Tell the federal government not to punish small businesses with its new tax proposal

Tax changes
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Over the summer, the federal government proposed the most drastic overhaul of the tax system in decades. These changes would have hurt small business owners by increasing your tax burden and adding complex red tape—so we fought back and so did you.

In reaction to pressure from CFIB and small business owners like you, the government announced that it would make some adjustments to the sweeping tax changes it proposed. While some proposed measures were taken off the table (which is good news), others were only slightly adjusted and may still be a concern for those business owners that use them.

Here are the proposed changes as they stand now:

Keeping its promise to reduce the small business tax rate

During the last election campaign, the government had promised to reduce the small business tax rate to 9%, but then rescinded this commitment in the 2016 Budget. Finally, they are making good on their promise and have said that they will reduce the rate to 9% by January 1, 2019!

Added red tape for family businesses

Currently, business owners can lower their taxes by sharing income (salaries, dividends) with their family members. The government will change the rules around income-sharing, meaning that your business could face more red tape if you employ family members. They will introduce a “reasonableness test” that you need to meet to prove that your family has made a meaningful contribution to your business. Though the government says the test will be simple, we are worried it may not reflect the many formal and informal ways family members contribute to a business.

The government said that it will not create new rules around family members splitting the Lifetime Capital Gains Exemption (LCGE), which is good news if you’re looking to sell your business to retire.

New rules on savings in your business

As a small business owner, you are able to keep certain investments in your business in order to set money aside for business investments, emergencies or your retirement. The government will apply higher tax rates to income over $50,000 from these passive investments, but the small business rate will continue to apply to annual passive income up to $50,000 (equivalent to $1 million in savings, based on a nominal 5% rate of return).

While the government says that this change will only target the very wealthy, this threshold may be too low if your business is saving to grow and get to the next level.

Further details on these changes will come in the 2018 Budget.

More work to be done on capital gains

The government had planned to restrict your ability to convert income into capital gains. This would have made it more difficult for you to retire and sell or transfer your business to your kids.

The good news is they have announced that they will not be moving forward with these changes! 

While this is a positive step, it still remains more expensive and complicated for you to sell your business to your kids than to a third party. We are ready to work with the government to find solutions to make intergenerational business transfer less costly and difficult.

The fight continues

Some of the changes bring good news, but others may still have a negative impact on your business. CFIB is still committed to bringing your concerns to the government. We will continue to fight for your business and urge the federal government to address the unintended consequences of their new proposals on passive investments and sharing income with family members.

We want the government to know how these tax changes will impact your business. Sign the petition and share your story.

Make your voice heard
Tell the Finance Minister and your MP how these changes would harm your business. Sign the petition today.
Understanding your tax changes
Get a detailed look at the federal government's proposed tax changes and how they could impact your business
CFIB on your side
Learn how we're taking action against these changes.
Questions? Feedback?
Do you have questions or want to share how these changes could impact your business? Contact Business Resources at 1-888-234-2232.