10/13/2019 2019 Fall Tax Update Whats New? 2019 Fall Tax Update - PDF document

10/13/2019 2019 Fall Tax Update – What’s New? 2019 Fall Tax Update – What’s New? Banff Small Practitioners Forum CPA Forum North October 26/27, 2019 Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP Video Tax News Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 2019 Fall Tax Update – What’s New? Tax Rates • Personal Rates Rates • No changes - Pre-Election! • Post-Election? Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 2019 Fall Tax Update – What’s New? Tax Rates • Federal Corporate Rates • No changes - Pre-Election! • SBD rate 9% (2019 onwards) • High Rate 15% • Post-election? Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 1

10/13/2019 2019 Fall Tax Update – What’s New? Tax Rates • Alberta Corporate Rates • Top Rate Declining • 12% to June 30, 2019 • 11% July 1, 2019 • 10%/9%/8% January 1, 2020/2021/2022 • GRIP Integration pretty close by 2022 Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 2019 Fall Tax Update – What’s New? Integration • ABI – not much change • High rate ABI over-integrated in 2022? • SIBI – getting less terrible • Deferral by 2022 Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 2019 Fall Tax Update – What’s New? Passive Income Grind • Dec 31, 2019 earliest YE for most • Use SBD in earlier year ends? Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 2

10/13/2019 2019 Fall Tax Update – What’s New? Passive Income Grind • REFRESHER • Passive income over $50k • $1 income = $5 SBD limit lost • All gone with $150k passive income • Look to prior calendar year Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 2019 Fall Tax Update – What’s New? Passive Income Grind • REFRESHER • Adjusted Aggregate Investment Income • Aka “passive income” • Income subject to RDTOH (AII) • Add most dividends received • Not reduced by cap losses carried over • Excludes “active asset” cap gains Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 2019 Fall Tax Update – What’s New? Passive Income Grind • Substantial cash flow hit • Up to $70,000 in 2020 • Pull out investment capital? • DO THE MATH FIRST Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 3

10/13/2019 2019 Fall Tax Update – What’s New? Passive Income Grind • Pull out capital? Consider • Up front cost (repay old deferral) • SBD benefit declining from $80k • $60k after 2020 • How long to recover up front cost? • Where does the new deferral go? Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 2019 Fall Tax Update – What’s New? RDTIOH Streaming • REFRESHER • First affected year Dec 31/19 • Eligible and Non-eligible RDTOH • Old RDTOH “grandfathered” • No reason to accelerate dividends • New RDTOH mainly non-eligible Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 2019 Fall Tax Update – What’s New? RDTIOH Streaming • Planning – before Dec 31/19 • Consolidate GRIP and RDTOH? • Trigger GRIP and/or RDTOH? • Running out of time… Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 4

10/13/2019 2019 Fall Tax Update – What’s New? RDTIOH Streaming • Planning – after Dec 31/19 • Move corporate investments to CDN dividends? • Only generator of eligible RDTOH Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 2019 Fall Tax Update – What’s New? RDTIOH Streaming • Planning – after Dec 31/19 • Priority of dividends • Eligible dividends - recover eligible RDTOH • Non-Eligible div – recover non-el RDTOH • Back to eligible dividends when no RDTOH • Finally, non-eligible when GRIP runs out Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 2019 Fall Tax Update – What’s New? 2019 Federal Budget • Pre-election to be sure • A shotgun, not a rifle Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 5

10/13/2019 2019 Fall Tax Update – What’s New? 2019 Federal Budget • What Was There – The Big Ones • There were no big ones! Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 2019 Fall Tax Update – What’s New? 2019 Federal Budget • Housing Related • Home Buyers’ Plan • $35,000 limit • Marital breakdown Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 2019 Fall Tax Update – What’s New? 2019 Federal Budget • Housing Related • First-time Home Buyer Incentive • 5% or 10% of home price • Shared equity mortgage • Many restrictions • CMHC shares the lift. Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 6

10/13/2019 2019 Fall Tax Update – What’s New? 2019 Federal Budget • Partial change of use • Canada Training Credit • New annuities for retirement plans • Employee Stock Options Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 2019 Fall Tax Update – What’s New? 2019 Federal Budget • Medicinal Cannabis • Fertility expenses • Registered Disability Savings Plans • Kinship Care Providers • Transfers to IPPs restricted Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 2019 Fall Tax Update – What’s New? 2019 Federal Budget • Canadian Journalism Measures • Credit for wages • Qualified donee status • Personal tax credit for subscriptions • No process yet for designating news organizations Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 7

10/13/2019 2019 Fall Tax Update – What’s New? 2019 Federal Budget • Farmers/Fishers • Exempt from Specified Corporate Income • SRED • No more income grind for CCPCs • Mutual Funds – Capital Gain changes Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 2019 Fall Tax Update – What’s New? 2019 Federal Budget • Money for CRA – compliance issues • Cryptocurrency and digital economy • Non-residents including withholdings and reporting • Offshore non-compliance • Real estate • Including principal residence reporting Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 2019 Fall Tax Update – What’s New? 2019 Federal Budget • Money for CRA – service issues • T1 Adjustment processing • Dedicated telephone service • Improved tracking online • Objection processing • Liaison Officer Initiative (corporations) Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 8

10/13/2019 2019 Fall Tax Update – What’s New? 2019 Federal Budget • Zero-emission Vehicles • Up to $5,000 purchase incentive OR • Accelerated CCA – full writeoff • Watch out for passenger vehicles! Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 2019 Fall Tax Update – What’s New? 2018 Fall Economic Statement • Accelerated Investment initiative • Full writeoff • M & P Equipment • Clean Energy assets Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 2019 Fall Tax Update – What’s New? 2018 Fall Economic Statement • Accelerated Investment initiative • All other assets • Accelerated CCA • Half year rule • year and a half rule! Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 9

10/13/2019 2019 Fall Tax Update – What’s New? 2018 Fall Economic Statement • Accelerated Investment initiative • Special rules for some assets • Few exceptions • Full claim? • Watch marginal rates • Watch acquisition dates! Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 2019 Fall Tax Update – What’s New? Tax on Split Income - TOSI • Applied for 2018 • were we ready? • was CRA ready? • what next? Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 2019 Fall Tax Update – What’s New? Tax on Split Income - TOSI • Related Business Updates • Benchmark for “business”? • Seems pretty low • Source & Specified Individual • Must be two people Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 10

10/13/2019 2019 Fall Tax Update – What’s New? Tax on Split Income - TOSI • Related Business Updates • Investment income • Not derived from financing source • Business of portfolio investing? • “For the year” • Watch the clock when business sold Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 2019 Fall Tax Update – What’s New? Tax on Split Income - TOSI • Reasonable Return Update • Relative contributions • Full history • Initial financing? • Undistributed earnings • Not contributions to business Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 2019 Fall Tax Update – What’s New? Tax on Split Income - TOSI • Excluded Business Update • Bright line • Any five years = permanent exception • Exception means no limit to income • The Gold Card! Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 11