Each year, the government of Canada releases a Budget that outlines planned spending and expected government revenue, as well as the current and expected economic positions and conditions.
In addition to new tax legislation for individuals, business and charities, the 2018 Budget brings forth extensive reporting requirements for Canadian-resident express trusts, including most family trusts, and non-resident trusts.
The 2018 Budget brought forth a number of changes to individuals, families and for-profit businesses. In addition to these amendments, changes to the taxation and registration of certain charities have also been proposed.
The 2018 Federal Budget brings forth several changes that could affect you both as an individual taxpayer and as a business owner.
For information on changes related to individual taxpayers, read our blog – 2018 Canada Federal Budget Commentary - Part 1: INDIVIDUALS and FAMILIES.
Looking at the Budgets proposed changes, in terms of businesses, the following will discuss several changes that could affect your company’s tax planning strategy on a go forward basis. While there are many new proposals, some of the proposed measures, such as alterations to the management of passive investment income and income sprinkling, may be familiar to you, as they were originally introduced in 2017.
Just last month, the Government of Canada released the 2018 Federal Budget which showed a strong economic growth. Canada saw GDP growth of 3.2% along with a low unemployment rate of 5.9% and improvements in consumer confidence, average weekly earnings and household consumption.
While there was much speculation about what this Budget would bring, from a personal tax perspective, many were not introduced/reintroduced in the 2018 Federal Budget.
2018 has started and while many Canadians are still concerned with their 2017 tax return, we must also remember to plan and strategize for the year ahead.
The first step in this process is determining the applicable tax brackets, credit rates, contributions and premiums that will apply to you and your specific situation in 2018.
For your convenience, we have gathered the most popular tax related information and listed it below.
In the past, parents who owned or operated corporations would have their minor children, directly or indirectly, subscribe to shares or invest in partnerships, which provided management services to the parent’s company.
They would then declare dividends on these shares, which would be tax-free, as these minors had lower income.
Most often, this income would be held in trust for the child.
The trust would then be used to pay for the child’s expenses – school, camp, extra curriculars.
This process became known as income sprinkling.
Once the tax year comes to a close, there are very few steps that can be taken to further reduce income and tax liability. There are, however, some last minute tax-planning strategies that can be very beneficial. The first, which we speak of often, is contributions made to an RRSP (registered retirement savings plan). The other is Pension Income Splitting.
Pension Incomes Splitting is a tax planning tool that was implemented for taxpayers over the age of 65 (and in some cases 60). When implemented correctly, as part of your tax planning strategy, Pension Income Splitting can reduce your tax liability and increase your eligibility for government benefits.
