Reviewing Recent Changes to Small Business Taxation

Anyone who wants to utilize the tax planning options available to them and avoid complications or penalties should always stay updated on tax policy. There are several changes to Canadian tax law going into effect this year, so let’s look at some that are relevant to business owners.


Small Business Tax & Capital Cost Allowance


In a positive development for many Canadian business owners, the small business tax rate will be reduced to 9%, effective in January of this year. This is down from the 10% rate established in 2018, which was a reduction from the previous 10.5%. Meanwhile, temporary amendments are being introduced to the rules dictating capital cost allowance. These will enable full first-year write-offs for the purchase of certain machinery and equipment, specifically those that are used to manufacture and process goods and for clean energy equipment. A temporary enhanced first-year CCA rate of 100% has also been introduced for eligible zero-emission vehicles.


Accelerated Investment Incentive


Similarly to the temporary enhancements for CCA deductions mentioned above, the government is also rolling out what it calls the Accelerated Investment Incentive. This is designed to encourage capital property investments made by businesses and applies to businesses across the spectrum, whether small or large. The primary component of this incentive affords businesses an enhanced first-year allowance of CCA deductions on certain capital property. In addition to this, however, its secondary component effectively allows for an enhanced CCA rate that is equal to three times the amount you would normally be able to claim for that first year.


New Rules for Passive Income & Split Income


While the changes noted above are advantageous for many Canadian businesses, there are of course plenty of adjustments in effect for 2019 that will present challenges. Most prominently, the more passive investment income a business holds above a threshold of $50,000, the more constrained its access to the small business deduction will be. This renders the first $500,000 of your company’s income far more vulnerable to taxation. Additionally, the CRA’s new rules on Tax on Split Income are in effect this year, notably expanding their scope to adults. Speak with your CPA to find out how these developments affect your business and how to adapt to them.


You can always count on the team at Cook & Company to keep you updated on the latest developments in tax law. If you have any questions regarding the latest tax changes affecting business owners, our Calgary accountants are here to help. Call us at (403) 768-4377 today!