I am writing to you today because you have a corporate account at Baskin Wealth Management. Like you, we were very concerned about possible tax changes affecting private companies in the recent Federal Budget. I am happy to say that, as you probably know by now, the measures taken by the Federal government were much less punitive than those that had been proposed last summer.
For those of you who have active small businesses, mostly professional companies for legal, medical and dental practices, there will be an impact. The maximum amount of extra tax which you might have to pay is about $50,000 per year, if your income from passive investments (that is, your investment account with us) exceeds $150,000 per year. If you find yourself in this group, we can discuss reducing the amount of interest and dividend income in your account, and buy securities which are more oriented towards longer term growth by way of capital gains. This will reduce the tax hit in the short run.
For our clients with passive companies, the only changes are technical in nature, and we do not anticipate any of these companies being faced with higher tax bills.
I am happy to note that the Minister of Finance and the Federal government were in this case responsive to the criticism of the original plans, and have come up with a scheme which is both simpler and fairer. It will still punish those professionals who have planned to finance their retirements through the growth of investment accounts within their companies, but at a much lower level than we feared.
Naturally you should consult with your accountant and/or tax advisor concerning these changes.
If you would like to discuss this and talk about possible portfolio allocation changes, please contact your portfolio manager, who would be happy to help.