How to Choose and Customize a Group Benefits Plan for Small Businesses

Building a Bright and Sustainable Future Together

As a small business owner, you recognize the significance of looking after your team and fostering a nurturing work environment. One method to demonstrate this is by providing a robust group benefits plan. This not only reflects your dedication to your team’s well-being but also is instrumental in drawing and retaining the best talent. Dive into the realm of group benefits and discover how to select and tailor the ideal plan for your small enterprise.

Understanding the Basics of Group Benefits

Group benefits plans are crafted to offer a variety of health, financial, and wellness advantages to your team members. These packages can encompass health and dental insurance, life and disability insurance, retirement savings alternatives, and more. The main benefit of a group benefits plan is its ability to distribute the risk among your team, making coverage more cost-effective and reachable for all.

Step 1: Assess Your Business Needs

Before diving into a group benefits plan, it’s vital to evaluate the requirements of your business and your team. Ponder over these questions:

  1. What’s the profile of your workforce? Think about age, family composition, and health statuses.
  2. Which benefits are most cherished by your employees? Is it health insurance, dental care, or retirement savings?
  3. How much can you allocate for group benefits? Keep in mind, offering benefits is a commitment to your team’s welfare.

Step 2: Collaborate with a Benefits Specialist

Teaming up with a benefits specialist is akin to having a navigator on your quest to devise the perfect plan. They will assist you in traversing the intricate landscape of insurance choices, rules, and compliance mandates. They’ll engage closely with you to grasp the distinct needs of your business and craft a plan that matches your budget and principles.

Step 3: Customize Your Plan

Adaptability is paramount when shaping a benefits plan that appeals to your team. Here are some avenues for personalization:

  1. Benefit Choices: Opt for a blend of health, dental, vision, life, and disability insurance based on what your team values.
  2. Wellness Initiatives: Mull over introducing wellness programs such as fitness center memberships, mental health resources, and stress alleviation workshops.
  3. Retirement Schemes: Offer retirement savings avenues like a Group RRSP or a staff pension scheme.

Step 4: Educate Your Employees

The efficacy of a group benefits plan hinges on transparent communication and enlightenment. Ensure your team comprehends the worth of the benefits provided and the methods to utilize them optimally. Arrange seminars, online sessions, or informational meetups to aid them in making knowledgeable choices about their coverage.

Step 5: Regularly Review and Adjust

The dynamics of your business and the needs of your team will transform over time. Hence, it’s crucial to revisit your group benefits plan annually and make requisite modifications. This guarantees that your plan stays in sync with your objectives and consistently delivers value to your team.

Building a Sustainable Future Together

As you embark on the path of picking and personalizing a group benefits plan for your small enterprise, bear in mind that your collaboration with your team is central to the process. By placing their welfare at the forefront and presenting a comprehensive benefits package, you’re not merely paving a brighter path for your team but also cultivating a sustainable work setting that promotes allegiance, efficiency, and expansion.

Stay Ahead in 2024: A Comprehensive Checklist for Federal Tax Updates

With the upcoming 2024 Canadian tax rule changes, it’s important to review your financial strategies. We’ve identified the key changes that we expect to influence financial decisions for investors, business owners, incorporated professionals, retirees, and individuals with high income or net worth.


Capital Gains Inclusion Rate

Starting on June 25, 2024, the tax on capital gains is changing. Until now, you would only have to include half of your capital gains in your income for tax purposes. But after that date, you’ll have to include two-thirds of any capital gains over $250,000 on your tax return. This is also the case for employee stock options. 

Consequently, for corporations and trusts, they will have to include two-thirds of all their capital gains, no matter the amount. This is a significant change. 


Lifetime Capital Gains Exemption (LCGE)

The budget proposes increasing the LCGE for qualified capital gains from $1,016,836 to $1.25 million, effective for sales made after June 24, 2024. This change increases tax benefits for individuals selling certain types of property, such as small business shares or farming and fishing assets.


Alternative Minimum Tax (AMT)
The 2023 budget included updates to the AMT, suggesting revising the charitable donation tax credit for AMT calculations, increasing the claimable amount from 50% to 80%.


Employee Ownership Trust (EOT)

The budget proposes a tax exemption on up to $10 million in capital gains for individuals selling their businesses to an EOT if certain criteria are met. 


Canadian Entrepreneurs’ Incentive

This new tax measure offers a reduced inclusion rate of 1/3 for up to $2 million in capital gains during an individual’s lifetime, with this limit being phased in over 10 years. However, it’s important to know that not all businesses qualify—this doesn’t apply to businesses in professional services, finance, real estate, hospitality, arts, entertainment, or personal care.

Below is a checklist to help you navigate the tax adjustments and ensure your financial plans are updated and aligned with the new rules.


Investors

  • Investments: Evaluate portfolios to identify where capital gains can be realized under the current lower inclusion rate.

  • Investment Property: Consider advancing the sale of such properties to benefit from the existing capital gains rate.

  • Estate Planning: Revise plans to address potential increases in capital gains taxes, ensuring estates are structured for tax efficiency.

  • Employee Stock Options: Adjust the timing of exercising stock options to align with the upcoming changes in inclusion rates.


