Personal Finance

Trudeau going after Personal Services Corps disguised as small businesses

  • Last Updated:
  • Apr 8th, 2022 5:08 pm
Sr. Member
Jul 20, 2017
568 posts
125 upvotes
treva84 wrote: MACA - Make All of Canada Awesome
- Tax cuts for everyone
- Trim public entitlements and bureaucracy (use this to cover tax cuts).
- Let QC leave if they want to
- Support resource infrastructure and leverage Canada's strength (resources) to drive economic development
- Cut public handouts and instead use the money to create programs that increase social and economic mobility , so people with poor paying / low skill jobs can transition into higher paying / higher skilled jobs

That'd be my platform. Can you tell I'm from Alberta? ;)
I think there is a higher chance of Alberta separating then QC.
This also related to the higher number of refugees coming to QC. Refuges don't want QC, they want to be in Canada...
Also most refugees will vote liberal. That is the government that let them in...
There is no alternative to Liberals right now...I would like to see Justin and morneau go...

Anyway deficits will not be tackled in my lifetime, so I am not worried. As for my kids, they should form their own party, as we are seeing in Europe...The Young Independents, or something similar...As a first they could win the elections around the big Universities..They should fight for electoral reform...
Sr. Member
Jul 20, 2017
568 posts
125 upvotes
tdiddy23 wrote: For non Canadian investments (ie an SP500 ETF) without swaps I found for myself they are better held personally. Foreign income is taxed quite punitively in corp, offsets the deferral advantage in many circumstances. in this circumstance the advantage with swaps is pretty sizable long term.

https://www.pwlcapital.com/en/Advisor/T ... te-Account
Very nice link! The site was probably used by justin gurou and morneau when they came to the conclusion that there is an inequality between how small businesses and employees are taxed...Too bad they did not read the details :
having an overall tax rate of 58.65%, which is 9.12% higher than the top 49.53% tax rate in 2015, is indeed an inequality that should have been fixed...maybe they used the phoenix system calculator for employees ( that includes paying employees extra money tax free to cover credit card interest) to come up with the new rules? They probably added the $5000 per employee already spent on the payroll system versus the free WINTOD used by small businesses...

So the conclusion of the whole liberal small business campaign is that they have woken up the small business owners to the fact that they are mistreated tax-wise. The government is hiding behind artificial and untrue arguments to prove their point..They have brainwashed the whole population to believe that doctors are super-rich spoiled arrogant *^$!' s
Sr. Member
Jul 20, 2017
568 posts
125 upvotes
The tax free benefits have a side effect:

https://www.thestar.com/news/crime/2018 ... ation.html

Another 53 TTC employees have quit, been fired or retired to avoid being dismissed since September amid a benefits fraud investigation, the transit agency said Wednesday.
A total of 223 employees have left since the probe began in 2014, according to the TTC statement.
Receipts were given to TTC employees by Healthy Fit — a health-care products and service provider — where reimbursements were made but “no product or services were being obtained,” and receipt amounts were “inflated,” agency officials said.
Adam Smith, the proprietor of the health company, was found guilty of two counts of fraud over $5,000 and sentenced to two years in a federal penitentiary. Ten TTC employees faced fraud charges, with four pleading guilty.
The TTC has collected more than $82,000 back from those employees.

Yes, some money was recovered...but how much did it cost taxpayers to conduct all this investigations and prosecutions?
Deal Fanatic
Nov 9, 2013
5885 posts
7465 upvotes
Edmonton, AB
So when do I get my 700k trip on the tax payers dime - good thing he changed those small business tax rates.
Buy right, hold tight. Keep calm and go long.
Sr. Member
Jul 20, 2017
568 posts
125 upvotes
It looks like this thread is stale...That is understandable, democracy in Canada is a based on the stupid first out the post rule, were those who are not part of the majority voters, have little say between elections.
I guess we can comment whatever we want, trudeau/wynn dream team does whatever they want.
I think the big deficits will lead to high interest rates, so the blow to small business punitive taxes on investments having a much higher impact then expected.
Just imagine the years with 15-17% interest ( I think it was the early 90's?)
Just spoke with a small business client recently. He said that he is increasing his prices and laying off people. They have no interest in doing any business that does not have a large profit margin...He reduced overtime and shift work to almost zero. It is true that this is mostly caused by the wynn labor law changes. But he said that he sees little chance that he can increase his gain from what he already has. It is no point to take more risks when there is no real reward scenario...He also said that they implemented some strict rules when hiring, like not hiring before official holidays ( they have to pay for it based on new rules).

