Federal Budget 2021 Highlights

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On April 19, 2021, the Federal Government released their 2021 budget. We have broken down the highlights of the financial measures in this budget into three different sections:

  • Business Owners

  • Personal Tax Changes

  • Supplementary Highlights

Business Owners

Extending Covid -19 Emergency Business Supports

All of the following COVID-19 Emergency Business Supports will be extended from June 5, 2021, to September 25, 2021, with the subsidy rates gradually decreasing:

  • Canada Emergency Wage Subsidy (CEWS) – The maximum wage subsidy is currently 75%. It will decrease down to 60% for July, 40% for August, and 20% for September.

  • Canada Emergency Rent Subsidy (CERS) – The maximum rent subsidy is currently 65%. It will decrease down to 60% for July, 40% for August, and 20% for September.

  • Lockdown Support Program – The Lockdown Support Program rate of 25% will be extended from June 4, 2021, to September 25, 2021.

Only organizations with a decline in revenues of more than 10% will be eligible for these programs as of July 4, 2021. The budget also includes legislation to give the federal government authority to extend these programs to November 20, 2021, should either the economy or the public health situation make it necessary.

Canada Recovery Hiring Program

The federal budget introduced a new program called the Canada Recovery Hiring Program. The goal of this program is to help qualifying employers offset costs taken on as they reopen. An eligible employer can claim either the CEWS or the new subsidy, but not both.

The proposed subsidy will be available from June 6, 2021, to November 20, 2021, with a subsidy of 50% available from June to August. The Canada Recovery Hiring Program subsidy will decrease down to 40% for September, 30% for October, and 20% for November.

Interest Deductibility Limits

The federal budget for 2021 introduces new interest deductibility limits. This rule limits the amount of net interest expense that a corporation can deduct when determining its taxable income. The amount will be limited to a fixed ratio of its earnings before interest, taxes, depreciation, and amortization (sometimes referred to as EBITDA).

The fixed ratio will apply to both existing and new borrowings and will be phased in at 40% as of January 1, 2023, and 30% for January 1, 2024.

Support for small and medium-size business innovation

The federal budget also includes 4 billion dollars to help small and medium-sized businesses innovate by digitizing and taking advantage of e-commerce opportunities. Also, the budget provides additional funding for venture capital start-ups via the Venture Capital Catalyst Program and research that will support up to 2,500 innovative small and medium-sized firms.

Personal Tax Changes

Tax treatment and Repayment of Covid-19 Benefit Amounts

The federal budget includes information on both the tax treatment and repayment of the following COVID-19 benefits:

  • Canada Emergency Response Benefits or Employment Insurance Emergency Response Benefits

  • Canada Emergency Student Benefits

  • Canada Recovery Benefits, Canada Recovery Sickness Benefits, and Canada Recovery Caregiving Benefits

Individuals who must repay a COVID-19 benefit amount can claim a deduction for that repayment in the year they received the benefit (by requesting an adjustment to their tax return), not the year they repaid it. Anyone considered a non-resident for income tax purposes will have their COVID-19 benefits included in their taxable income.

Disability Tax Credit

Eligibility changes have been made to the Disability Tax Credit. The criteria have been modified to increase the list of mental functions considered necessary for everyday life, expand the list of what can be considered when calculating time spent on therapy, and reduce the requirement that therapy is administered at least three times each week to two times a week (with the 14 hours per week requirement remaining the same).

Old Age Security

The budget enhances Old Age Security (OAS) benefits for recipients who will be 75 or older as of June 2022. A one-time, lump-sum payment of $500 will be sent out to qualifying pensioners in August 2021, with a 10% increase to ongoing OAS payments starting on July 1, 2022.

Waiving Canada Student Loan Interest

The budget also notes that the government plans to introduce legislation that will extend waiving of any interest accrued on either Canada Student Loans or Canada Apprentice Loans until March 31, 2023.

Support for Workforce Transition

Support to help Canadians transition to growing industries was also included in the budget. The support is as follows:

  • $250 million over three years to Innovation, Science and Economic Development Canada to help workers upskill and redeploy to growing industries.

  • $298 million over three years for the Skills for Success Program to provide training in skills for the knowledge economy.