Business Owners:

  • Corporate Investments: Assess the impact of increased inclusion rates on corporately held assets, exploring the timing of gains realization. Review trust-held investments. 

  • Lifetime Capital Gains Exemption: Maximize the benefits of the increased LCGE for qualifying business assets.

  • Employee Ownership Trust: Consider the advantages of transferring business ownership via an EOT.

  • Succession Planning: Update your succession plans to consider the potential impact of capital gains tax changes.

  • Entrepreneurs Incentive: Check if you are eligible to reduce capital gains taxes. 


Incorporated Professionals:

  • Investments: Assess both personal and corporate investments for the new inclusion rate. Determine the most tax-effective structure for holding and realizing gains from investments.

  • Succession Planning: Time the potential sale of your professional corporation to capitalize on the current LCGE.


Retirees:

  • Estate Planning: Update estate plans considering the impending increase in capital gains rates.

  • Life Insurance Coverage: Ensure life insurance is adequate to cover increased capital gains tax liabilities upon death.

  • Non-Registered Investments and Retirement Income: Review your strategy for non-registered investments to manage taxes on gains and adjust your retirement income plans to accommodate the upcoming changes in capital gains rates.


Individuals with High Income or Net Worth: 

  • Investments: Evaluate portfolios to identify where capital gains can be realized under the current lower inclusion rate. Review trust-held investments. 

  • Investment Property: Consider advancing the sale of such properties to benefit from the existing capital gains rate.

  • Estate Planning: Revise plans to address potential increases in capital gains taxes, ensuring estates are structured for tax efficiency.

  • Charitable Contributions: Align your charitable giving strategies with the new tax benefits and AMT considerations.

Please reach out to us to review your financial strategy together and ensure it aligns with the upcoming changes. 

2024 Federal Budget Highlights

On April 16, 2024, Canada’s Deputy Prime Minister and Finance Minister, Chrystia Freeland, presented the federal budget.

While there are no changes to federal personal or corporate tax rates, the budget introduces:

  • An increase in the portion of capital gains subject to tax, rising from 50% to 66.67%, starting June 25, 2024. However, individual gains up to $250,000 annually will retain the 50% rate.

  • The lifetime exemption limit for capital gains has been raised to $1.25 million. Additionally, a new one-third inclusion rate is set for up to $2 million in capital gains for entrepreneurs.

  • The budget confirms the alternative minimum tax changes planned for January 1, 2024 but lessens their impact on charitable contributions.

  • This year’s budget emphasizes making housing more affordable. It provides incentives for building rental properties specifically designed for long-term tenants.

  • Introduces new support measures to aid people buying their first homes.

  • Costs for specific patents and tech equipment and software can now be written off immediately.

  • Canada carbon rebate for small business.

Capital Gains Inclusion Rate

The budget suggests raising the inclusion rate on capital gains after June 24, 2024:

  • Corporations and trusts, from 50% to 66.67%.

  • Individuals, on capital gains over $250,000 annually, also from 50% to 66.67%.

For individuals, the $250,000 annual threshold that applies to net capital gains—the amount remaining after offsetting any capital losses. This includes gains acquired directly by an individual or indirectly through entities such as partnerships or trusts. Essentially, this threshold acts as a deductible, considering various factors to determine the net gains eligible for the increased capital gains tax rate.

Individuals in the highest income bracket, who earn above the top marginal tax rate threshold, will face a higher tax rate on capital gains exceeding $250,000 due to these changes. Furthermore, the budget modifies the tax deduction for employee stock options to align with the updated capital gains taxation rates yet maintains the initial 50% deduction for the first $250,000 in gains. Regarding previously incurred financial losses, the budget plans to adjust the value of these net capital losses from past years so that they are consistent with the current gains, upholding the uniformity with the new inclusion rate.

The budget outlines transitional rules for the upcoming tax year that straddles the implementation date of the new capital gains rates. If the tax year begins before June 25, 2024, but ends afterward, capital gains realized before June 25 will be taxed at the existing rate of 50%. However, gains accrued after June 24, 2024, will be subject to the increased rate of 66.67%. It’s important to note that the new $250,000 threshold for higher tax rates will only apply to gains made after June 24.

Consequently, for individuals earning capital gains beyond the $250,000 threshold and who fall into the highest income tax bracket, new rates will be effective as outlined in the table below. Specifically, this pertains to individuals with taxable incomes exceeding $355,845 in Alberta, $252,752 in British Columbia, $1,103,478 in Newfoundland and Labrador, $500,000 in the Yukon, and $246,752 in all other regions.

Further details and guidance on these new rules are expected to be provided in future announcements.

Lifetime Capital Gains Exemption

The budget proposes raising the Lifetime Capital Gains Exemption (LCGE) for qualified capital gains from $1,016,836 to $1.25 million, effective for sales made after June 24, 2024. Additionally, the exemption will once again be adjusted for inflation starting in 2026. This change aims to increase the tax benefits for individuals selling certain types of property, such as small business shares or farming and fishing assets.

Canadian Entrepreneurs’ Incentive

The Canadian Entrepreneurs’ Incentive is a new tax measure which provides a reduced inclusion rate on capital gains from the disposition of qualifying small business shares.

