On July 18th, Federal Finance Minister Bill Morneau annouced tax reforms for small private canadian businesses to reduce tax exposure. Even they are still proposals, if they are applied, they will have a direct effect on private healthcare professionals owners.
Here are a preview of the proposals:
Restrict income sprinkling between family members
This proposition aims to stop sprinkling or divide the company’s income between family’s members, like a child or spouse who will be taxed at a lower rate, regardless of whether they actually do any work for the company.
Limit the use of private corporations to make passive investments not related to the company
Another tax benefit that could disappear, the finance department wants to crack down on passive income from investments parked within a private corporation, money that can be shielded from the higher personal income tax rate.
Limit the conversion of a regular income into capital gains
The last proposal will be to curb the ability of business owners to convert regular income of a corporation into capital gains, which are taxed at a lower rate. (October 2nd update, this proposal should not longer be part of the Morneau reform).
Morneau has pitched these changes as a necessity to end tax advantages unfairly exploited by some business owners comparatively to employees who are not able to access to the same tax advantages. Even if this reform is not applied yet, small businesses are starting to get concerned and mentioned that they don’t have the same as risks as employees for a retirement or maternity leave for example.
