After two months of active campaigning against the federal government’s proposed tax changes to small business, our work has paid off. The lifetime capital gain exemption (LCGE) restrictions were removed from the propositions and government has given its word that it won’t punish in-family transfer of businesses. In a separate announcement on October 19, the government also backed away from their original proposal to restrict a person’s ability to convert money held in a private corporation into capital gains as a way to reduce taxes.
Although income sprinkling is still restricted, government will make it easier for restaurant operators to have contributions from less active shareholders in a private corporate structure recognized. Of the 16 formal recommendations we made, over 60% were addressed in some way, including the preservation of passive income to fuel growth and development.
And there’s more good news, as government announced a reduction of the small business tax rate from 10.5% to 9% by January 1, 2019. This has been an historic demand from Restaurants Canada and represents up to $7,500 in tax savings each and every year.
The location where Prime Minster Trudeau and Minster Morneau made the announcement demonstrated the importance of our industry – in a restaurant!