Qualifications for the incentive include:

  • Shares must be of a small business corporation directly owned by an individual.

  • For 24 months before selling, over half the corporation’s assets must be actively used in a Canadian business or be certain connected assets.

  • The seller needs to be a founding investor who held the shares for at least five years.

  • The seller must have been actively involved in the business continuously for five years.

  • The seller must have owned a significant voting share throughout the subscription period.

  • The incentive does not apply to shares linked to professional services, financial, real estate, hospitality, arts, entertainment, or personal care services sectors.

  • The shares must have been acquired at their fair market value.

  • The incentive allows for a reduced inclusion rate of 1/3 for up to $2 million in capital gains during an individual’s lifetime, with this limit being phased in over 10 years.

This measure will apply to dispositions after December 31, 2024.

Alternative Minimum Tax (AMT)

The 2023 budget included updates to the AMT, with proposed changes outlined in the summer of 2023. The budget suggests revising the charitable donation tax credit for AMT calculations, increasing the claimable amount from 50% to 80%.

Further proposed changes to the AMT include:

  • Permitting deductions for the Guaranteed Income Supplement, social assistance, and workers’ compensation benefits.

  • Exempting employee ownership trusts (EOTs) entirely from AMT.

  • Allowing certain tax credits, like federal political contributions, investment tax credits (ITCs), and labour-sponsored funds tax credit, to be carried forward if disallowed under the AMT.

These changes would take effect for tax years beginning after December 31, 2023. Additionally, the budget proposes technical amendments that would exempt specific trusts benefiting Indigenous groups from the AMT.

Employee Ownership Trust (EOT) Tax Exemption

The budget proposes a tax exemption on up to $10 million in capital gains for individuals selling their businesses to an EOT if certain criteria are met:

  • Sale of shares must be from a non-professional corporation.

  • The seller, or their spouse or common-law partner, must have been actively involved in the business for at least two years prior to the sale.

  • The business shares must have been solely owned by the seller or a related person or partnership for two years before the sale, and mainly used in active business.

  • At least 90% of the EOT’s beneficiaries must be Canadian residents after the sale.

  • If multiple sellers are involved, they must jointly decide how to divide the $10 million exemption

  • If the EOT doesn’t maintain its status or if the business assets used in active business drop below 50% at any point within 36 months after the sale, the tax exemption may be revoked.

  • For Alternative Minimum Tax purposes, the exempted gains will face a 30% inclusion rate.

  • The normal reassessment period for the exemption is extended by three years.

  • The measure now also covers the sale of shares to a worker cooperative corporation.

This exemption is valid for sales occurring from January 1, 2024, to December 31, 2026.

Home Buyers Plan (HBP)

The budget proposes enhancements to the HBP for 2024 and beyond, effective for withdrawals after April 16, 2024. These include:

  • Raising the RRSP withdrawal limit from $35,000 to $60,000 to support first-time homebuyers and purchases for those with disabilities.

  • Extending the grace period before repayment starts from two to five years for withdrawals made between January 1, 2022, and December 31, 2025, deferring the start of the repayment period and thereby providing new homeowners additional time before they need to commence repayments

Interest Deductions and Purpose-Built Rental Housing

The budget proposes a selective exemption from the Excessive Interest and Financing Expenses Limitation (EIFEL) rules for certain interest and financing expenses related to arm’s length financing. This exemption is for the construction or purchase of eligible purpose-built rental housing in Canada and applies to expenses incurred before January 1, 2036. To qualify, the housing must be a residential complex with either at least four private apartment units, each with its own kitchen, bathroom, and living areas, or 10 private rooms or suites. Additionally, at least 90% of the units must be designated for long-term rental. This exemption will be effective for tax years starting on or after October 1, 2023, in line with the broader EIFEL regulations.

Accelerated Capital Cost Allowance (CCA) – Purpose built rental housing

The budget introduces an accelerated CCA of 10% for new rental projects that start construction between April 16, 2024, and December 31, 2030, and are completed by December 31, 2035. This accelerated depreciation applies to projects that convert commercial properties into residential complexes or expand existing residential buildings that meet specific criteria under the EIFEL rules. However, it does not cover renovations to existing residential complexes.

Additionally, these investments will benefit from the Accelerated Investment Incentive, which allows for immediate depreciation deductions for properties put into use before 2028. Starting in 2028, the regular depreciation rules, including the half-year rule, will apply.

Accelerated Capital Cost Allowance (CCA)- Productivity-enhancing assets

The budget introduces immediate expensing for newly acquired properties that become operational between April 16, 2024, and December 31, 2026. This applies to specific categories such as:

  • Class 44- Patents and rights to patented information

  • Class 46- Data network infrastructure and related software

  • Class 50- General electronic data-processing equipment and software

Properties that are put into use between 2027 and 2028 will continue to benefit from the Accelerated Investment Incentive.

To qualify for this accelerated depreciation, the property must not have been previously owned by the taxpayer or someone closely connected to them, and it must not have been received as part of a tax-deferred deal. Also, if a tax year is shorter, the depreciation will be adjusted accordingly and will not carry over to the next year.