  • $960 million over three years for the Sectoral Workforce Solutions Program to help design and deliver training relevant to the needs of small and medium businesses.

Supplementary Highlights

Federal Minimum Wage

The federal budget also introduces a proposed federal minimum wage of $15 per hour that would rise with inflation.

New Housing Rebate

The GST New Housing Rebate conditions will be changed. Previously, if two or more individuals were buying a house together, all of them must be acquiring the home as their primary residence (or that of a relation) to qualify for the GST New Housing Rebate. Now, the GST New Housing Rebate will be available as long as one of the purchasers (or a relation of theirs) acquires the home as their primary place of residence. This will apply to all agreements of purchase and sale entered into after April 19, 2021.

Unproductive use of Canadian Housing by Foreign Non-Resident Owners

A new tax was introduced in the budget on unproductive use of Canadian housing by non-resident foreign owners. This tax will be a 1% tax on the value of non-resident, non-Canadian owned residential real estate considered vacant or underused. This tax will be levied annually starting in 2022.

All residential property owners in Canada (other than Canadian citizens or permanent residents of Canada) must also file an annual declaration for the prior calendar year with the CRA for each Canadian residential property they own, starting in 2023. Filing the annual declaration may qualify owners to claim an exemption from the tax on their property if they can prove the property is leased to qualified tenants for a minimum period in a calendar year.

Excise Duty on Vaping and Tobacco

The budget also includes a new proposal on excise duties on vaping products and tobacco. The proposed framework would consist of:

  • A single flat rate duty on every 10 millilitres of vaping liquid as of 2022

  • An increase in tobacco excise duties by $4 per carton of 200 cigarettes and increases to the excise duty rates for other tobacco products such as tobacco sticks and cigars as of April 20, 2021.

Luxury Goods Tax

Finally, the federal budget proposed introducing a tax on certain luxury goods for personal use as of January 1, 2022.

  • For luxury cars and personal aircraft, the new tax is equal to the lesser of 10% of the vehicle’s total value or the aircraft, or 20% of the value above $100,000.

  • For boats over $250,000, the new tax is equal to the lesser of 10% of the full value of the boat or 20% of the value above $250,000.

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!

What’s new for the 2021 tax-filing season?

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Tax season is upon us once again. But since 2020 was a year like no other, the 2021 tax-filing season will also be different. Both how we worked and where we worked changed for a lot of us in 2020.

Some Canadians got to work from home for the first time but saw no other disruption to their jobs. There was a much bigger disruption for other Canadians – they faced temporary or permanent job losses and had to supplement their incomes wide side gigs and emergency government programs.

The Canadian government has introduced some new tax credits and deductions in response to these changes. We’ve covered some of the highlights below.

Claiming home office expenses

With a sudden shutdown happening across the country in March 2020, many Canadians stopped commuting to the office and started working from home. As a response to this, the Canada Revenue Agency (CRA) has offered a new way to claim home office expenses. If you:

  • Worked from home due to COVID-19 – for a minimum of 50 percent of the time for at least four consecutive weeks AND

  • Your employer did not reimburse you for your home office expenses.

You can claim $2 for each day – to a maximum of $400 for the year.

If you have more complicated or higher home office expenses, then your employer must provide you with a T2200 form, with a list of deductions included.

New Canada Training Credit

Suppose you are between the ages of 25 and 65 and taking courses to upgrade your skills from a college, university, or other qualifying institution. In that case, you can claim this new, refundable tax credit.

You can automatically accumulate $250 annually – and the new Canada Training Credit has a lifetime maximum of $5,000. You can claim this credit when you file your taxes.

Pandemic emergency funds

The emergency support programs helped a lot of Canadians avoid financial disaster. If you were one of the Canadians who received pandemic emergency funds, you must be aware of the tax implications.

If you received the Canada Emergency Response Benefit (CERB) or the Canada Emergency Student Benefit (CESB), no taxes were withheld at source, so you will be taxed on the full amount. If you received the Canada Recovery Benefit (CRB), Canada Recovery Sickness Benefit (CRSB), or Canada Recovery Caregiver Benefit (CRCB), the CRA withheld a 10% tax at source, so you may not owe additional taxes on this income.

