It would be fair to say that small business wasn't a big consideration for the new Federal Liberal government when it prepared the budget. That could be good or bad news depending on what you were expecting or hoping for.
Besides the size of the deficit projected, the government did not make good on its promise to reduce small business tax from 10.5% to 9%. While disappointing for those who where expecting the reduction, it's important to note that Canada's corporate tax is one of the lowest in the G7.
On the other hand, this budget closed a number of tax-planning options that some consider loopholes: transference of life insurance into a corporation; fees charged to partnerships where the shareholder is a partner; and the doubling up on small business deductions by converting interest income to active income.
There are also rule changes that may affect you if you are buying or selling a business in the area of capitalizing goodwill.
Other things were confirmed in the budget, like reducing the Tax-Free Savings (TFSA) Account from $10,000 to $5,500 and changes to personal income tax – highest tax rate increases from 29% to 33% and a reduction in the second tax bracket from 22% to 20.5%.
Do you have questions about how any of the federal changes affect your situation? Ask us.