2018 Third Annual Federal Budget
By Mauricio Dreher | Published 13/03/2018
On February 27, 2018, the Liberal federal government presented its third annual budget. This year’s budget focuses mainly on investments in areas of innovation and research and in pay equity to position Canada’s economy for success over the long term.
SMALL BUSINESS TAX MEASURES
Passive investments
New rules have been introduced to limit the ability of Canadian-controlled private corporations (CCPCs) to benefit from earning passive investment income, to the extent that a CCPC earns more than $50,000 of investment income in a year. These measures replace more complex measures that had been previously proposed in 2017.
Income sprinkling
The government confirmed its intention to proceed with “income sprinkling” measures announced on December 13, 2017. These rules are effective for 2018, meaning that paying dividends to certain family members may no longer be effective in reducing a family’s tax burden.
Small-business tax rate
The government also confirmed that it will proceed with lowering the small-business tax rate from 10.5% to 10%, effective January 1, 2018, and to 9% effective January 1, 2019. However, this will be accompanied by a corresponding increase in the non-eligible dividend tax rate.
OTHER TAX RELATED MEAUSURES
Capital gains inclusion rate
Despite speculation that the capital gains inclusion rate would be increased, it remains at 50 per cent.
Tax credits
The Working Income Tax Benefit is renamed and enhanced as the Canada Workers Benefit. Starting in 2019, eligible low-income earners could receive up to $1,355 under this tax credit.
Pay equity legislation
Recognizing that in Canada, women earn on average 31% less than men in annual earnings, the government will move forward with new proactive pay equity legislation that would ensure that women and men in federally regulated sectors will receive the same pay for work of equal value.