New digital news subscription tax credit

This is a new, non-refundable tax credit that is calculated at 15 percent – and is eligible for up to a maximum of $500 in qualifying subscription expenses. To qualify for this credit, you must subscribe to one or more qualified Canadian journalism organizations – and you could save up to $75 a year thanks to this credit.

I’m here to help you understand where you owe taxes and how you can lower your tax bill. Give me a call today!

Do you REALLY need life insurance?

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You most likely do, but the more important question is, What kind? Whether you’re a young professional starting out, a devoted parent or a successful CEO, securing a life insurance policy is probably one of the most important decisions you will have to make in your adult life. Most people would agree that having financial safety nets in place is a good way to make sure that your loved ones will be taken care of when you pass away. Insurance can also help support your financial obligations and even take care of your estate liabilities. The tricky part, however, is figuring out what kind of life insurance best suits your goals and needs. This quick guide will help you decide what life insurance policy is best for you, depending on who needs to benefit from it and how long you’ll need it. 

Permanent or Term? 

Life insurance can be classified into two principal types: permanent or term. Both have different strengths and weaknesses, depending on what you aim to achieve with your life insurance policy. 

Term life insurance provides death benefits for a limited amount of time, usually for a fixed number of years. Let’s say you get a 30-year term. This means you’ll only pay for each year of those 30 years. If you die before the 30-year period, then your beneficiaries shall receive the death benefits they are entitled to. After the period, the insurance shall expire. You will no longer need to pay premiums, and your beneficiaries will no longer be entitled to any benefits.

Term life insurance is right for you if you are: 

  • The family breadwinner. Death benefits will replace your income for the years that you will have been working, in order to support your family’s needs.

  • A stay-at-home parent. You can set your insurance policy term to cover the years that your child will need financial support, especially for things that you would normally provide as a stay-at-home parent, such as childcare services.

  • A divorced parent. Insurance can cover the cost of child support, and the term can be set depending on how long you need to make support payments.

  • A mortgagor. If you are a homeowner with a mortgage, you can set up your term insurance to cover the years that you have to make payments. This way, your family won’t have to worry about losing their home.

  • A debtor with a co-signed debt. If you have credit card debt or student loans, a term life insurance policy can cover your debt payments. The term can be set to run for the duration of the payments. 

  • A business owner. If you’re a business owner, you may need either a term or permanent life insurance, depending on your needs. If you’re primarily concerned with paying off business debts, then a term life insurance may be your best option. 

Unlike term life insurance, a permanent life insurance does not expire. This means that your beneficiaries can receive death benefits no matter when you die. Aside from death benefits, a permanent life insurance policy can also double as a savings plan. A certain portion of your premiums can build cash value, which you may “withdraw” or borrow for future needs. You can do well with a permanent life insurance policy if you: 

  • …Have a special needs child. As a special needs child will most likely need support for health care and other expenses even as they enter adulthood. Your permanent life insurance can provide them with death benefits any time within their lifetime.

  • …Want to leave something for your loved ones. Regardless of your net worth, permanent life insurance will make sure that your beneficiaries receive what they are entitled to. If you have a high net worth, permanent life insurance can take care of estate taxes. Otherwise, they will still get even a small inheritance through death benefits.

  • …Want to make sure that your funeral expenses are covered. Final expense insurance can provide coverage for funeral expenses for smaller premiums.

  • …Have maximized your retirement plans. As permanent life insurance may also come with a savings component, this can also be used to help you out during retirement.

  • …Own a business. As mentioned earlier, business owners may need either permanent or term, depending on their needs.

A permanent insurance policy can help pay off estate taxes, so that the successors can inherit the business worry-free. Different people have different financial needs, so there is no one-sized-fits-all approach to choosing the right insurance policy for you. Talk to us now, and find out how a permanent or term life insurance can best give you security and peace of mind. 

Extended COVID-19 Federal Emergency Benefits

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On Friday, February 19, 2021, Prime Minister Justin Trudeau announced an extension to several of the COVD-19 federal emergency benefits.  The goal of this extension is to support Canadians who are still being financially impacted by the COVID-19 pandemic.

