Farmers and small business owners are being urged to attend an information session on tax changes, set to take place on September 19 at Cardiff Hall in Sturgeon County.
The federal government has proposed several changes to taxes for small businesses. The event, spearheaded by the St. Albert and District Chamber of Commerce, will provide information on what the proposed tax changes are, how owners will be affected and what they can do about it.
Rob Heron, partner and tax adviser at accounting firm Kingston Ross Pasnak, will be speaking at the event. He says the proposed changes are going to have a significant impact.
“In my opinion there has not been any changes in the past decade that have been as pervasive as what’s being proposed,” he says.
The proposed changes to private corporations include ending income splitting where a recipient is not active in the business, taxing passive income at the highest marginal rates and preventing a private corporation from converting income into capital gains.
The Trudeau government brought forward the changes in July to “level” the playing field for high income-earning individuals, whether they are taxed as employment income or corporations. The changes, however, could adversely affect small business owners and farmers.
Farmers and small business owners that declare dividends among family members will be subject to a “reasonableness test.” The Canada Revenue Agency will determine whether each individual contributed enough labour directly into the business to warrant the income. If they fail that test, recipients could be held to the highest tax rates.
The changes also will limit the eligibility of lifetime capital gains exemptions for family members.
Heron says under the changes small business owners will find it extremely difficult to grow, put aside reserves for a rainy day or prepare for retirement.
Corporations putting aside present day earnings as preparation for the future will be taxed on those earnings at the highest personal rates.
Heron says the information session will detail each change and how it will affect business owners and farmers.
He says after the changes take effect all taxes filed will be investigated by the Canadian Revenue Agency, which could take up to two years. As a result, Heron says those who think they’re filing their taxes correctly could end up owing the government in the future.
“Farmers are going to be fraught with litigation,” he says.
Brian Bachynski, publisher of the St. Albert Gazette and chair of the St. Albert and District Chamber of Commerce, says the changes have “tremendous implications on the family farm business.”
“The proposed tax changes could hit farmers hard,” he says. “Income splitting, lifetime capital gains deductions, paying dividends to family members could all be impacted. The result would have a severe impact on transforming a farmer’s wealth into retirement and the ability of passing the family farm on to the next generation.”
Heron says even though farmers are knee-deep in harvest season, it’s important they attend the event to learn how tax changes will affect them.
“This is to get educated on how this is going to impact them. We’re still in an open-comment period (with the government), and have the ability to persuade the department of finance to go in another direction.”
Allan Sawiak, agricultural tax expert at the firm, will be joining Heron at the event. Heron will be discussing how the changes will affect small businesses, while Sawiak discusses the impacts of the changes on small businesses.
The firm is urging business owners and farmers to contact their local MP to voice their concerns.
The government has given a deadline of Oct. 2 to receive public feedback.