The federal budget that was released on April 17, 2024 was controversial, to say the least. For years, finance people have been hypothesizing about an increase to the capital gains “inclusion” rate. This budget finally made good on that speculation and was perhaps the most significant provision of this budget.

A capital gain occurs when you sell an asset for a higher price than what you paid for it. Of the gain that you realize i.e. the difference between the sale price and the purchase price, currently only 50% of the gain is “included” and is taxable.

It is now April and we are getting closer to the tax filing deadline. Some of us have anxiety just thinking about it and have understandably decided to procrastinate as the only reasonable response :). Of course there are those of you who have already filed their tax returns, thereby (mostly) eliminating their stress and should be commended for their judiciousness.

As I’ve been immersed in taxes (for what seems like an eternity), I have received a number of questions. I thought I would share a handful of these with you:

It is easy to get sucked into the vortex of social media. It can be a fun distraction and depending on your interests, educational and inspiring. It is also a megaphone where often the most opiniated people hold the most weight. Someone with thousands of followers who confidently asserts a fact, is taken at their word. Unfortunately, thought, some of this information is erroneous or has been manipulated to support an argument and anyone trying to correct errors or present a counter argument is shut down or simply deleted.

As we are firmly into tax season, I thought it would be useful to delve into the endlessly exciting topic of sales tax. I have several blog posts and videos about sales tax which I will link to below, including an FAQ (which I have just updated). In this article, I will provide some context that might be useful.

Sales taxes in Canada in it’s original form was introduced during the Great Depression The federal government introduced a "manufacturer's sales tax" (MST) in 1920 to bolster their revenues during a challenging time. The tax was levied on the sale of goods by manufacturers and was primarily intended to be a hidden tax, that was indirectly paid by consumers.

f you are the owner/shareholder of a small business corporation, you likely know something (and is some cases quite a lot) about dividends. As an accountant, it is one of the areas of small business tax that people ask me the most questions about. Mostly, dividends are relatively straightforward, but there are some complexities for which expert tax advice is often necessary.

A dividend is simply a reward for ownership of shares in a corporation that is represented as a payment to a shareholder, usually in cash, but sometimes in kind. Since dividends are only paid to investors, they are considered to be passive income similar to interest, rental income or gains on sale of investments. This has tax implications in the Canadian tax code in that passive income:

As we approach the deadline to contribute to RRSPs which is February 29th , I thought it would be useful to look at the potential sources that might contribute to your retirement income. For many of us, retirement seems like a long way off and consequently we perhaps don’t spend enough time thinking about it until it’s too late to make much of a meaningful change.

In my last newsletter article about RRSPs (around this time last year), I highlighted how 5,000 per year over 30 years i.e. a total investment of $150,000 invested at 5% (which is lower than the average return on the stock market) would result in $338,899.11 at the end of 30 years. This applies to all types of investments and is essentially the power of compounding which is a function of the rate of return and time i.e. the number of years the investment is earning the return. This demonstrates that contributing, even small amounts, as early as is possible, can lead to a significant nest egg.

As tax season approaches, a question that I get often is whether you should do your own taxes or outsource them to a tax preparer or accountant. My answer, perhaps unsurprisingly, is that it depends.

The first and perhaps most important factor is to determine the level of complexity you are dealing with. If your situation is simple e.g. you have a T4 slip from your employer, RRSPs and a couple of donations, it is quite easy to do it yourself especially using tax software which guides you through the process. However, if you have sold a principal residence or rental property, or have an active investment portfolio or another arcane tax event , and you are unsure of how to deal with this, it might make more sense to outsource so that you are not doubting whether you have done it correctly.

Anyone who has glanced a non fiction bestseller list over the past few years has likely noticed a book called “Atomic Habits” . The thesis of the book is that small incremental changes to our habits (i.e. atomic units) can lead to significant changes in our lives, over time. He explains the behaviour that drives habits, provides strategies for forming good habits and helps to break bad ones.

I mention this as I was thinking about my goals recently (as one does in a new year) and realized that I had some work to do on defining and refining them. My starting point was an internet search on “how to set goals” which lead me to James Clear’s (author of “Atomic Habits” ) website and this post. He provides some great insight on how to set, attain and measure goals. However, the most interesting insight to me was that the systems (i.e. habits) are more important than the goals:

Most people would agree that lifelong learning is a good thing. It helps to keep you sharp, improves confidence and likely makes you more interesting at parties (assuming you don’t nerd out too much :)). It can also be quite gratifying to acquire new knowledge or a new skill, especially in an area of interest.

In Canada, there are also some tax benefits to be had from training. On an individual level, you are eligible for the tuition tax credit or the training tax credit assuming you :

• File an income tax return

• You were a Canadian resident for the full year

• Tuition or other fees were paid to an eligible educational institution for courses that you took in the year that you are claiming the credit for or to certain bodies for an occupational, trade or professional examination

A few years ago I read a book called the The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It. (which I highly recommend). The gist of the book is that too much time spent working in the business and not enough time spent working on the business is a big reason why 50% of new ventures fail within the first 5 years. In other words, many of us (I am certainly guilty of this) spend too much of our time on the technical or management of the business rather than growing it. The book focuses on the franchise model, which allowed McDonald’s (and everyone since) to expand (and create empires) relatively seamlessly by systematizing, documenting and automating processes.

Depreciation is one of those accounting terms that sounds like technical jargon, but is actually conceptually straightforward. It simply refers to the measure by which asset will lose value over time. For example when you buy a car (which are notorious for losing a significant amount of value as soon as you drive it off the car dealership parking lot), it will be worth less each year as it starts to deteriorate. Finally, at some point in the future you will have to replace it.

As a business owner, I think a well crafted survey can provide you with a wealth of information about your customers. Creating a good survey, however ( as I have learnt), can take time and effort. It can’t be too long, shouldn’t have too many open ended questions and has to anticipate the needs of your audience. One of my goals is to get more general information on my readers and where there interest and more importantly, their challenges, lie.