The following benefits are impacted:

  • Canada Recovery Benefit 

  • Canada Recovery Caregiving Benefit

  • Canada Recovery Sickness Benefit 

  • Employment Insurance

Canada Recovery Benefit

The Canada Recovery Benefit (CRB) provides income support to anyone who is:

  • Employed or self-employed, but not entitled to Employment Insurance (EI) benefits.

  • Has had their income reduced by at least 50 percent due to COVID-19. 

You can receive up to $1,000 ($900 after taxes withheld) a week every two weeks for the CRB. The recent changes now allow you to apply for this benefit for a total of 38 weeks – previously the maximum was 26 weeks.  

Canada Recovery Caregiving Benefit

The Canada Recovery Caregiving Benefit (CRCB) helps support people who cannot work because they must supervise a child under 12 or other family members due to COVID-19. For example, a school is closed due to COVID-19 or your child must self-isolate because they have COVID-19.  

You can receive $500 ($450 after taxes withheld) for each 1-week period you claim the CRCB. The recent extension made now allows you to apply for this benefit for a total of 38 weeks instead of the previous 26 weeks. 

Canada Recovery Sickness Benefit

The $500 a week ($450 after taxes) Canada Recovery Sickness Benefit (CRSB) is also getting a boost. If you cannot work because you are sick or need to self-isolate due to COVID-19, you can now apply for this benefit for a total of four weeks. Previously, this benefit would only cover up to two missed weeks of work. 

Employment Insurance 

Finally, the government will also be increasing the amount of time you can claim Employment Insurance (EI) benefits. You will now be able to claim EI for a maximum of 50 weeks – this is an increase of 24 weeks from the previous eligibility maximum.

For full details, go to https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/covid-19-benefits-credits-support-payments.html

Self-employed: Government of Canada addresses CERB repayments for some ineligible self-employed recipients

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Great news for some ineligible self-employed Canadians who received the Canada Emergency Response Benefit (CERB). As per canada.ca:

“Today, the Government of Canada announced that self-employed individuals who applied for the Canada Emergency Response Benefit (CERB) and would have qualified based on their gross income will not be required to repay the benefit, provided they also met all other eligibility requirements. The same approach will apply whether the individual applied through the Canada Revenue Agency or Service Canada.

This means that, self-employed individuals whose net self-employment income was less than $5,000 and who applied for the CERB will not be required to repay the CERB, as long as their gross self-employment income was at least $5,000 and they met all other eligibility criteria.

Some self-employed individuals whose net self-employment income was less than $5,000 may have already voluntarily repaid the CERB. The CRA and Service Canada will return any repaid amounts to these individuals. Additional details will be available in the coming weeks.”

For full details, see full news release at https://www.canada.ca/en/revenue-agency/news/2021/02/government-of-canada-announces-targeted-interest-relief-on-2020-income-tax-debt-for-low–and-middle-income-canadians.html

Government of Canada to allow up to $400 for home office expenses

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For the 2020 tax year, the Government of Canada introduced a temporary flat rate method to allow Canadians working from home this year due to Covid-19 to claim expenses of up to $400. Taxpayers will still be able to claim under the existing rules if they choose using the detailed method.

Eligibility

From the canada.ca website:

Each employee working from home who meets the eligibility criteria can use the temporary flat rate method to calculate their deduction for home office expenses.

To use this method to claim the home office expenses you paid, you must meet all of the following conditions:

  • You worked from home in 2020 due to the COVID-19 pandemic

  • You worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020

  • You are only claiming home office expenses and are not claiming any other employment expenses

  • Your employer did not reimburse you for all of your home office expensesWhat if your employer has reimbursed you for some of your home office expenses

You need to meet all of the above conditions to be eligible to use the Temporary flat rate method.

New eligible expenses

For the detailed method, the CRA has expanded the list of eligible expenses that can be claimed as work-space-in-the-home expenses to include reasonable home internet access fees. A comprehensive list of eligible home office expenses has also been created.

Click For Full details and Claim Forms

Business Owners: 2020 Tax Planning Tips for the End of the Year

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It’s a great time to review your business finances now that we are nearing year-end. Your business may be affected by recent tax changes or new measures to help with financial losses due to COVID-19. Figuring out the tax ramifications of these new measures can be complicated, so please don’t hesitate to consult your accountant and us to determine how this may affect your business finances.

