Update on Changes to the Income Tax Act
In July 2017, the federal government announced far-reaching changes to the Income Tax Act that would affect private corporations.
In response, thousands of individuals and organizations, including BCREA, expressed serious concern. BCREA joined the coalition spearheaded by the Canadian Federation for Independent Business, representing hundreds of thousands of business professionals across the country, urging the government to take these proposals off the table.
In October, the government took note of this feedback and abandoned many of its original proposals. While there aren’t a lot of details about the new proposals yet, some information has been released:
- Under the July proposal, the small business tax rate was set to remain the same in the coming years. In October, the government announced it would reduce the small business tax rate by 10 per cent, effective January 1, 2018, and by a further 9 per cent, effective January 1, 2019.
- In October, the government also announced that small businesses will be allowed a $50,000 annual threshold on passive investment income. While this amount may be too small to help some firms looking to grow, it signals recognition that many small businesses need passive income investments to be prepared in case of emergencies or unforeseen costs.
- The government has also dropped proposed changes related to capital gains and income stripping. Dropping these changes means greater stability for small businesses and enables easier transfers of businesses from one generation to another.
BCREA will continue to monitor new developments and advocate for REALTORS® who have private real estate corporations.
Read the Coalition for Small Business Fairness’s letter here.
Read the federal government’s October update here.