The Federal Budget and Your Small Business

The recent federal election brought Canada a new Liberal government, and with that came the promise to invest in the Canadian economy. What does this mean for small business owners in Canada? The new budget has brought upon some changes that are favourable to small businesses as well as some guarantees that life will not be made more difficult for small businesses from a tax perspective. It means that things have not necessarily changed for the better or for the worse. Here’s a small breakdown of what Canadian small business owners can expect going forward.

No Changes to Capital Gains Inclusions and Stock Options

Prior to the release of the federal budget there was concern that the capital gains inclusion rate would increase from its rate of 50% and that there would be changes to stop option benefit rules. The good news is that the release of the federal budget shows no changes to either the stock option rules or the capital gains inclusion rate.

Corporate Tax Rates

The bane of all small businesses is the amount of taxes owed to the government every quarter. The federal budget shows no changes to the tax rates on small corporations which is a relief because the proposed deficit needs to be answered for somewhere and small business owners are glad it’s not at their expense.

Small Business Deduction

Various loopholes have now been closed with respect to the previously allotted small business deductions. The small business deduction is available to businesses who earn less than $500,000.00 annually; the tax rate is 15% and can provide tax savings of up to $55,000.

Transferring Life Insurance

It used to be that you were able to transfer life insurance policy to a corporation and thereby obtain tax-free corporate money. The new federal budget has done away with this loophole and no longer allows it to occur. There may also be an inquiry to examine policies that did this prior to the release of the 2016 federal budget.

Life can go on normally for small business owners in Canada with the implementation of the 2016 federal budget. Many of the changes made were not harmful or costly to small business owners and are simply just procedural updates. The Liberal Government is being true to their word on the notion of building up the Canadian economy and providing support for small businesses.