Over 30 business owners filled the Chamber of Commerce Board Room on September 7th for a presentation from Gerald Price of GPI Chartered Professional Accountants on the proposed federal tax changes. The Fernie Chamber of Commerce offered this session to help business owners understand how the federal government proposed tax changes may impact their business.
Price gave an overview of the tax regulation changes released earlier this summer by the Liberal government. The proposed regulations include three key changes: 1) changes to income sprinkling or how corporations pay family members; 2) how businesses hold passive income within a corporation; and, 3) converting regular income into capital gains. According to Price, the third change will affect a small number of businesses. He has seen this strategy used two times in his 20-year career.
The regulations changes for income sprinkling come with some challenges. The rules are meant to restrict payment to individuals age 18 to 24 to the value of their contribution for work done at a reasonable market rate. A question arises from this – what is a reasonable rate and who is responsible for defining that rate?
The business audience had many questions for Price on the changes to holding passive investments inside a private corporation. Price noted the government has not released the draft legislation for these changes yet, only that discussions of alternate approaches to non-refundable tax be explored.
The holding of passive investments within a corporation is one way business owners prepare for the rise and fall of business cycles. One government assumption is that these funds are used as retirement plans for the owners and that the owner should pull funds out of the corporation to buy RRSPs to pay for retirement. Many question that strategy and are concerned about losing the option to keep passive investments within the corporation as a financial strategy to weather economic downturns or a bad season.
The Chamber of Commerce and GPI Chartered Professional Accountants encourage businesses owners to speak with a professional accountant for specifics on how the proposed changes will impact individual businesses.
The Liberal government is encouraging stakeholders to share their views about the proposal. Written comments can be sent to firstname.lastname@example.org. Business owners can share how the changes impact their business by writing our local MP – Wayne Stetski. The closest liberal MP is Stephen Fuhr, Kelowna-Lake County.
The Fernie Chamber of Commerce represents over 255 business in Fernie and the Elk Valley. Its mission is to strengthen commerce in the Fernie area and is guided by principles of membership, integrity, best-practices, business excellence, and non-partisanship. The Fernie Chamber of Commerce is a champion for business.