and rehabilitation project planning and construction.

  • Over the next ten years, $70.5 billion will be spent on transit, strongly emphasizing supporting GO transit and expanding the Toronto subway system.

We can help!

Wondering how the budget will impact you? Reach out to us – we’re here to answer any questions!

Why A Buy-Sell Agreement Is Vital For Your Business

Why A Buy-Sell Agreement Is Vital For Your Business

The purpose of a buy-sell agreement is to establish a set of rules or actions (that are legally binding) for what must happen to a business if one or more of the business owners is no longer involved.

Why does my business need a buy‐sell agreement?

A buy-sell agreement is vital for your business as it protects the shareholders and the business itself if one of the partners exits the business for any reason.

A buy-sell agreement offers so many benefits for your business. It:

  • Can help maintain the continuity of your business.
  • Minimize disputes between remaining co-owners and the family of the departing owner.
  • Decrease stress and uncertainty for all business owners.
  • Protect business assets and liquidity by including a solid financial and tax plan.

What are the different types of buy-sell agreements?

These are the most common types of buy-sell agreements:

  • A cross-purchase agreement. In this agreement, each remaining shareholder agrees to buy a percentage of the shares owned by the departing shareholder. The purchase can be funded by life insurance in case of the death of one of the shareholders.
  • A promissory note agreement. Each shareholder has corporate-owned life insurance in this agreement, and the corporation is the beneficiary. If a shareholder dies, the surviving shareholder(s) use a promissory note to purchase the deceased’s shares from their estate. The shareholders then use a capital dividend provided by the life insurance to pay off the promissory note.
  • A share redemption arrangement. This is similar to the promissory note agreement set up, but no promissory note is involved, and the capital dividend account pays for the deceased shareholder’s shares.

What do I need to cover in my buy‐sell agreement?

Your buy-sell agreement must address the following:

  • Valuation of the company.
  • Ownership interests.
  • Buyout clauses.
  • Terms of payment.
  • What will happen in the event of any “triggering events.”. These events can include a disagreement between business owners, a business owner getting divorced or retiring, a business owner going bankrupt or becoming disabled, or a business partner dying.

What is the best way to fund my buy-sell agreement?

This needs to be addressed when putting the buy-sell agreement together and can be challenging in the case of some “triggers,” such as a business owner getting a divorce or a disagreement between business owners.

In the case of the death of a business owner or a business owner becoming disabled, the buy-sell agreement can be funded by insurance. Insurance provides both immediate capital and significant tax benefits.

We Can Help!

Buy-sell agreements can be complex and challenging, but they are vital to protect your business and your personal interests. We can explain the best way to set one up – reach out to us today to get started!