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Koroll & Company Blog

Tax Changes Affecting Your Company's 2018 and 2019 Tax Returns

[fa icon="calendar"] Mar 29, 2019 11:00:00 AM / by Allen Koroll

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As with every new year, 2018 and 2019 saw changes that will affect your tax planning strategy as both an individual and as a business owner.

To help you better understand the changes you should be considering when completing your 2018 tax return and planning for 2019, we have compiled them here for your review.

Changes affecting Canadian-controlled private corporations

As of January 1, 2018, the federal tax rate for small businesses decreased from 10% to 10.5%. This has been further reduced to 9% for 2019.

To offset these decreases, the personal tax rate has been increased for ineligible dividends, which includes dividends that were paid out of corporate income that benefits from tax treatment through reduced small business tax rates or refundable dividend tax treatment.

This was done to ensure that the tax paid for income earned by an individual personally should be roughly the same as the combined corporate and personal tax paid if that income was earned by a corporation and paid out as a dividend to the individual. This concept is referred to as tax integration.

Changes to taxes on split income (TOSI)

In 1999, rules for TOSI were introduced to limit preferential tax treatment gained by families aggregate tax position by splitting income with children.

In 2017, it became apparent that similar tax advantages could be gained by adult family members. As a result, new rules were introduced in 2018 that extend the TOSI rules with certain exceptions depending on the age of the relation.

If the relative you are splitting income with is between 18 and 24, and they made regular, continuous and substantial contribution to the business, the income will be excluded from the new TOSI rules. In addition, income under a specified threshold will also be excluded. The calculation for this threshold uses a legislated rate applied to the assets that the individual has provided to the business.

If the relative is 25 or older, shared income will be excluded if the individual owns more than 10% of a non-service-based company and if the return is reasonable based on the financial contributions made by the individual, i.e. work they have done or risks they have assumed.

An additional exception to the TOSI rules has also been implemented for spouses over 65. For more information on new TOSI rules see our blog - Income Splitting Rules Could Affect Tax Planning through Private Corporations.

Changes to passive income taxation

In the past, Canadian-controlled private corporations (CCPCs) have been able to recognize and take advantage of passive income that is invested at the low small business rates available to passive income. In contrast, individuals who earn income personally would have less after-tax income to invest due to higher tax rates.

In response, the federal government has implemented rules that reduce access to the preferential small business tax rates for passive income by $5 for every $1 of adjusted aggregate investment income above $50,000. These changes can be complex, especially when considering the provincial counterpart as some provinces, including Ontario, will not be implementing rules that parallel these changes.

Changes to Canada Pension Plan Contributions

In an effort to fund enhanced Canada Pension Plan Contributions (CPP) benefits, 2019 brings increased contribution amounts for working Canadians who contribute to CPP. In total, the contribution amount will increase from 4.95% to 5.95% and will occur gradually from 2019 to 2023.

Year Employer/employee contribution rate
2018 4.95%
2019 5.10%
2020 5.25%
2021 5.45%
2022 5.70%
2023 5.95%

It is important to note that self-employed individuals must pay both the employee and employer contribution resulting in a contribution rate that is double the above-prescribed amount.

Introduction of new carbon pricing mechanism

In provinces where a carbon pricing mechanism is not in place, the federal government has implemented a new carbon pricing mechanism, increasing the cost for fossil fuels and supporting services. To offset some of these increases in costs, consumers will receive a direct rebate.

Changes to tax brackets and credit amounts

No changes will be made to personal credit amounts and tax brackets over and above inflation adjustments. To find out the applicable rates for 2019, see our blog Planning Ahead – Everything You Need to Know for the 2019 Tax Season.

Changes to the public transit credit

As of 2018, the tax credit for public transit will no longer be available. While it was eliminated in 2017, taxpayers received partial credit for transit costs incurred prior to July 1.

Changes to the Canada Workers Benefit

As of 2019, low-income workers will now qualify for an increased Canada Workers Benefit. It is important to note that additional benefits will not be received until 2020.

For more information on these changes and find out how they will affect your after-tax position, contact us today.


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The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.



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Topics: Tax Deductions

Allen Koroll

Written by Allen Koroll