New Rules on Passive Income to Affect Only 3% of Corporations

by in Canadian Government News and Updates
New Rules on Passive Income to Affect Only 3% of Corporations
Finance Minister Bill Morneau announced last October 18th of the Government’s intention to move forward with the tax changes albeit with a few tweaks here and there.  The Finance Minister focused on the tax changes to limit the tax deferral opportunities related to passive investments. 

In his statement in New Brunswick, the Finance Minister said that the Government will ensure that a $50,000 threshold on passive income in a year which is equivalent to $1 million in savings based on a nominal 5% rate of return will be made available to provide more flexibility for business owners to hold savings for multiple purposes.  The Finance Minister further adds that this $50,000 threshold is an amount that is exceeded only by about 3% of corporations – meaning 97% of Canadian private corporations will not be affected by the proposed new rules on passive investments. 

As for other proposed tax measures, the Government has also announced that it will simplify the proposal to limit the ability of owners of private corporations to lower their personal income taxes by sprinkling their income to family members who do not contribute to the business. Also, the Government has decided not to move forward with the proposed measures relating to the conversion of income into capital gains. 

Source:  http://www.fin.gc.ca/n17/17-100-eng.asp, http://www.taxtips.ca/federalbudget/budget-2017.htm#income-sprinkling  
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