Springtide North Wealth Advisory

Major change to capital gains tax will have effects on owners of small business corporations and Hold Co’s.

The increase to the capital gains tax will increase capital gain within corporations by 8%.

This is a disadvantage to any small business owner who has been building retirement funds in a Corp. Its significance is primarily on holdings inside the corporation and any gains on holdings.

Income tax deferral is a legitimate tax planning strategy to increase your long term rate of return. It allows for compounding without paying income tax until the final ‘sale’ of the investment.

This increase to capital gain tax will result in a higher tax but it does not change this deferral strategy.

There are some voices that suggest this tax increase could be reversed with a new government?

The bottom line is that its bad for investment in Canada. It targets small business owners, large business owners, entrepreneurs, incorporated professionals and real estate developers.

If this policy is for the long term, here are a few strategies that can be implemented before June 1st.
Short Term:
1) Take some gains now inside a corp. Use CDA from gains to payout tax free to TFSA or open non-reg.
2) Own capital in non-reg open accounts held personally. $250K per year exemption applies.
Long term:
3) Buy more life insurance in corps it shelters gains.

Investing decisions should come before income tax decisions.

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