Canada Carbon Rebate for Small Businesses

The budget introduces a Canada Carbon Rebate for small businesses, offering a new refundable tax credit automatically. To be eligible, a Canadian-controlled private corporation must:

  • File a tax return for its 2023 tax year by July 15, 2024, for the fuel charge years from 2019-20 to 2023-24. For subsequent fuel charge years, it must file a tax return for the tax year that ends within that fuel charge year.

  • Employ 499 or fewer people across Canada during the year that corresponds with the fuel charge year.

The amount of the tax credit for each eligible business will depend on:

  • The province where the company had employees during the fuel charge year.

  • The number of employees in that province multiplied by a rate set by the Minister of Finance for that year.

  • The CRA will automatically calculate and issue the tax credit to qualifying businesses.

We can help!

Wondering how this year’s budget will impact your finances or your business? We can help – give us a call today!

2024 Financial Calendar

2024 Financial Calendar

Welcome to our 2024 financial calendar! This calendar is designed to help you keep track of important financial dates and deadlines, such as tax filing and government benefit distribution. You can bookmark this page for easy reference or add these dates to your personal calendar to ensure you don’t miss any important financial obligations.

If you need help with your taxes, tax packages will be available starting February 2024. Don’t wait until the last minute to get started on your tax return – make an appointment with your accountant to ensure you’re ready to go when tax season arrives.

Important 2024 Dates to Know

On January 1, 2024 the contribution room for your Tax Free Savings Account opens again. The maximum contribution for 2024 is $7,000.

If you qualify, on January 1, 2024 the contribution room for your First Home Savings Account opens. The maximum contribution for 2024 is $8,000. 

For your Registered Retirement Savings Plan contributions to be eligible for the 2023 tax year, you must make them by February 29, 2024.

GST/HST credit payments will be issued on:  

  • January 5

  • April 5

  • July 5

  • October 4

Canada Child Benefit payments will be issued on the following dates: 

  • January 19

  • February 20

  • March 20

  • April 19

  • May 17

  • June 20

  • July 19

  • August 20

  • September 20

  • October 18

  • November 20

  • December 13

The government will issue Canada Pension Plan and Old Age Security payments on the following dates: 

  • January 29

  • February 27

  • March 26

  • April 26

  • May 29

  • June 26

  • July 29

  • August 28

  • September 25

  • October 29

  • November 27

  • December 20

The Bank of Canada will make interest rate announcements on:

  • January 24

  • March 6

  • April 10

  • June 5

  • July 24

  • September 4

  • October 23

  • December 11

April 30, 2024 is the last day to file your personal income taxes, and tax payments are due by this date. This is also the filing deadline for final returns if death occurred between January 1 and October 31, 2023.

May 1 to June 30, 2024 would be the filing deadline for final tax returns if death occurred between November 1 and December 31, 2023. The due date for the final return is six months after the date of death.

The tax deadline for all self-employment returns is June 17, 2024. Payments are due April 30, 2024. 

The final Tax-Free Savings Account, First Home Savings Account, Registered Education Savings Plan and Registered Disability Savings Plan contributions deadline is December 31.

December 31 is also the deadline for 2024 charitable contributions.

December 31 is also the deadline for individuals who turned 71 in 2024 to finish contributing to their RRSPs and convert them into RRIFs.

Please reach out if you have any questions. 

2023 Year-End Tax Tips and Strategies for Business Owners

2023 Year-End Tax Tips and Strategies for Business Owners

Now that we’re approaching the end of the year, it’s time to review your business finances. We’ve highlighted the most critical tax-planning tips you need to know as a business owner.

Salary/Dividend Mix

As a business owner, an essential part of tax planning is determining if you receive salary or dividends from the business.

When you’re paid a salary, the corporation can claim an income tax deduction, which reduces its taxable income. You include this pay in your personal taxable income. You’ll also create Registered Retirement Savings Plan (RRSP) contribution room.

As a general guideline, if you find yourself needing to take money out of your corporation, like for personal expenses, it’s a good idea to consider withdrawing a salary to create room for contributing to your Registered Retirement Savings Plan (RRSP). By receiving a salary of up to $175,333 in 2023, you can potentially generate RRSP contribution room for the following year, amounting to a maximum of $31,560 (the 2024 limit).

If you don’t have an immediate need to withdraw funds from your corporation, you might still want to take out enough money to maximize your contributions to RRSPs and Tax-Free Savings Accounts (TFSAs). These plans can offer an effective way to earn a return on your investments without incurring taxes.

Lastly, it’s worth considering the option of leaving any surplus funds in your corporation to take advantage of substantial tax deferral benefits. This strategy may potentially result in more substantial investment income over the long term compared to personal investing.

The alternative is the corporation can distribute a dividend to you. The corporation must pay tax on its corporate income and can’t claim the dividend distributed as a deduction. However, because of the dividend tax credit, the dividend typically pays a lower tax rate (than for salary) on eligible and non-eligible dividends.

In addition to paying yourself, you can consider paying family members. These are the main options you can consider when determining how to distribute money from your business:

  • Pay a salary to family members who work for your business and are in a lower tax bracket. This enables them to declare an income so that they can contribute to the CPP and an RRSP. You must be able to prove the family members have provided services in line with the amount of compensation you give them.

