The income sprinkling rules outlined in July 2017 held strong and the rules pertaining to passive investment income weren’t as harsh as predicted. Specifically, Budget 2018 has implemented two simple measures as it pertains to passive investment income:

  1. Limiting Access to Small Business Tax Rate

Budget 2018 proposed to provide for an alternative reduction to the small business tax rate where a Canadian Controlled Private Corporation (CCPC) and its associated corporations have investment income in the year exceeding $50,000. The amount of the reduction is $5 for every $1 of investment income exceeding $50,000. In effect, the small business tax rate reduction disappears if passive income in a related business exceeds $150,000 in a fiscal year.

  1. Refundable Taxes on Investment Income

Currently, private corporations are entitled to claim a tax refund equal to $38.33 for every $100 of taxable dividend Where the corporation has a combination of regular business income (taxed at the regular business rate which does not include a refundable tax element) and investment income (taxed at the corporate investment rate which includes a refundable tax component), planning was commonly implemented to have the business income distributed by way of eligible dividend (taxed at a lower rate) while still being able to claim the tax refund.Budget 2018 proposes to modify the refundable tax regime to eliminate this planning and ensure that, in general, the private corporation is entitled to a dividend refund only when non-eligible dividends are paid.

There are ways to reduce the impact the business tax changes outlined within Budget 2018 through other financial strategies. These strategies may include Individual Pension Plans, Cash Value Insurance, as well as the strategic use of prescribed loans. We highly recommend contacting your financial advisor to determine which of these strategies will best suit your financial situation.

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If you have any questions on this taxes, or the different kind of impact it could have on you, please, do not hesitate to contact us!

Singer Olfert Financial Group is an independent financial planning firm that offers holistic advice to clients based on their current goals and future aspirations. We use well-established workflows and cutting edge technology to maximize financial efficiencies while simplifying the process for clients. Learn how you can maximize your financial opportunities at www.singerolfert.com

 

BC’s 2018 budget was announced on February 20th. Its focus was to provide lower income households with tax relief. It provides some parents with reduced child care fees while also reassuring parents that spaces in child care and in schools would become more adequate.

There are numerous articles that focus on the many highlights (some are listed below) that will work to assist the many varied interests of middle and lower income households in BC. Less reported however is that in order to provide the tax relief outlined within the budget, the BC Government will undertake a record-breaking capital spend and increase overall taxes to the tune of $4.4 billion over three years.
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In life and finances, the government is our biggest business partner, usually in the form of taxes.

If you are a business owner:
1.  You are a tax collector (payroll taxes, GST, PST).
2.  The government is your business partner (corporate taxes).

As a family, taxes are often your largest expense:
1.  Income tax (as high as 45.7% of every dollar you earn).
2.  Sales taxes (GST, PST).
3.  Property taxes, and so on.

Fortunately, the government has provided different vehicles to help us plan when we pay our taxes (RRSP, TFSA, pensions, IPPs). These can all be great vehicles to help us defer, smooth out and/or lower our tax bills.

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You may have built a successful business but have you planned your exit strategy?

Preparing for succession may not be at the forefront of every business – but it should be.  Having a succession plan allows for employees, owners and the company itself to have a clear direction on how the company will move forward in its life cycle. Often, the best way to explain a concept is to share a real life story. Recently my Father, Phil Singer, and I were published in a nationally distributed magazine called Collision Quarterly. It is directed to members of the ARA (Automotive Retailers Association).

The article describes how our team at Singer Olfert assisted my Dad in the selling of his business a few years back. I will summarize the two-page article and you may click the link to read more about our story. Read more

Planning On Selling Your Business…

Are you approaching retirement and planning on selling your business?
As an entrepreneur, you dreamed of building your own successful business. After all those years of hard work, you plan to reap the rewards in the form of a successful business sale. Sounds like a great plan! But, making the sale is not as easy as it may appear. Read more

Not knowing could cost you thousands!
Did you purchase the coverage offered to you by your lender? Most people have a mortgage in Canada and it is typically the largest debt most Canadians will ever assume. Before buying a house people will research and compare to find the best mortgage rates and terms but not necessarily the best insurance coverage. Read more

Prepare Your Business For Sale
Only 9% of business owners have a documented transition plan in place and yet 70% of small business owners plan to transition in the next 10 years*! As a financial planner I continue to meet business owners who are planning to sell or transition their company but they do not have a plan. Typically they are either unsure of the process, so they procrastinate or the business is their baby and they do not want to let it go. It is understandable that a major decision like this is hard to make, especially without someone to assist you.

When a business owner is considering selling here are some things to consider:

1. Don’t Leave the Party Last – You see this with professional athletes when they face the question of when to retire? In my opinion you are either growing your business or it is shrinking it, there is no standing still. A lot of business owners later in their career can get into maintenance mode, which usually means the business is starting to decrease in revenues. At first the revenues may hold but after a couple of years you typically see them start to decline. If you want to maximize your selling price and be attractive to potential buyers be careful to wait too long.

2. It Takes Time – Selling a business can take you longer than you think. You need to find the right candidate to take over your business. You are looking for an individual that is an entrepreneur; remember there are more employees in the world than business owners. Also, in most transitions the current owner is asked to stay with the company to assist with the passing of the reigns. You should plan for 1-2 years to sell. This means you should be creating a plan 5-7 years prior to your planned exit.

3. Change – Every industry is faced with changes due to technology, regulatory, competition, etc. If you owned a video or record store in the 80 or 90’s, when was the best time to get out? What if the technology that Google is working on to make it so that cars drive themselves eliminate car accidents in the future. Could that affect you if you own an auto body business? What changes face your business?

4. Financials – Often times the financial statements for a business are ignored until it is too late. Yet they will play a very important role in the sale of the business. You want to make sure that your financials present the best view of your company so that a potential buyer is enticed to make an offer.

There are many things to consider when selling a business. The first is to get a professional that can assist you with putting a plan together to ensure that you maximize the value, save tax, and control when and how you sell your business. As with any financial strategy we would recommend ensuring that you have your personal situation reviewed by a professional to make sure that is done in the best way possible. If you have any questions or would like your plan reviewed feel free to contact us.

Questions?

*Source – http://www.advocis.ca/Update2014/index.html