We’re assuming that your corporate year-end is December 31. If it’s not, then this information will be useful when your business year-end comes up.

Below, we have listed some of the critical areas to consider and provide you with some helpful guidelines to make sure that you cover all the essentials. We have divided our tax planning tips into four sections:

  • Year-end tax checklist

  • Remuneration

  • Business tax

  • Estate

Business Year-End Tax Checklist

Remuneration

  • Salary/dividend mix

  • Accruing your salary/bonus

  • Stock option plan

  • Tax-free amounts

  • Paying family members

  • COVID-19 wage subsidy measures for employers

Business Tax

  • Claiming the small business deduction

  • Shareholder loans

  • Passive investment income including eligible and ineligible dividends

  • Corporate reorganization

Estate

  • Will review

  • Succession plan

  • Lifetime capital gains exemption

Remuneration

What is your salary and dividend mix?

Individuals who own incorporated businesses can elect to receive their income as either salary or as dividends. Your choice will depend on your situation. Consider the following factors:

  • Your current and future cash flow needs

  • Your personal income level

  • The corporation’s income level

  • Tax on income splitting (TOSI) rules. When TOSI rules apply, be aware that dividends are taxed at the highest marginal tax rate.

  • Passive investment income rules

Also consider the difference between salary and dividends:

Salary

  • Can be used for RRSP contribution

  • Reduces corporate tax bill

  • Subject to payroll tax

  • Subject to CPP contribution

  • Subject to EI contribution

Dividend

  • Does not provide RRSP contribution

  • Does not reduce a corporate tax bill

  • No tax withholdings

  • No CPP contribution

  • No EI Insurance contribution

  • Depending on the province¹, receive up to $50,000 of eligible dividends at a low tax rate provided you have no other sources of income

¹The amount and tax rate will vary based on province/territory you live in.

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. For 2020, salaries of $154,611 will provide the maximum RRSP room of $27,830 for 2021.

Is it worth accruing your salary or bonus this year?

You could consider accruing your salary or bonus in the current year but delaying payment of it until the following year. If your company’s year-end is December 31, your corporation will benefit from a deduction for the year 2020. The source deductions are not required to be remitted until actual salary or bonus payment in 2021.

Stock Option Plan

If your compensation includes stock options, check if you will be affected by the stock option rules that went into effect on January 1, 2020. These new rules cap the amount of specific employee stock options eligible for the stock option deduction at $200,000 as of January 1, 2020. These rules will not affect you if a Canadian controlled private corporation grants your stock options.

Tax-Free Amounts

If you own your corporation, pay yourself tax-free amounts if you can. Here are some ways to do so:

  • Pay yourself rent if the company occupies space in your home.

  • Pay yourself capital dividends if your company has a balance in its capital dividend account.

  • Return “paid-up capital” that you have invested in your company

Do you employ members of your family?

Employing and paying a salary to family members who work for your incorporated business is worth considering. You could receive a tax deduction against the salary you pay them, providing that the salary is “reasonable” with the work done. In 2020, the individual can earn up to $13,229 (increased for 2020 from $12,298) and pay no federal tax. This also provides the individual with RRSP contribution room, CPP and allows for child-care deductions. Bear in mind there are additional costs incurred when employing someone, such as payroll taxes and contributions to CPP.

COVID-19 wage subsidy measures for employers

To deal with the financial hardships introduced by COVID-19, the federal government introduced two wage subsidy measures:

  • The Canada Emergency Wage Subsidy (CEWS) program. With this, you can receive a subsidy of up to 85% of eligible remuneration that you paid between March 15 and December 19, 2020, if you had a decrease in revenue over this period. You must submit your application for the CEWS no later than January 31, 2021.

  • The Temporary Wage Subsidy (TWS) program. With this program, which reduces the amount of payroll deductions you needed to remit to the CRA, you can qualify for a subsidy equal to 10% of any remuneration that you paid between March 18, 2020, and June 19, 2020. You can claim up to a maximum of $1,375 per employee and $25,000 in total.