  • Pay dividends to family members who are shareholders in your company. The amount of dividends someone can receive without paying income tax on them will vary depending on the province or territory they live in.

  • Distribute money from your business via income sprinkling, which is shifting income from a high-tax rate individual to a low-rate tax individual. However, this strategy can cause issues due to tax on split income (TOSI) rules. A tax professional can help you determine the best way to “income sprinkle” so none of your family members are subject to TOSI.

  • Keep money in the corporation if neither you nor your family members need cash. Taxes can be deferred if your corporation retains income and the corporation’s tax rate is lower than your tax rate.

No matter what strategy you take to distribute money from your business, keep in mind the following:

  • Your marginal tax rate as the owner-manager.

  • The corporation’s tax rate.

  • Health and payroll taxes

  • How much RRSP contribution room do you have?

  • What you’ll have to pay in CPP contributions.

  • Other deductions and credits you’ll be eligible for (e.g., charitable donations or childcare or medical expenses).

Compensation

Another important part of year-end tax planning is determining appropriate ways to handle compensation. Compensation is financial benefits that go beyond a base salary.

These are the main things to consider when determining how you want to handle compensation:

  • Can you benefit from a shareholder loan? A shareholder loan is an agreement to borrow funds from your corporation for a specific purpose and offers deductible interest.

  • Do you need to repay a shareholder loan to avoid paying personal income tax on your borrowed amount?

  • Is setting up an employee profit-sharing plan a better way to disburse business profits than simply paying a bonus?

  • Keep in mind that when an employee cashes out a stock option, only one party (the employee OR the employer) can claim a tax deduction on the cashed-out stock option.

  • Consider setting up a retirement compensation arrangement (RCA) to help fund your or your employee’s retirement.

Passive Investments

One of the most common tax advantages available to Canadian-controlled private corporations (CCPC) is the first $500,000 of active business income in a CCPC qualifies for the small business deduction (SBD), which reduces the corporate tax rate by 12% to 21%, depending on the province or territory.

With the SBD, you can reduce your corporate tax rate, but remember that the SBD will be reduced by five dollars for every dollar of passive investment income over $50,000 your CCPC earned the previous year.

The best way to avoid losing any SBD is to ensure that the passive investment income within your associated corporation group does not exceed $50,000.

These are some of the ways you can make sure you preserve your access to the SBD:

  1. Defer the sale of portfolio investments as necessary.

  2. Adjust your investment mix to be more tax efficient. For example, you could hold more equity investments than fixed-income investments. As a result, only 50% of the gains realized on shares sold is taxable, but investment income earned on bonds is fully taxable.

  3. Invest excess funds in an exempt life insurance policy. Any investment income earned on an exempt life insurance policy is not included in your passive investment income total.

  4. Set up an individual pension plan (IPP). An IPP is like a defined benefit pension plan and is not subject to the passive investment income rules.

Depreciable Assets

Consider speeding up the purchase of depreciable assets for year-end tax planning. A depreciable asset is a capital property on which you can claim Capital Cost Allowance (CCA).

Here’s how to make the most of tax planning with depreciable assets:

  • Make use of the Accelerated Investment Incentive. This incentive makes some depreciable assets eligible for an enhanced first-year allowance.

  • Consider postponing the sale of a depreciable asset if it will result in recaptured depreciation for your 2023 taxation year.

Qualified Small Business Corporation (QSBC) Share Status

Ensure your corporate shares are eligible to get you the $971,190 (for 2023) lifetime capital gains exemption (LCGE). The LCGE is $1,000,0000 for dispositions of qualified farm or fishing property.

Suppose you sell QSBC shares scheduled to close in late December 2023 to January 2024. In that case, you may want to consider deferring the sale to access a higher LCGE for 2024 and therefore defer the tax payable on any gain arising from the sale.

Consider taking advantage of the LCGE and restructuring your business to multiply access to the exemption with other family members. But, again, you should discuss this with us, your accountant and legal counsel to see how this can benefit you.

Business Transition

When considering the transfer of your business, family farm, or fishing corporation to your children or grandchildren, it is advisable to engage in a discussion with your advisor. This conversation should encompass an examination of recent and upcoming proposed changes to the Income Tax Act. These changes include the introduction of additional requirements that must be fulfilled for transfers taking place after 2023. The purpose of this discussion is to assess how these amendments may affect the tax implications associated with the sale of your assets.

Donations

Another essential part of tax planning is to make all your donations before year-end. This applies to both charitable donations and political contributions.

For charitable donations, you need to consider the best way to make your donations and the different tax advantages of each type of donation. For example, you can:

  • Donate Securities

  • Give a direct cash gift to a registered charity

  • Use a donor-advised fund account at a public foundation. A donor-advised fund is like a charitable investment account.

  • Set up a private foundation to solely represent your interests.

  • We can help walk you through the tax implications of these types of charitable donations.

  • Get year-end tax planning help from someone you can trust!

We’re here to help you with your year-end tax planning. So book a meeting with us today to learn how you can benefit from these tax tips and strategies.

