Update on the Changes to the Liberal Tax Proposals
We wanted to take a few minutes and update you on the current status of the Liberals proposed tax changes.
Over the past week, the following changes were announced:
|Tax Issue||Original Proposals||Revised Proposals||NCCA Comments|
|Income sprinkling||Restrictions on paying dividends, interest and other amounts (excluding wages) to family members||Promise to simplify the proposals to reduce the complexity||The government has not released sufficient details to fully assess how the promised changes will fully impact the original proposals.|
|Conversion of income to capital gains||Required tracking previously realized gains by non-arm’s length parties||Proposals being abandoned.||This helps ensure that the transfer of family businesses are not taxed in a punitive manner. Also removes retroactive effect of the original proposals.|
|Restrictions on the Lifetime Capital Gains Exemption (“LCGE”)||Proposals to restrict access to the LCGE are now being abandoned.||A welcome change that hopefully reduces some concerns that the original tax proposals created with business transfers.|
|Some transactions converted to dividends instead of capital gains (resulting in an increased tax rate)||The government will continue to examine this area for future changes.||Tax preparers are also assuming that challenges created in the original proposals with capital dividend payments will be corrected by these changes.|
|Passive income||The original proposals discussed a couple methods of addressing passive income, but draft legislation was not released.||Existing investments and income earned thereon will be exempt from any new rules.||We hope that continued political pressure will result in these proposals being abandoned.|
|$50,000 of investment income will be exempted from any new rules||The proposed rules will reduce the number of companies that are impacted by the change.|
|Small business tax rate||No rate change was originally proposed||Rate dropping from 10.5% to 10% on January 1, 2018, and to 9% on January 1, 2019.||An unexpected positive change.|
The Government has not released details on these changes. We will update you further, when additional details are available.
The changes outlined above were the direct result of small business owners, farmers, doctors and consultants providing political pressure. Continued political pressure will likely determine exactly how the Liberal government decides to implement the announced changes. To this end, we strongly encourage everyone to continue to express their concern on social media.
To assist you in this endeavor, we have been updating the news section of our website with social media friendly stories, so please feel free to read and share the articles linked on our site.
If you review the following statistics from the latest Angus Reid polls on the small business tax changes, you will see that public sentiment on some of the changes is still not in our favor.
If you want to see additional changes to the Liberals tax proposals, you need to continue to make your voice heard!!!!
The information in this publication is current as of October 25, 2017.This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact NCCA LLP to discuss these matters in the context of your particular circumstances. NCCA, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.