Page 32 - SpectrumOctober2018

ADVERTORIAL

Government Policies and

Small Business Tax

By: Noah C. Jensen, CPA, CA

The landscape for a small-to-medium sized business (SMB) in There are also special refundable tax credits, Scientific Research
Canada is constantly evolving with each budget, and the mandate & Experimental Development, for SMBs and large corporations
for each newly elected government. Politics aside, the more recent that invest in research and development. Moreover, these credits
changes have provided an impetus for us to re-think some of our are refundable, so if you are in the early stages of exploration and
previous tax strategies for SMB clients. are not yet turning a profit, you may receive tax refunds in your
corporation.
Tax splitting by way of dividend sprinkling, the multiplication of
the small business deduction across multiple companies, and other Sell the corporation
strategies have been reduced in effectiveness with the current You’ve grown your company by using the after-tax profits to
government’s policy adjustments. The government has curtailed purchase machines, hire employees, and conduct research and
several of the tax advantages to owner-manager remuneration in development that will generate more profits. You are now in a prime
family business contexts, but a similar set of incentives remain. position to sell your SMB. Each Canadian can exempt a capital gain
of $848,252 (2018, indexed to inflation) for the sale of qualified
Grow the company small business corporation shares. Qualifying for this deduction and
The government wants you to grow your company from being a creating structures that enable you to deduct it for more than one
small company to being a large company. They do this by providing family member at the sale of the company are two strategies worthy
incentives on low small business tax rates on Canadian controlled of their own article.
private corporations (CCPC) at 13.5% for 2018 on all income
less than $500,000 or 25% on income over $500,000. This leaves By following these policy incentives created by the government
you with more money in the company to invest in machinery, and using a qualified CPA to prepare your taxes and advise your
working capital, or hiring employees to free up your time to focus company, you will effectively defer taxes into the future, minimize
on expanding the business. Contrast these numbers to a 54% taxes when growing your company, and minimize the taxes on the
personal income tax rate over $220,000 in 2018 for unincorporated sale of the company to either third parties or your family.
businesses.

Invest in new technology Noah is a partner with Szczepski, Racolta,
Certain industries, such as manufacturing and Jensen & Co. LLP. He was raised by a small
processing, have tax advantaged depreciation business family and lives in a small business
accounts that allow you to accelerate family. His passion is helping small and
depreciation on equipment to realize a tax medium sized business owners and non-profits
write off on a quicker basis than standard with their assurance, accounting, and taxation
equipment in other industries. This is helpful needs and advising them in ways to improve
when new equipment with high degrees their organizations to fulfill their mission.
of automation or specialized technology
is expensive but helps our SMBs remain
competitive in the global marketplace.

www.cambridgechamber.com 31
Fall 2018