Small businesses to keep close eye on federal budget

With Ottawa delivering their budget Wednesday, there are a few issues that cause concern for the country’s small business community.

While nothing official has been announced, there are rumours the Trudeau government is looking at some measures that could affect small businesses in Canada.

Jamie Golombek, the managing director of tax and estate planning with CIBC, said two items that could raise eyebrows are changes to the small business deduction and lifetime capital gains exemption.

Currently, with the small business deduction, a Canadian-controlled private corporation is taxed a very small rate on the first $500,000 they make.

“In the Liberal election platform, one of the things they said they would do if elected was to make sure that private corporations are not being used by wealthy people to avoid paying tax,” Golombek told Gormley Tuesday. 

Golombek said the federal government could look at the deduction and put restrictions on it, such as a minimum number of employees and hours worked. 

“They may do what some of the experts are recommending and limit it to new corporations in the first couple of years, maybe test it based on industry, there’s a variety of things that they could do.”

He also mentioned they could do nothing, but it’s on the radar because of the election platform.

The lifetime capital gains exemption is another thing that could be targeted on budget day. 

The exemption comes into play when someone sells an operating business, around $830,000 is the tax-free capital gain per person. 

If it’s a farming or fishing property, that rises to $1 million per individual.

Golombek said concerns have been raised by academics the government might limit the opportunity, restricting it to certain innovative businesses or the first few years of a company’s existence.

– With files from Gormley.