Understanding Target Loss Ratio and Your Group Benefits Plan

Group benefits can be intricate both in their establishment and administration. There are numerous details and considerations to be aware of when purchasing a group benefits plan, one of which is the target loss ratio (TLR).

Key Questions Addressed:

  • What is a target loss ratio?

  • How does my TLR influence my premiums upon policy renewal?

  • What steps should I take if I have concerns regarding my TLR?

Understanding Target Loss Ratio (TLR):
Here are the primary aspects you should understand about the target loss ratio (TLR):

  • It represents the expected profit point of your employee benefit plan’s comprehensive health and dental benefits.

  • TLR is the maximum dollar amount of claims paid by the insurance company, expressed as a percentage of your premium. For instance, if an insurance company pays $40 in claims for every $80 collected in premiums, the loss ratio stands at 50%.

  • The TLR is primarily determined by two factors: the number of members participating in the employee benefit plan and the annual premium paid.

  • The loss ratios can vary based on the type of insurance. For instance, the loss ratio for property insurance is typically lower than that for health insurance.

Does my TLR Affect My Premiums Upon Renewal?
Generally, your TLR won’t have a significant influence on your premiums when renewing. However, a notable increase or decrease in the number of staff members participating in your group benefits plan might cause some impact.

Other factors influencing your renewal premiums include:

  • A substantial amount of health and dental claims made.

  • Changes in the general demographics of your employees, such as aging.

  • An increase in the cost of services covered by your group benefits plan.

  • General inflation.

Addressing Concerns About TLR:
As someone overseeing a group benefits plan, your objective is to ensure optimal value for your premium expenditure.

If you’ve been collaborating with the same insurance provider for an extended period, it’s beneficial to explore other available options. Comparing offerings can help ascertain if the rate and TLR you’re being offered align with current market standards.

It’s essential to consider how varying TLRs might influence the long-term viability of your group benefits plan. If you’re keen on gaining deeper insights, consider reaching out to industry experts or consultants for guidance.

Protecting Key Talent using Group Benefits

Building a Sustainable Future Together

As specialists in group benefits, the primary goal is to cultivate a sustainable future by collaborating closely with clients. The belief is that an informed and engaged workforce is pivotal for the success of any organization. A key component of this vision is the protection of the organization’s essential talent. This article delves into how group benefits can be instrumental in safeguarding an organization’s most treasured resource: its people.

The Importance of Essential Talent

Essential talent encompasses those employees who bring critical skills, expertise, and knowledge that propel an organization’s growth and success. These individuals form the core of any organization, ensuring its prosperity in the competitive market. Retaining such invaluable members is crucial as their absence can significantly affect business operations, productivity, and overall morale.

Challenges in Retaining Essential Talent

In the ever-evolving job market, holding onto essential talent can be a daunting task. Numerous factors, including enticing offers from rivals, opportunities for personal growth, work-life equilibrium, and employee well-being, can influence retention. For employers, recognizing and addressing these challenges is vital to safeguard top performers and sustain a competitive advantage.

The Significance of Group Benefits

Group benefits serve as a potent strategy in attracting and retaining essential talent. By presenting comprehensive and tailored benefits packages, organizations showcase their dedication to the well-being, security, and future of their employees. Here are some pivotal aspects of group benefits that aid in retaining essential talent:

  1. Health and Wellness Coverage: Offering comprehensive health and wellness benefits, such as medical, dental, and vision plans, not only fosters a healthy workforce but also signifies an organization’s commitment to overall employee well-being. Employees who feel this support are more inclined to stay loyal.

  2. Income Protection: Many group benefits packages encompass disability insurance, offering financial security for employees facing injuries or illnesses that hinder their work. Such provisions alleviate financial concerns during tough times, fostering a sense of stability and encouraging talent to remain with the organization.

  3. Retirement Planning: A meticulously crafted retirement plan appeals to essential talent. It signifies an organization’s concern for their future and dedication to ensuring their financial comfort during retirement. Contributing to such plans also strengthens the bond between employers and employees.

  4. Support for Work-Life Balance: Benefits that champion work-life balance, like flexible work schedules, paid leaves, and family leaves, reflect an organization’s understanding of the significance of a balanced life. Employees who sense this flexibility are more likely to remain devoted.

  5. Career Advancement: Benefits can also encompass professional development and training opportunities. Investing in employee growth not only sharpens their skills but also underlines an organization’s commitment to their long-term achievements.

Educational Approach and Teamwork

The role of group benefits specialists is to offer educational support and foster collaboration with clients. Through open dialogues about an organization’s aspirations and needs, it’s possible to design group benefits packages that resonate with specific demands. The collective goal is to nurture and protect essential talent, ensuring a sustainable future.

Protecting essential talent through group benefits is more than a strategic move; it embodies a dedication to employee welfare. By investing in the well-being, security, and future of employees, organizations not only boost loyalty and retention but also lay the foundation for a robust and sustainable future. The journey ahead is one of partnership, aiming for a flourishing and vibrant workforce.

Salary vs Dividend

As a business owner, you have the ability to pay yourself a salary or dividend or a combination of both. In this article and infographic, we will examine the difference between salary and dividends and review the advantages and disadvantages of each.

When deciding to pay yourself as a business owner, please review these factors:

  • How much do you need?

