Today the federal government released the 2015 budget to the public. Here are the highlights that will have an impact on you, your business, and your Toronto corporate taxes.
Lower minimum required withdrawals from Registered Income Funds (RIFs)
Easily the biggest change for personal taxes, this amendment lowers the minimum required withdrawal from your RIF if you are between 71 and 94. The amendment allows the minimum withdrawal to be approximately $17,885, and also may allow seniors to keep or get the Guaranteed Income Supplement and/or Old Age Security.
Increase to the Tax-Free Savings Account Limit
The limit has been increased to $10,000. The limit will not increase any further. This is another beneficial change for seniors as well as those who have the funds to invest.
Home Accessibility Tax Credit
At the end of the year, this credit will allow people 65 or older and individuals who otherwise get the disability tax credit to claim expenses (up to $10,000) as a non-refundable tax credit (i.e. the credit can only reduce your tax bill to zero and not generate a refund) to help these individuals to continue to live in their home. Examples of expenses that qualify include wheelchair ramps, walk-in bathtubs, wheel-in showers and grab bars. While I am not a fan of these boutique tax credits, this credit is easy to support. Other “minor” changes:
Reduction in the tax rate to corporations that get the small business deduction (“SBD”)
Currently, corporations that qualify for the SBD pay 11% tax to the federal government. The tax rate will be reduced by .5% per year for the next four years to take it to 9% starting in 2016. This change is a bit of a surprise as it was not mentioned in any political commentary.
As a result of these changes, dividends received from these corporations will have a higher effective tax rate due to a lower “dividend tax credit” resulting from lower Toronto corporate taxes being paid. However, a side effect of this change is that if your corporation earns rent and other passive income you may be better off taking some dividends out now to save tax overall.
New small businesses can remit their payroll quarterly
Currently, all new small businesses must remit payroll taxes monthly before qualifying to go quarterly. This change allows all small business to go immediately remit quarterly starting in 2016 assuming all of the qualifications are met.
Employment Insurance Premium Rate reduction
The rate will be reduced to $1.49 per $100 of earnings in 2017 from $1.88 per $100 of earnings in 2016. However, if Ontario goes ahead with its Ontario Pension Plan in 2017, you may not see this reduction.
Other changes that will impact your small business
This analysis is intended as a brief overview and does not include all of the details to ensure you can take advantage of these rules as applicable. Please contact me to see how these changes can impact you and your Toronto corporate taxes.
William Khalilieh is a Chartered Professional Accountant, based in Oakville, Ontario, who provides practical tax and accounting solutions to individuals and their businesses in the Greater Toronto Area.