Budget 2023 and Your Bottom Line
As many of you know, the federal budget was released last week. They now give these budgets descriptive titles - this one is Making Life More Affordable and Supporting the Middle Class which is an interesting focus (I imagine they have a marketing department that comes up with these). Given that the biggest economic headline from the last year or so has been inflation, I suppose it is important that this budget is seen as an effort to help make life easier for Canadians. Unfortunately, the budget does not have much in the way of inflation targeting nor is there anything significant for small businesses. There are however (as always) some items of interest.
Canada Dental Benefit: For children under 12 years of age and available to families earning under $90,000 per year. To be rolled out within the next couple of years.
One Time Grocery Rebate: The amounts potentially receivable are $467 for eligible couples with children; an additional $234 for single Canadians without children; and an additional $225 for seniors, on average. Sadly, this is completely unrelated to your actual grocery bill and will simply be an add on to your GST credit (that will likely be based on the same levels of income for those that are eligible for the GST credit.)
Credit card charges: The federal government has received commitments from Visa and MasterCard to cut credit card processing fees charged to small business by up to 27 per cent from the current average which will apparently benefit 90% of businesses. The details of how this will work in practice are yet to be released.
Canada Student Grants: The government proposes to increase Canada Student Grants by 40 per cent—providing up to $4,200 for full-time students. They will also raise the interest-free Canada Student Loan limit from $210 to $300 per week of study. Finally, credit screening for mature students (22 years or older) will be waived.
Tradespeople Deduction: The tax deduction for tradespeople will increase from $500 to $1,000.
Common Chargers for Your Devices: An interesting provision in the budget is the establishment of a standard for chargers (which anyone with a smartphone knows can be frustrating) federal government will work with international partners and other stakeholders to explore implementing a standard charging port in Canada, with the aim of lowering costs for Canadians and reducing electronic waste. It should be noted that the EU has already implemented a common standard so this is simply an extension of a worldwide movement.
Automatic Tax Filing: A new automated system, primarily directed at low income Canadians who are entitled to benefits but don’t file their tax returns, that will allow them to receive the benefits by simply filing their taxes over the phone.
RESP Changes: The budget proposes to increase limits on certain RESP withdrawals from $5,000 to $8,000 for full-time students, and from $2,500 to $4,000 for part-time students. Additionally, it will allow divorced or separated parents to open a joint RESP for their children.
First Home Savings Account (FHSA): This savings account, similar to the RRSP home buyers plan, was introduced last year for people wanting to buy their first home. and will be available starting April 1, 2023. You can save up to $8k a year, tax free in this account up to a maximum of $40k and use it towards your home.
Additional Measures: There are a number of investment tax credits for clean energy, a change to the alternative minimum tax (AMT) calculations and some provisions for inter generational transfers. Read more about the personal and business tax measures.
For the complete budget, or provisions that you find useful or interesting (or simply require something to help you with your insomnia), here is the table of contents.
Blog Post
Some posts about deducting expenses that are slightly more complex in their application - notably car expenses (both for sole proprietors and corporate owners) and capital cost allowance which is when you buy an asset that should be depreciated rather than expensed all at once.
What Types of Car Expenses Can Business Owners Deduct
Access to a car can be crucial to running a small business effectively. Costs of ownership, however, can be high, especially in the early stages when your business is not hugely profitable. Luckily,
What is Capital Cost Allowance and How Does it Impact Your Business
Frequently a client of mine will purchase a high ticket item such as a computer or a piece of furniture and will simply show it as an expense on their profit and loss. As far as they are concerned, if
Small Business Articles/Tips
Lessons on Negotiating: One of my favourite all time TV shows, Succession (on HBO currently in its fourth and final season), inspired an article by Harvard Business Review on how to (and not to) negotiate.
Canadian Marketing Stats: Apparently marketing materials received in the mail are still popular, digital campaigns take up significant portions of marketing budgets and other interesting marketing stats for Canadians.
Tax Stuff:
CBC Interview: Another short interview of mine on CBC radio discussing tax tips and how filing your tax return mitigates stress.
Budget Summary Video from CFIB: This video from the Canadian Federation of Independent Businesses gives a fairly thorough summary of budget and what was missing. Also a TLDR version.
How to Take Advantage of the FHSA: An article from the Financial Post that outlines how to get the most out of an FHSA.
Maximize Your Tax Deductions and Credits: A review of tax credits and deductions - a reminder for those of you who are starting to work on their taxes.
QuickBooks Tip: Transfers Between Accounts
A common error for QBO users involves transfers between bank and credit card accounts. A transfer between the bank and credit card accounts should only be “added” once. Once added from one side of the banking download the other side of the transaction should simply be matched (which often happens automatically but not always since QBO can be glitchy or not “match” older transactions. If it doesn’t you can find the transaction by using “find match”). If you don’t do this, you will find yourself with a duplicate transaction that will result in incorrect bank and credit card balances.
Books and Resources:
Small Business Tax Facts(Sole Proprietorships/Registered Businesses/Self Employed Workers)
This book helps you have a better understanding of tax (brackets, tax rates, deductions etc), how it applies to your unincorporated small businesses and how to do your own tax return (or at least understand what your accountant does). It also includes a comprehensive breakdown of deductible expenses, by category with special sections on more complex deductions such as home office, vehicle and capital cost allowance.
FastStart Your Corporation(Corporations)
A step by step guide to starting your small business corporation, including what you need to know about incorporation, setting up your accounting and tax considerations.
QuickStart your QuickBooks(Sole Proprietorships and Corporations)
A comprehensive guide that takes you through the many features of QBO and gives you step by step instructions on how to setup and work with QBO day to day. It is ideal for beginners who have never used QBO before and also for those who are currently using it, but have questions or need guidance.
FastStart Your Business (Sole Proprietorships)
A step by step guide for anyone who is planning to start a Canadian business or become self employed (and does not want to incorporate) and wants to know what they need to do or simply has questions.
Small Business and Your Dividends (Corporations)
For incorporated small business owners who want to know more about small business dividends, the differences between salary vs dividends and which is better and step by step instructions on how to file your own dividend declarations (T5s).
Use discount code “special” to save 20% on any (or all) book(s) when you purchase from the website.
Please note that all books on my website are in PDF format.
If you prefer a print version, all books are also available at Amazon . Note that print versions purchased on Amazon include a complimentary PDF - you just need to email me and include proof of purchase.
Free Resources
Business 2023 Tax Deadline Calendar
Starting A Corporation Checklist
Start Your Business Checklist
Dividend Declarations Checklist
Small Business Tax Return Checklist
QBO Set Up Checklist.
Small Business Calculators
Previous newsletters
Consultations
I also provide consultation services where I can answer your specific questions relating to your small business and/or finances, provide clarity and give you guidance. Additional details can be found here and here. Note that I no longer provide ongoing accounting or tax preparation services.
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Wishing everyone a great weekend and a quick recovery to those of us who lost power during the ice storm in Montreal.
Ronika