Unfortunately for entrepreneurs, the 2013 federal budget continued the trend of recent budgets—shutting down perceived tax advantages for private business owners, while offering little if any new opportunities.
The latest planning tools that the Department of Finance has targeted relate to products offered by the life insurance industry, principally to private business owners and high net worth individuals.
Any individuals who have invested in a leveraged insurance solution commonly referred to as a 10/8 policy or more recently a 9/7 policy should consult with their insurance and tax advisors about the impact of the budget on their insurance planning.
Also, anyone who has invested in an insured life annuity arrangement involving borrowings should seek professional advice on the implications of the budget.
Finally, as bad news usually comes in threes, the budget also proposes to raise the federal tax rate on ineligible dividends by almost 2% commencing in 2014. The increase is even higher after taking into account provincial and territorial taxes.
On the plus side, the budget didn't raise any other taxes and increased the lifetime capital gains exemption from $750,000 to $800,000 starting 2014, with indexation of the amount after 2014.
For more information, contact:
Canadian Private Company Services Tax Leader