The Federal Government laid out their budget this past week detailing the economic roadmap for the country. Titled “Building A Strong Middle Class”, the 280-page document outlined key expenditures, investments, changes to the tax system, and programs the government is altering for the coming year.

Related: Breaking Down The Budget: Part 2

Our team at TD Accounting Services has reviewed key portions of the budget and highlighted some of the announcements we think are important.

For small businesses, there were a number of notable announcements that will affect business operations in the coming year. The most significant are:

• Work-In-Progress Provision: Small businesses can no longer willfully exclude income from ongoing projects when computing their taxes on or after Budget Day. This means businesses must claim forecasted income yet to be billed. Business owners should consult with their accountants and tax professionals as the Federal Government is looking to close previously existing tax loopholes.
• Tax Benefits for Small Businesses: The government will be reviewing tax-planning strategies employed by small businesses in the coming months. Specifically, the government is looking to address:

 

1. Distribution of business income among family members in the form of dividends and capital gains
2. The benefits of a passive investment portfolio inside a private corporation
3. Converting salary and income dividends into capital gains.

 

As these provisions have yet to be implemented, business owners should consider making adjustments in advance to accommodate the coming changes.

• Intellectual Property Strategy for 2017: The government is looking to develop a modernized strategy to protect and project intellectual property rights. This initiative could prove to be lucrative for small businesses and entrepreneurs as intellectual property rights can increase competition and spur financial growth.

• Business Superclusters: The government is investing $950 million over 5 years to support the creation of superclusters – dense areas of business activity for small and emerging businesses, post-secondary institutions, and specialized industries to stimulate commercialization and economic growth.

As more information becomes available over the coming weeks, business owners should remain alert and prepare to discuss their business and tax strategies with their relevant advisors.

For non-business owners, the budget contained significant announcements that can impact day-to-day living. Most notably,

• Investments in Child Care tally $7 billion over the next 10 years, beginning in 2018-2019
• Extending the tuition tax credit. With the new credit, anyone over the age of 16 enrolled in occupational skills courses will qualify. This is a significant adjustment since the credit previously applied strictly to post-secondary courses.
• Employment Insurance premiums are on the rise. Currently the rate is $1.63 per $100 of insurable earnings. This is set to rise to $1.68 per $100.
• Longer Parental Leave: now parents have the option to take an 18-month parental leave rather than the typical 12-month leave. The caveat for the 18-month option is a lower benefit rate of 33% compared to 55% for the 12-month.
• The Canada Savings Bond: The CSB is being phased out after 71 years and will no longer be available for sale starting in the fall. Framed as no longer being a ‘cost-effective’ source of funds, Canadians will have to find new and alternative modes of investment.
• Increased SIN taxes: Canadians can expect to pay more for alcohol and cigarettes – one cent on a bottle of wine and 5 cents for a 24-pack of beer, while 200 cigarettes will cost an additional 53 cents. The increase will raise a projected $85 million into government coffers.
• Transit tax credit: Canadians will no longer be able to claim transit expenses on their tax returns. Prior to the budget, Canadians enjoyed a 15% refund on transit expenses. This will expire on July 1, 2017. This announcement echoed throughout the House of Commons and across Canada as Canadians brace for rising transit costs.

 

As consequences continue to unravel with more analysis of the budget, Canadians should expect to make changes to their financial portfolio, or at the very least, remain alert as to how these changes will affect their day-to-day lives.

Stay tuned to our blog as we will be breaking down some of the key components of the budget in greater detail in the coming days. As always, if you have concerns or questions regarding your portfolio, reach out to one of our knowledgeable team members and we’d be happy to speak with you.

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Until the next time,