On October 16, 2017, the Federal Government announced that it will lower the small business tax rate from 10.5 to 10 per cent, effective January 1, 2018, and to 9 per cent, effective January 1, 2019.
The Government also announced that it will move forward with the dividend sprinkling proposals, however simplify the proposals to provide greater certainty for family members' contributions (in the past and present) to a family business. The Government stated that family members who "meaningfully contribute" to the business will not be impacted by the proposals. A family member's labour and capital contributions, and assumption of financial risk such as co-signing a loan will be taken into account.
The Government further announced that it will not continue with the proposals to limit access to the lifetime capital gains exemption noting "potential unintended consequences associated with the proposed measures" such as the concern that they would negatively affect the inter-generational transfer of family businesses.
There were no updates to the other proposals such as the conversion of income into capital gains and deferral advantages using a private corporation.
The revised draft legislation is expected to be released later this fall. To view our previous article on the July 18, 2017 tax proposals, click here.