You can apply for both programs if you are eligible. If you qualify for the TWS but did not reduce your payroll remittances, you can still apply. The CRA will then either pay the subsidy amount to you or transfer it over to your next year’s remittance.

Business Tax

Claiming the Small Business Deduction

Are you able to claim a small business deduction? The federal small business tax rate decreased to 9% in 2019. It did not increase in 2020, nor is it expected to increase in 2021. From a provincial level, there will be changes in the following provinces:

Therefore, a small business deduction in 2020 is worth more than in 2021 for these provinces.

Should you repay any shareholder loans?

Borrowing funds from your corporation at a low or zero interest rate means that you are considered to have received a taxable benefit at the CRA’s 1% prescribed interest rate, less actual interest that you pay during the year or thirty days after the end of the year. You need to include the loan in your income tax return unless it is repaid within one year after the end of your corporation’s taxation year.

For example, if your company has a December 31 year-end and loaned you funds on November 1, 2020, you must repay the loan by December 31, 2021; otherwise, you will need to include the loan as taxable income on your 2020 personal tax return.

Passive investment income

If your corporation has a December year-end, then 2020 will be the second taxation year that the current passive investment income rules may apply to your company.

New measures were introduced in the 2018 federal budget relating to private businesses, which earn passive investment income in a corporation that also operates an active business.

There are two key parts to this:

  • Limiting access to dividend refunds. Essentially, a private company will be required to pay ineligible dividends to receive dividend refunds on some taxes. In the past, these could have been refunded when an eligible dividend was paid.

  • Limiting the small business deduction. This means that, for impacted companies, the small business deduction will be reduced at a rate of $5 for every $1 of investment income over $50,000. It is eliminated if investment income exceeds $150,000. Ontario and New Brunswick are not following these federal rules. Therefore, the provincial small business deduction is still available for income up to $500,000 annually.

Suppose your corporation earns both active business and passive investment income. In that case, you should contact your accountant and us directly to determine if there are any planning opportunities to minimize the new passive investment income rules’ impact. For example, you can consider a “buy and hold” strategy to help defer capital gains.

Think about when to pay dividends and dividend type

When choosing to pay dividends in 2020 or 2021, you should consider the following:

  • Difference between the yearly tax rate

  • Impact of tax on split income

  • Impact of passive investment income rules

Except for two provinces, Quebec and Alberta, the combined top marginal tax rates will not change from 2020 to 2021 at a provincial level. Therefore, it will not make a difference for most locations if you choose to pay in 2020 or 2021.

In Quebec and Alberta, as there will be increases in the combined marginal tax rate, you will have potential tax savings available if you choose to pay dividends in 2020 rather than 2021.

When deciding to pay a dividend, you will need to decide whether to pay out eligible or ineligible dividends. Consider the following:

  • Dividend refund claim limits: Eligible refundable dividend tax on hand (ERDTOH) vs Ineligible Refundable dividend tax on hand (NRDTOH)

  • Personal marginal tax rate of eligible vs. ineligible dividends (see chart below)

Given the passive investment income rules, typically, it makes sense to pay eligible dividends to deplete the ERDTOH balance before paying ineligible dividends. (Please note that ineligible dividends can also trigger a refund from the ERDTOH account.)

Eligible dividends are taxed at a lower personal tax rate than ineligible dividends (based on top combined marginal tax rate). However, keep in mind that when ineligible dividends are paid out, they are subject to the small business deduction; therefore, the dividend gross-up is 15% while eligible dividends are subject to the general corporate tax rate, a dividend gross-up is 38%. It’s important to talk to a professional to determine what makes the most sense when selecting the type of dividend to pay out of your corporation.

Corporate Reorganization

It might be time to revisit your corporate structure, given recent changes to private corporation rules on income splitting and passive investment income to provide more control on dividend income distribution.

Before you issue dividends to other shareholders in your private company (this includes your spouse, children, or other relatives), review the TOSI rules’ impact with us or your tax and legal advisors.

Another reason to reassess your structure is to segregate investment assets from your operating company for asset protection. You don’t want to trigger TOSI, so make sure you structure this properly. If you are considering succession planning, this is the time to evaluate your corporate structure as well.

Another aspect of corporate reorganization can be loss consolidation – where you consolidate losses from within related corporate groups.

