Skip to main content

Finance Minister Bill Morneau listens to a question during a news conference in Ottawa on Dec. 11, 2017.

CHRIS WATTIE/REUTERS

Finance Minister Bill Morneau will release long-promised details of new small-business tax changes Wednesday, leaving business owners with just over two weeks to prepare before the new rules take effect on Jan. 1.

Business groups and opposition parties have sharply criticized the federal government in recent weeks for failing to address the uncertainty and concern about the looming tax changes.

Specifically, the new details are expected to show how the Canada Revenue Agency will determine when business owners can use "income sprinkling" with family members as an approach for paying less tax.

Story continues below advertisement

The income sprinkling provisions were part of a controversial package of small-business tax proposals that were first introduced by Mr. Morneau in July. In response to critics, the minister backed down on several elements of the plan in October. However, he said at that time that the income sprinkling provisions would be going ahead on Jan. 1 and promised to release further details in the fall of 2017.

The House of Commons is expected to rise as early as Wednesday for a six week recess. That means opposition MPs won't get a chance to question the minister again until Parliament's scheduled return on Jan. 29.

Mr. Morneau said Tuesday that the vast majority of incorporated small businesses will not be affected by the government's new income sprinkling rules.

"We are going to announce, for those 3 per cent of small businesses that split revenue to other family members, how they can do this very simply," he said, adding that the tax rate for all small businesses will be reduced from 10.5 per cent to 10 per cent on Jan. 1.

Tax lawyers and accountants noted Wednesday that the tight timeline leaves them with a large amount of work over the holidays to prepare businesses for the new year.

"Tax professionals and small businesses lose their holidays and their minds while the Liberals go on their merry way," said accountant Peter Weissman, a partner at Cadesky Tax in Toronto and a past governor of the Canadian Tax Foundation, in an online note.

In addition to Mr. Morneau's announcement, the Senate national finance committee is also planning to release a report Wednesday on the minister's total package of small-business tax proposals. Senators have travelled the country hearing from business owners, accountants, labour leaders and other interested groups. Recent public comments from Senators on the committee suggest the report is likely to be critical of the minister's plans.

Story continues below advertisement

Wednesday's announcement is expected to provide more detail of how Ottawa will administer a "reasonableness test" to determine whether or not income sprinkling will be allowed. The government has previously said the test will be based on four criteria, including whether or not the family member contributed labour, capital or equity to the business, or took on financial risks such as by co-signing a loan or made past contributions to the business.

Conservative MPs said the minister's approach doesn't leave businesses with enough time to prepare for the new rules.

"I don't know whether or not we can put actual stock in what we are going to be hearing [Wednesday]," said Conservative deputy leader Lisa Raitt. "First he ruined summer, and now he is ruining Christmas for small-business owners."

Mr. Morneau responded that businesses that do sprinkle income will be able to adjust to the new rules before filing their 2018 taxes in 2019.

"I think they will have adequate time," he said.

Report an error Editorial code of conduct
Comments

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • All comments will be reviewed by one or more moderators before being posted to the site. This should only take a few moments.
  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed. Commenters who repeatedly violate community guidelines may be suspended, causing them to temporarily lose their ability to engage with comments.

Read our community guidelines here

Discussion loading ...

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.
Cannabis pro newsletter