  • How much tax?

  • Other considerations including retirement and employment insurance.

How much do you need?

Determine your cash flow on a personal and corporate level.

  • What’s your personal after-tax cash flow need?

  • What’s your corporate cash flow need?

How much tax?

Figure out how much you will pay in tax. Business owners understand that tax is a sizeable expense.

  • What’s your personal income tax rate?

Depending on the province you reside in and your income, make sure you also include income from other sources to determine your tax rate. (Example: old age security, pension, rental, investment income etc.)

If you decide to pay out in dividends, check if you will be paying out eligible or ineligible dividends. The taxation of eligible dividends is more favorable than ineligible dividends from an individual income tax standpoint.

  • What’s your corporation’s income tax rate?

For taxation year 2020, the small business federal tax rate is 9% . Please also remember, if you pay out salary, salary is considered a tax-deductible expense, therefore this will lower the corporation’s taxable income versus paying out dividends will not lower the corporation’s taxable income.

Other considerations

If you pay yourself a salary, these options are available.

  • Do you need RRSP contribution room?

As part of this, it’s worth considering ensuring that you receive a salary high enough to take full advantage of the maximum RRSP annual contribution that you can make.

  • Are you interested in contributing to the Canada Pension Plan?

This is unique to your circumstances and a cost-benefit analysis to determine the amount of contributions makes sense.

  • Do you need employment insurance (EI)?

For shareholders owning more than 40% of voting shares, EI is optional. There are situations worth careful thought such as maternity benefit, parental benefit, sickness benefit, compassionate care benefit, family caregiver benefit for children or family caregiver benefit for adults.

The infographic below summarizes the difference between Salary vs. Dividend.

We would also advise that you get in touch with your accountant to help you determine the best mix for your unique situation.

Federal Budget 2023 Highlights

On March 28, 2023, the Federal Government released their 2032 budget. This article highlights the following financial measures:

  • New transfer options associated with Bill C-208 for intergenerational transfer.

  • New rules for employee ownership trusts.

  • Changes to how the Alternative Minimum Tax is calculated.

  • Improvements to Registered Education Savings Plans.

  • Expanding access to Registered Disability Savings Plans.

  • Grocery rebate.

  • Deduction for tradespeople tool expenses.

  • Automatic tax filing.

  • New Canadian Dental Care Plan.

Amendments To Bill C-208 Intergenerational Transfer Introduces Two New Transfer Options

Budget 2023 introduces two transfer options associated with the intergenerational transfer of a business:

  1. An immediate intergenerational business transfer (three-year test) based on arm’s length sales terms.

  2. A gradual intergenerational business transfer (five-to-ten-year test) based on estate freeze characteristics.

For the three-year test, the parent must transfer both legal and factual control of the business, including an immediate transfer of a majority of voting shares and the balance, within 36 months. The parent must also transfer a majority of the common growth shares within the same time frame. Additionally, the parent must transfer management of the business to their child within a reasonable time, with a 36-month safe harbour. The child or children must retain legal control for 36 months following the share transfer, and at least one child must remain actively involved in the business during this period.

For the gradual transfer option, the conditions are similar to the immediate transfer, but with a few differences. The parent must transfer legal control, including an immediate transfer of a majority of voting shares and the balance, within 36 months. They must also transfer a majority of the common growth shares and the balance of common growth shares within the same time frame. As well, within 10 years of the initial sale, parents must reduce the economic value of their debt and equity interests in the business to 50% of the value of their interest in a farm or fishing corporation at the initial sale time, or 30% of the value of their interest in a small business corporation at the initial sale time. The child or children must retain legal control for the greater of 60 months or until the business transfer is completed, and at least one child must remain actively involved in the business during this period.

The extended intergenerational transfer now applies to children, grandchildren, stepchildren, children-in-law, nieces and nephews and grandnieces and grandnephews.

The changes apply to transactions that occur on or after January 1, 2024. If the election is made, the capital gain reserve period is extended to ten years, and the limitation period for assessing a return is extended to three years for an immediate transfer and ten years for a gradual business transfer.

New Rules for Employee Ownership Trusts

The employees of a business can use an employee ownership trust (EOT) to purchase the business without having to pay the owner directly to acquire shares. Business owners can use an EOT as part of their succession planning.

Budget 2023 introduces new rules for using ownership trusts (EOTs) as follows:

  • Extending the five-year capital gains reserve to ten years for qualifying business transfers to an EOT.

  • A new exception to the current shareholder loan rule which extends the repayment period from one to fifteen years for amounts loaned to the EOT from a qualifying business to purchase shares in a qualifying business transfer.

  • Exempts EOTs from the 21-year deemed disposition rule that applies to some trusts. This means that shares can be held indefinitely for the benefit of employees.

Clean Energy Credits

The upcoming Budget 2023 is set to introduce a series of measures aimed at encouraging the adoption of clean energy. These measures include several business tax incentives such as:

  1. Clean Electricity Investment Tax Credit: This is a refundable tax credit of 15% for investments in equipment and activities for generating electricity and transmitting it between provinces. The credit will be available to new and refurbished projects starting from March 28, 2023, and will end in 2034.

