Budget 2018 impact for entrepreneurs: billion-dollar support for women, no hidden surprises


Business owners who were feeling anxious ahead of this year’s federal budget were likely reassured after details were unveiled on Tuesday. After months of speculation on just how passive income in small companies might be taxed, the results are in. The news is relatively good when compared to what many may have expected in the months leading up the unveiling.

First and foremost, small business will not see any new tax increases. In fact, it’s clear the government did not deviate from its previously announced plan to bring the small business tax rate down to nine per cent by 2019. And there are no changes to personal tax rates or the capital gains inclusion rate.

After proposing sweeping changes to the taxation of private corporations in 2017, cooler heads seemed to prevail, with the government opting for greater simplicity. Budget 2018 proposed two changes to limit the tax deferral advantages of earning passive income inside private corporations.

Beginning in 2019, the small business tax rate will begin to be phased out when passive income earned in the corporation exceeds $50,000. Once passive income exceeds $150,000, the corporation will no longer be able to access the small business tax rate.

A second measure proposes to generally limit the accessibility to a corporation’s refundable taxes to the extent non-eligible dividends are paid, with certain exceptions for dividends arising from portfolio dividends.