Although a date for the next federal budget hasn’t yet to be announced, rumours are swirling that Justin Trudeau’s ruling Liberal party plans to make a number of significant changes.
The biggest is slated to impact people who own a small business. While it appears a Canadian-controlled private corporation will still pay a very small amount of taxes for earnings less than $500,000 per year, changes could be coming that will increase taxes on any surplus funds that aren’t being used to fund the operation.
The other anticipated change would immediately change any corporation that doesn’t actively earn income as a passive vehicle, increasing the tax rate on any earnings to the 50% range.
Many doctors, dentists, accountants, and other professionals have also been using their own corporations to effectively income split, by paying spouses or children for work that may or may not actually be done. New rules could limit this as well.
Another change reportedly being mulled could impact individual investors. The capital gains inclusion rate could be going up from today’s level of 50% of the gain to 66.6% or even 75%. Remember, Canadians did pay 75% in the 1990s.
Finally, many expect the government to go after stock options. Finance Minister Bill Morneau did contemplate placing a $100,000 per year cap on annual eligible stock option gains in 2016, but was thwarted by tech execs who said such a limit could impede their ability to attract talent. The cap is said to be back on the table this year.