  2. Clean Technology Manufacturing Credit: This tax credit is worth 30% of the cost of investments in new machinery and equipment for processing or manufacturing clean technologies and critical minerals. It applies to property acquired and put into use after January 1, 2024. The credit will be phased out starting in 2032 and fully eliminated in 2034.

  3. Clean Hydrogen Investment Tax Credit: It offers a refundable tax credit ranging from 15% to 40% of eligible project expenses that produce clean hydrogen, as well as a 15% tax credit for certain equipment.

  4. Clean Technology Investment Tax Credit: This tax credit will be expanded to include geothermal systems that qualify for capital cost allowance under Classes 43.1 and 43.2. The phase-out will begin in 2034, and it will not be available after that date.

  5. Carbon Capture, Utilization and Storage Investment Tax Credit (CCUS): The budget broadens and adjusts specific criteria for the refundable Investment Tax Credit (ITC) for CCUS. Qualified equipment now includes dual-purpose machinery that generates heat and/or power or utilizes water for CCUS and an additional process, as long as it meets all other requirements for the credit. The expense of such equipment is eligible on a proportionate basis, based on the anticipated energy or material balance supporting the CCUS process during the project’s initial 20 years.

  6. Reduced rates for zero-emission technology manufacturers: The reduced tax rates of 4.5% and 7.5% for zero-emission technology manufacturers will be extended for three years until 2034, with phase-out starting in 2032. The eligibility will expand to include the manufacturing of nuclear energy equipment and processing and recycling of nuclear fuels and heavy water for taxation years starting after 2023.

  7. Lithium from brines: Allow producers of lithium from brines to issue flow-through shares and expand the Critical Mineral Exploration Tax Credit’s eligibility to include lithium from brines.

Changes To How Alternative Minimum Tax Is Calculated

Budget 2023 proposed several changes to calculating the Alternative Minimum Tax (AMT), including the following:

  • The capital gains inclusion rate will increase from 80 percent to 100 percent, while capital losses and allowable business investment losses will apply at a rate of 50 percent.

  • The inclusion rate for employee stock option benefits will be altered to 100 percent, and for capital gains resulting from the donation of publicly listed securities, it will be modified to 30 percent.

  • The 30 percent inclusion rate will also apply to employee stock option benefits if any deduction is available because underlying shares are also publicly listed securities that were donated.

  • Certain deductions and expenses will now be limited to 50 percent, and only 50 percent of non-refundable credits (excluding a special foreign tax credit) will be permitted to reduce the AMT.

  • The AMT tax rate will increase from 15 percent to 20.5 percent.

  • The AMT exemption will rise from the present allowable deduction of $40,000 for individuals to an amount indexed to the fourth tax bracket, expected to be $173,000 in 2024.

  • The AMT carryforward period will remain unaltered at seven years.

Improving Registered Education Savings Plans (RESPs)

Budget 2023 introduces the following changes to RESPs:

  • As of March 28, 2023, beneficiaries may withdraw Educational Assistance Payments (EAPs) up to $8,000 (from $5,000) for full-time programs and $4,000 (from $2,500) for part-time programs.

  • Individuals who withdrew EAPs before March 28, 2023, may be able to withdraw an additional EAP amount, subject to the new limits and the plan terms.

  • Divorced or separated parents can now open joint RESPs for one or more of their children.

Expanding Access to Registered Disability Savings Plans

Qualifying family members, such as a parent, a spouse, or a common-law partner, can open an RDSP and be the plan holder for an adult with mental disabilities whose ability to enter into an RDSP contract is in doubt and who does not have a legal representative.

Budget 2023 announces the government’s intention to extend the provision that allows this until December 31, 2026. To further increase access to RDSPs, the government also intends to expand the provision to include adult siblings of an RDSP beneficiary.

Grocery Rebate

The Budget 2023 will implement the Grocery Rebate, which will be a one-time payment managed through the Goods and Services Tax Credit (GSTC) system. The maximum amount that can be claimed under the Grocery Rebate is:

  • $153 for each adult

  • $81 for each child

  • $81 for a single supplement.

The implementation of the Grocery Rebate will be gradual and will follow the same income thresholds as the present GSTC regulations.

Deduction for Tradespeople’s Tool Expenses

Budget 2023 increases the employment deduction for tradespeople’s tools to $1,000 from $500. This is effective for 2023 and subsequent taxation years.

Automatic Tax Filing

The Canada Revenue Agency (CRA) will pilot a new automatic filing service for Canadians who currently do not file their taxes to help them receive certain benefits to which they are entitled.

The CRA also plans to expand taxpayer eligibility for the File My Return service, which allows taxpayers to file their tax returns by telephone.

Canadian Dental Care Plan

In Budget 2023, the federal government is investing in dental care for Canadians with the new Canadian Dental Care Plan. The plan will provide dental coverage for uninsured Canadians with annual family incomes of less than $90,000, with no co-pays for those under $70,000.

The budget allows the CRA to share taxpayer information for the Canadian Dental Care Plan with an official of Employment and Social Development Canada or Health Canada solely to administer or enforce the plan.

Wondering How This May Impact You?

If you have any questions or concerns about how the new federal budget may impact you, call us – we’d be happy to help you!