The federal government has unveiled its new proposal to curb "income sprinkling" by some small business owners to family members, with substantive changes to a much-criticized initial proposal unveiled in the summer.
But the government still intends to apply the new rules for the 2018 tax year to reduce the illegitimate use of income sprinkling, a tax-planning measure to shift income to family members in a lower tax bracket as a way to reduce taxes owed.
Morneau will speak to reporters about the changes after question period later today. CBCNews.ca will carry his remarks live.
Finance Canada said Wednesday the new changes will ensure legitimate contributors to a small business will still be eligible to receive income from the business. The government has introduced a number of "bright-line" tests that will be used to weed out those who stand to benefit financially from business operations but have few day-to-day dealings with the company.
A "reasonableness test" was unveiled last July to determine legitimate contributions, but small business owners and business groups were unhappy with the increase in paperwork.
Now, no reasonableness test will be needed for family members:
Those who do not meet these "bright-line" tests — as usual, a tax-filer would self-assess if they meet the qualifications on their tax return — will then face a reasonableness test review by the Canada Revenue Agency.
Visit CBC News for full article.
Sign up now to get advice about tax deductions, growing your income and managing your finances delivered straight to your inbox.