Estate

Ensure your will is up to date

If your estate plan includes an intention for your family members to inherit your business using a trust, ensure that this plan is still tax-effective; income tax changes from January 1, 2016 eliminated the taxation at graduated rates in testamentary trusts and now taxes these trusts at the top marginal personal income tax rate. Review your will to ensure that any private company shares that you intend to leave won’t be affected by the most recent TOSI rules.

Succession plan

Consider a succession plan to ensure your business is transferred to your children, key employees or outside party in a tax-efficient manner.

Lifetime Capital Gains Exemption

If you sell your qualified small business corporation shares, you can qualify for the lifetime capital gains exemption (In 2020, the exemption is $883,384), where the gain is entirely exempt from tax. The exemption is a cumulative lifetime exemption; therefore, you don’t have to claim the entire amount at once.

The issues we discussed above can be complicated. Contact your accountant and us if you have any questions. We can help.

Highlights of the 2020 Federal Fall Economic Statement | Additional $20,000 CEBA loan available now

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On November 30, Finance Minister Chrystia Freeland provided the government’s fall economic update. The fall economic update provided information on the government’s strategy both for dealing with the COVID-19 pandemic and its plan to help shape the recovery. We’ve summarized the highlights for you.

Corporate Tax Changes

Information on several subsidy programs was included in the update. These changes apply from December 20, 2020 to March 13, 2021.

  • The government has provided an increase in the Canada Emergency Wage Subsidy (CEWS) to a maximum of 75% of eligible wages.

  • If you are eligible for the Canada Emergency Rent Subsidy (eligibility is based on your revenue decline), you can claim up to 65% of qualified expenses.

  • The Lockdown Support Subsidy has also been extended – if you are eligible, you can receive a 25% subsidy on eligible expenses.

Also, there were two other significant corporate tax changes:

  • Starting January 1, 2022, the government plans to tax international corporations that provide digital services in Canada if no international consensus on appropriate taxation has been reached.

  • The tax deferral on eligible shares paid by a qualifying agricultural cooperative to its members has been extended to 2026.

Personal Tax Changes

The following personal tax changes were included in the update:

  • The update confirmed the government’s plan to impose a $200,000 limit (based on fair market value) on taxing employee stock options granted after June 2021 at a preferential rate. Canadian-controlled private corporations (CCPCs) are not subject to these rules.

  • If you started working from home due to COVID-19, you could claim up to $400 in expenses.

  • The Canada Child Benefit (CCB) has temporarily been increased to include four additional payments. Depending on your income, you could receive up to $1200.

  • Additional modifications were proposed to how the “assistance holdback” amount is calculated for Registered Disability Savings Plans (RDSP). The goal of these modifications is to help RDSP beneficiaries who become ineligible for the Disability Tax Credit after 50 years of age.

Indirect Tax Changes

GST/HST changes impacting digital platforms were included in the update. They will be applicable as of July 1, 2021:

  • Foreign-based companies that sell digital products or services in Canada must collect and remit GST or HST on their taxable sales. Also, foreign vendors or digital platform operators with goods for sale via Canadian fulfillment warehouses must collect and remit GST/HST.

  • Short-term rental accommodation booked via a digital platform must charge GST/HST on their booking. The GST/HST rate will be based on the province or territory where the short-term accommodation is located.

And some good news on a GST/HST removal! As of December 6, and until further notice, the government will not charge GST/HST on eligible face masks and face shields.

The Takeaway

A lot of changes came out of the fall update – and you may be feeling overwhelmed. But help is at hand!

Contact us to learn more about how these changes could impact your personal and business finances.

Canada Emergency Business Account (CEBA) $20,000 expansion available now

The Government of Canada website has been updated with the new CEBA requirements and deadlines:

  • As of December 4, 2020, CEBA loans for eligible businesses will increase from $40,000 to $60,000.

  • Applicants who have received the $40,000 CEBA loan may apply for the $20,000 expansion, which provides eligible businesses with an additional $20,000 in financing.

  • All applicants have until March 31, 2021, to apply for $60,000 CEBA loan or the $20,000 expansion.

Apply online at the financial institution your business banks with:

To get the full details:

CEBA Loan Details