The whiff of nutmeg, sprinkled atop a freshly-brewed eggnog latte, can only mean one thing — year-end tax planning season is upon us, once again.

While it’s true that the list of year-end tax planning tips doesn’t vary much from year to year, for 2017, there a few unique planning opportunities that are worth considering to save you some tax when you file your return next spring.


It may seem odd to talk about tax loss selling in a year in which many investors’ non-registered portfolios are generally up, but you may still be holding on to that “sure thing” penny-stock your great uncle tipped you off about a few years back that’s just about to rebound. If your patience is running out, now may be a good time to consider dumping that stock, doing some tax-loss selling to offset some of the gains you may have realized when you sold off some winners in 2017.

Tax-loss selling involves selling investments with accrued losses, typically at year end, to offset capital gains realized elsewhere in your portfolio. Any net capital losses that cannot be used currently may either be carried back three years or carried forward indefinitely to offset net capital gains in other years.

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Canada’s capital gains tax should be reduced or abolished as a number of countries have done, according to an economic note published this week by the Montreal Economic Institute, an independent, non-partisan, not-for-profit research and educational organization.

“Capital formation is one of the foundations of economic growth. Yet investment in Canada has fallen 18 per cent since 2014. Now that the oil industry boom is behind us, it’s obvious that Canada has a chronic problem. The capital gains tax reduces the availability of capital, and makes it more expensive for companies. Who ends up paying the price? Workers in particular, through fewer jobs and lower wages,” explains Mathieu Bédard, economist at the MEI and author of the publication.

Prior to 1972, Canada didn’t tax capital gains at all. The Carter Commission Report recommended 100 per cent taxation of capital gains. But the law, as originally introduced, ultimately decided to tax only 50 per cent of gains. Subsequent governments increased the inclusion rate to 66 2/3 per cent in 1988, then increased it again to 75 per cent in 1990. A decade later, it was dropped back down again to 66 2/3 per cent on Feb. 28, 2000 and then further reduced on Oct. 18, 2000 to 50 per cent, the inclusion rate that still applies today.

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On Oct. 16, 2017, Finance Minister Bill Morneau announced that the Liberal government intends to lower the small-business tax rate from 10.5 to 10 per cent, effective Jan. 1, 2018, and to nine per cent effective Jan. 1, 2019. Tax cuts are sure to be welcomed by many, as they often are, but it is important to keep in mind that the reduction in the small-business tax rate has implications that go well beyond tax savings for small businesses.

To understand some of the implications of the recent tax cut, it is important to first understand a fundamental concept in Canadian taxation known as “integration.” Integration is achieved when the treatment of income earned by a corporation and distributed to an individual shareholder in the form of a taxable dividend is comparable to the treatment of income earned directly by the individual. To achieve integration, corporations pay tax on the income they earn, and when a dividend is paid, the shareholder is required to include the dividend in the computation of his/her income plus a grossed-up amount. The shareholder is then entitled to a claim a credit (known as the “dividend tax credit”) to offset the corporate tax payable by the corporation and avoid double taxation.

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 Back in January, if someone had asked me what the dominant political headline would be for much of 2017, I don’t think I would have responded with “A series of complicated tax changes affecting Canada’s small businesses.”

But for the past four months, the July package of federal tax reforms was a leading story in the news almost every day. Hundreds of articles, editorials, online petitions, rallies and public meetings kept this issue alive. My 400 staff at the Canadian Federation of Independent Business lived and breathed the file for months. More than 75 major business associations came together and formed one of the biggest coalitions of businesses the country has seen.

What were the results?

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For many small business owners, it’s difficult enough keeping customers happy without thinking about the stuffy world of finance. But money management isn’t something you can afford to ignore. Doing so can easily send the company off the rails. According to Industry Canada, 3,116 businesses turned off the lights in 2014 because of insolvency.

Here are five common mistakes small businesses can make, which can lead to disaster further down the track.

Ignoring your numbers

Unless you are an accountant, your core area of expertise won’t be in managing financial statements. It is tempting to focus on the practical aspects of your business and leave the accounting until later. This is perhaps the worst possible mistake for a small company.

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