I guess our only democratic choice right now is to vote on what justin poncho should be wearing during his south american trip. My vote goes for a poncho with red stripes on a red background....or as a punishment a blue striped on orange background poncho with one blue and one orange sock...The budget for the trip should be kept under 10 million..
It is amazing how he disappeared after the India trip...waiting to see the scandal with the expenses of the trip..
Deal Fanatic
Oct 7, 2007
9406 posts
5374 upvotes
I keep reading comments around the world that suggest our PM is not in high favour. Not sure if this is the same here at home.
Deal Fanatic
Nov 24, 2013
6479 posts
3344 upvotes
Kingston, ON
choclover wrote: I keep reading comments around the world that suggest our PM is not in high favour. Not sure if this is the same here at home.
Support and disdain both get blown out of proportion depending on who you're talking to. Even within Canada, Conservatives hate him for supporting carbon taxation, while Greens also hate him for supporting oil pipelines. To some degree, you can't win as a politician no matter what you do.

Likewise on corporate taxation issues, the Conservatives argue he's strangling small businesses; NDP & Greens argue general-rate corporate taxes are too low (and even if they want to keep Corp taxes under the Small Business threshold low, they're not out to lower the integrated rate).
Sr. Member
Jul 20, 2017
568 posts
125 upvotes
Mike15 wrote: Support and disdain both get blown out of proportion depending on who you're talking to. Even within Canada, Conservatives hate him for supporting carbon taxation, while Greens also hate him for supporting oil pipelines. To some degree, you can't win as a politician no matter what you do.

Likewise on corporate taxation issues, the Conservatives argue he's strangling small businesses; NDP & Greens argue general-rate corporate taxes are too low (and even if they want to keep Corp taxes under the Small Business threshold low, they're not out to lower the integrated rate).
At the end of the day at election time you can cast your vote for one of the 3.5 parties..that's it. Then you wait another 4 years to have a say..
Deal Addict
User avatar
Jan 15, 2017
2365 posts
1755 upvotes
Sebastian6300 wrote: It looks like this thread is stale...That is understandable, democracy in Canada is a based on the stupid first out the post rule, were those who are not part of the majority voters, have little say between elections.
The first-past-the-post system historically gave us pretty good governments, with the pendulum shifting slightly from left to right and vice-versa.

That shift is becoming more pronounced lately, resulting in a cycle of new governments cancelling the policies of the previous government and replacing them with ones that are more aligned with their own ideology.

Going forward, this is going to result in a lack of direction.

Personally, I like the 3P model that was proposed by Stephane Dion.
Sr. Member
Jul 20, 2017
568 posts
125 upvotes
The same polarization is more visible in US: a country of 350 mil people has to chose one of 2 parties. That is pretty ridiculous.. Both parties' supporters have become very radicalized...
The trend I see in Canada is that parties are promising everything just to win the elections, or at least make sure that if the other party wins they will be very unpopular for cutting the promises made by the other party..
Somebody at some point has to tackle the deficits...Just look at Ontario the wynns have made so many promises that you will need 2 generations to pay for it...So if you thought 1 billion for cancelling some gas plants to ween 3 extra seats was a lot, just try to budget for these promises made now..This is basically political chess...just corner the other party..
Finally the gas plant trial is over for now...Somebody might go to jail for what they did to hide the truth...Unfortunately is not a politician..
Deal Addict
Nov 13, 2013
4528 posts
3689 upvotes
Ottawa
taxrage wrote: The first-past-the-post system historically gave us pretty good governments, with the pendulum shifting slightly from left to right and vice-versa.

That shift is becoming more pronounced lately, resulting in a cycle of new governments cancelling the policies of the previous government and replacing them with ones that are more aligned with their own ideology.

Going forward, this is going to result in a lack of direction.

Personally, I like the 3P model that was proposed by Stephane Dion.
Federally at least we haven't really had huge swings and frankly imho we have been pretty well governed for the past 25 years. The scandals are all pretty minor. A bit of waste on advertising, $90k in excess expense claims that cost $25 mil to investigate, a free helicopter ride. Pretty banal stuff if you look at other countries.

Provincially (Ontario) I agree is a different story and we have no good choices again this time as for the past several elections.
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Jan 15, 2017
2365 posts
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fogetmylogin wrote: Federally at least we haven't really had huge swings and frankly imho we have been pretty well governed for the past 25 years.
I wasn't only referring to Canada. The US also has a FPTP system and few would question the swing that took place.

