It’s been a month since the Tories released their federal budget. The Economic Action Plan 2015 includes many funding and tax changes, particularly for small businesses.
In fact, many pointed to small business owners as the big winners of the federal budget — mostly due to the planned tax cut, from 11 to nine per cent over the next four years.
But besides the tax cut, how else does this budget affect small businesses? Here’s a breakdown of what to consider over the next few years:
- Personal taxes: Once fully implemented, the tax cut will result in savings of $10,000 per year. However, these savings will likely be offset by higher personal tax on dividends paid out of small business earnings. When looking at this tax cut, it’s important to account for both corporate and personal taxes. (We’ll be discussing TFSA changes, the family tax, and other personal tax changes next week.)
- Eligibility: The small business eligibility criteria is changing, meaning you can stay a small business for longer. A small business will soon include a business with gross annual revenues of up to $10 million, rather than capping at the current $5 million.
- RRIFs: As a business owner, succession planning and retirement should always be on your mind. And it’s important to start early. The Tories will be reducing the amount that seniors are required to withdraw at the age of 71 and at the age of 80. It will then increase at 94 years old.
- Young entrepreneurs: The budget also earmarks $14 million over two years for Futurpreneur Canada. It comes at a time when Futurpreneur is seeing more young people turn to entrepreneurship than ever. However, this money is conditional on Futurpreneur raising matching funds from non-federal sources.
Stay tuned next week when we discuss personal tax changes, including changes to the TFSA contribution limit and the family tax credit.
