Advisor explains how business owners were spared a disaster by government backtrack
The budget was a victory for small businesses in light of the “disastrous” implications of last July’s initial tax proposal, according to one advisor.
David Little, of Little Wealth Management Group, of HollisWealth, said the government clearly listened to unhappy business owners and recognised how bad its original plans had been.
He said by tying passive investment income to the small business tax rate, which they expect to drop to 9%, Finance Minister Bill Morneau has conceded ground on what he had wanted to implement. Passive income above the $150,000 threshold will be subject to the corporate tax rate of 15%.
“Before they were just going to say you can’t do it and we’re going to tax you on it all,” Little said. “So that was a big win for the small business corporations. It certainly would have been better not to do anything but they have definitely backtracked a fairly significant amount from what they were talking about. It’s not a win-win but it certainly is a win for small businesses on certain levels.”
He added: “I can’t even imagine what would have happened to this country if they had done what they had proposed to do last July.”
Little said the original plans would have been a disaster for a large proportion of his clients, who are doctors or dentists and, therefore, own their own businesses. By initially wanting to tax all it, Little said the government proved they just don’t understand many people’s retirement plans, which are based on returns from passive income.
He said: “It’s huge because they all have small businesses and we invest their capital that they don’t need to use. What they were originally getting at was, for example, if a dentist brought in $1 million and spent only $600,000 on running the business in income, they wanted the rest of that taxed so they could access the tax on it. That would have been disastrous. [The government] just doesn’t get it; that’s their retirement.”
The advisor also expressed general disappointment with the overall direction of the budget, which he said failed to address what he believes should be every government’s priority.
He said: “From a global perspective, it’s [Justin] Trudeau trying to socially engineer the country and not doing what people want governments to do, and that’s worry about the economy.
“You’ve got more important things to do than trying to engineer the gender gap and one big one is called Nafta. That’s a big mistake. They don’t seem to be too concerned about the general view point that as a country does good, all genders and all races do well.”