IMHO, the election of JT represented a more significant shift to the left than we've seen in recent years, which will at some point trigger a significant shift to the right, especially if this twit of a PM doesn't deal with the open border that now exists in Quebec.
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Aug 20, 2009
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Guys we don't mind the odd aside into other areas of discussion but this is becoming solely focused on politics. Its a long thread so perhaps its run its course or needs to be moved but I'm going to give it another chance.
Sr. Member
Jul 20, 2017
568 posts
125 upvotes
Redmask wrote: Guys we don't mind the odd aside into other areas of discussion but this is becoming solely focused on politics. Its a long thread so perhaps its run its course or needs to be moved but I'm going to give it another chance.
Maybe should leave it for a while...I am sure that the road to communism still has some surprises to small businesses:-)
Let's wait till people start to do their taxes...I am sure there will be lots of questions.
I just read the CMA ( doctors) journal recently...things are pretty muddy in the exact accounting of this changes..
Sr. Member
Jul 20, 2017
568 posts
125 upvotes
I am a little confused about paying adult children under 24. My understanding is that if they do not work full time for the business you can not pay them in any form.
Here is my situation: I am able to get some data entry work from a customer, that my college student kid could do. It could be $1k-2k during the summer. This is not something that I would like to do myself..but for him it would be a nice job...Customer would not deal with my son, unless my company takes the job and I am responsible for it...Could I pay my son from my company in this case, or I am breaking the morneau/trudeau income splitting rules?
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Jan 15, 2017
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Americans living in Canada who thought it was a good idea to incorporate hit by Trump tax overhaul Click for story

Some owe millions in tax now.
Deal Fanatic
Nov 24, 2013
6479 posts
3344 upvotes
Kingston, ON
Sebastian6300 wrote: I am a little confused about paying adult children under 24. My understanding is that if they do not work full time for the business you can not pay them in any form.
Here is my situation: I am able to get some data entry work from a customer, that my college student kid could do. It could be $1k-2k during the summer. This is not something that I would like to do myself..but for him it would be a nice job...Customer would not deal with my son, unless my company takes the job and I am responsible for it...Could I pay my son from my company in this case, or I am breaking the morneau/trudeau income splitting rules?
That scenario you describe is your son actually performing work for your business. Of course that's allowed.

The income sprinkling rules discourage situations where the family member gets dividends at a lower tax rate without active involvement in the corp. There's nothing disallowing hiring them for work for the corp (which is tax deductible on the corp's end and taxable income on the individual's end).

https://www.canada.ca/en/revenue-agency ... dults.html
Example 5B: Salary paid to an adult under age 25
Facts
Same as Example 5 and Example 5A except the same amount is paid as salary instead of dividends.
Conclusion
The Proposals will not apply. No change in treatment.

Explanation
Section 120.4 does not apply to salary. In the circumstances, section 67 should also not apply to limit the deduction of the salary expense by Opco.
https://www.canada.ca/en/revenue-agency ... kling.html
Q6 Do the TOSI rules apply to the salary I earned?
The TOSI rules do not apply to salary received by an individual.

Q7 I am over the age of 17 and actively involved in my family's business. Do the TOSI rules apply to me in respect of the dividends I receive from the business?
The TOSI rules will not apply to dividends an individual receives from a business in a taxation year if the individual has attained the age of 17 before the taxation year and is engaged on a regular, continuous and substantial basis* in the business during the year.
* An individual is deemed to have satisfied this requirement if he or she is engaged in the business at least an average of 20 hours per week during the part of the taxation year that the business operates. If an individual does not satisfy this deeming rule, then it is a question of fact whether he or she was engaged on a regular, continuous and substantial basis.
Here's a good explainer article with less CRA-ese,

http://business.financialpost.com/perso ... r-business
Isn’t there already a rule to prevent this?

Sort of. The current “Tax on Split Income” (“TOSI”), sometimes referred to affectionately as the “kiddie tax,” applies the highest marginal tax rate (currently 33 per cent federally plus provincial tax) to “split income” of certain family members under the age of 18. Split income includes private company dividends, capital gains and certain income from partnerships or trusts.

So, what changes are being made to the TOSI rules to further prevent income sprinkling?

The draft rules released on Dec. 13 will extend the TOSI rules to certain family members over the age of 17, with, as the government put it, some “clear, bright-line tests or off ramps” to exclude certain members of the related business owner’s family who fall into various categories.

What are these new exclusions?

It all depends on your age.

If you’re at least 18 years old in the year you receive so-called sprinkled or split income, it won’t be considered TOSI if it comes from an “excluded business.” An excluded business is one in which you were “actively engaged on a regular, continuous and substantial basis in the activities of the business” either in the tax year in question or in any five prior tax years, which need not be consecutive.

Do the proposed TOSI rules apply to salaries?

Nope. Salaries paid must always be considered “reasonable” to be deductible by the corporation.
Sr. Member
Jul 20, 2017
568 posts
125 upvotes
Mike15 wrote: That scenario you describe is your son actually performing work for your business. Of course that's allowed.

The income sprinkling rules discourage situations where the family member gets dividends at a lower tax rate without active involvement in the corp. There's nothing disallowing hiring them for work for the corp (which is tax deductible on the corp's end and taxable income on the individual's end).

https://www.canada.ca/en/revenue-agency ... dults.html


https://www.canada.ca/en/revenue-agency ... kling.html


Here's a good explainer article with less CRA-ese,

http://business.financialpost.com/perso ... r-business
thanks a lot for clarifying...
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Jan 15, 2017
2365 posts
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Incorporated senators don't want to give up income sprinkling?

The last sentence in the article is the main reason for the change, hence its impact.

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