dfk canada inc. and dfk internaonal tax newsletter winter...

Fraudsters came calling to our officethe other day via an attempt to helpthemselves to some money in ourbank account. I want to share thestory of what happened as a reminderof how important it is to regularlycheck your account on-line as well ascomplete monthly bank reconcilia-tions.

So here is what happened:

We paid a supplier’s invoice by mail-ing them a cheque. Somehow, thecheque did not end up in the suppli-er’s hands and they issued a state-ment to us advising that payment wasstill due. Lucky for us, we have anextremely diligent CFO who immedi-ately followed up and found that thecheque had cleared our account butwith an altered payee. The bank wasable to determine that the cheque wasdeposited through a mobile bankingmethod such that the recipient banknever handled the original cheque,thus making it easier to hide the alter-ation.

It gets worse. The thieves then dupli-cated the image of the cheque, alter-ing the payee, amount and even thecheque numbers and they again de-posited the cheques through mobilebanking. Our bank was on alert anddid not honor the cheques but thethieves attempted to process an addi-tional 8 or 9 cheques between $5,000and $10,000 each. In the absence ofthe statement alert from our supplier,this fraud would not have been caught

until after month end when the bankreconciliation was being completed andwhen the thieves may have had more thanone pay day.

From here, the bank closed our accountand opened a new one for us, required usto sign Statutory Declarations that theinitial and subsequent fraudulent chequeswere not our doing, and required us tocomplete all of the ‘normal’ steps withopening a new account, including updatinginformation for all auto-pay amounts andtransfers.

We were lucky as we suffered no financiallosses by catching it early and notifyingthe bank. This is a sharp reminder of theimportance of keeping watch over yourbank account on a regular basis.

A Potential New Attack on Your BankAccountIn This Issue...

A Potential New Attackon Your Bank Account

Fall Economic StatementTax Update

Small Business and theTax Revolt

By Deanna Muise, CPA, CA, TEPPartner, Tax at Kingston Ross Pasnak LLP

Keep watchover your bankaccount on aregular basis.

TAX NEWSLETTER WINTER 2019

An Independent Member firm ofDFK Canada Inc. and DFK Interna onal

Winter 2019 - Tax Newsletter -

Fall Economic Statement - Tax Update

The Fall Economic Statement wasreleased by the Department of Financeon November 21, 2018. Canada’s econo-my continues to remain strong and grow-ing. However, the country has facedseveral years of uncertainty, includingnew tax changes in the United States thatmay impact the Canadian economy. Inresponse to this, along with other factors,the Government has proposed a numberof new tax incentives to support andincrease business investment in Canada.

Under the current tax rules, the cost of acapital asset, such as building, machineryand equipment, is deducted as capitalcost allowance (CCA) over a period oftime that corresponds to the useful life ofthe asset. The new tax incentives willallow Canadian businesses to write off alarger amount of the cost of a newlyacquired asset in the year an investmentis made. By increasing the deductionavailable in the first year, the intention isto accelerate tax savings and allow fundsto be re-invested in the business forgrowth.

The tax incentives discussed below willapply to qualifying assets acquired afterNovember 20, 2018. The accelerated taxdeductions will be gradually phased outbeginning in 2024 and will no longer beavailable for investments put in use after2027.

Manufacturing and Processing Equip-ment

The new rules allow for an immediatewrite off of the cost of machinery andequipment used for the manufacturingand processing of goods in Canada. Thiseffectively increases the CCA rate forClass 53 assets put in use to 100%.

Specified Clean Energy Equipment

The new rules will also allow for an imme-diate write off of the cost of specifiedclean energy equipment. This effectivelyincreases the CCA rate for Classes 43.1and 43.2 assets put in use to 100%.

Accelerated Investment Incentive

This incentive applies to both tangible andintangible capital assets, with the excep-tion of those assets eligible for a full writeoff as discussed above. Under the Accel-erated Investment Incentive, a business isable to claim up to three times the normaldeduction for CCA in the year a capitalasset is put into use.

The half-year rule, which reduces theamount of CCA otherwise available byhalf in the year of acquisition, does notapply under any of the three incentives.Consistent with the existing rules, theaccelerated CCA claimed under theincentives will be pro-rated for short taxa-tion years.

The chart below outlines the impact of theproposed measures for the CCA deduc-tion in the first year on select assets asshown.

It is important to note that the total CCAavailable over the life of an asset doesnot change with the new tax incentives.The accelerated deduction in the first yearwill be offset by smaller deductions avail-able in future years. Capital assetsacquired in a non-arm’s length transactionor on a tax-deferred rollover basis are noteligible for the tax incentives.

The restrictions under the Income Tax Actthat limit the amount of CCA that may bededucted in a year, related to limitedpartnerships, specified leasing propertiesand rental properties, continue to apply.

Other Tax Measures

· The Mineral Exploration Tax Cred-it, which is scheduled to expireMarch 31, 2019 will be extendedto March 31, 2024.

· The Government will introduce anew category of qualified doneeswhich will include eligible non-profit journalism organizations.This will allow the organizations toreceive funding from registeredcharities and to issue official dona-tion receipts, allowing individualdonors to benefit from the charita-ble donation tax credit and corpo-rate donors to benefit from the taxdeduction.

· A new refundable tax credit will beintroduced for qualifying newsorganizations to be effectiveJanuary 1, 2019. The tax credit willsupport labour costs associatedwith the production of newscontent and will generally be avail-able to both non-profit andfor-profit news organizations.

· A new temporary, non-refundable15% tax credit will be introducedfor qualifying subscribers of eligi-ble digital news media. Additionaldetails are to be provided inBudget 2019.

By Laura Simmons,Senior Tax Manager, MRSB

Maximum First Year Capital Cost Allowance ExistingRules

ProposedMeasures to

Dec. 31, 2023Immediate expensing

Manufacturing and processing equipmentClean energy equipment

25%25%

100%100%

Accelerated Investment IncentiveComputer software - Class 12Computers - Class 50Motor vehicles - Class 10Office equipment - Class 20Buildings used in manufacturing andprocessing - Class 19

50%27.50%

15%10%5%

100%82.50%

45%30%15%

An Independent Member Firm ofDFK Canada Inc. and DFK Interna onal


When Finance Minister Bill Morneauannounced proposed changes to federalincome tax legislation in 2017, heinfuriated small and medium-sizedbusiness owners, the backbone of Cana-da’s economy.

What Morneau framed as a tax on the richseemed more of an attack on those whorisk everything to start a business.

As the furore built, the Senate NationalFinance Committee launched its cross-Canada tour to seek input from stakehold-ers and urged the government to put thechanges on ice for a year to better assessthe ramifications.

Morneau also invited input from thebusiness community during his ownin-person ‘listening tour’ across thecountry.

At issue were tax on split income (TOSI)rules and income from passive invest-ments (i.e., investments not directlyrelated to the business enterprise).

Faced with a sustained backlash,Morneau softened the proposedmeasures – a little – and went ahead withcuts to the small business tax rate. In2019, the combined Federal and Ontariosmall business tax rate will be 12.5 percent compared to its pre-cut high of 15 percent.

I was an early critic of Morneau’sproposed changes and wrote this shortlyafter the measures were announced.

“The accounting community accepts thatthe current legislation is not perfect andmany of us support some of the changes.But we also know that this proposedtargeting of small business corporations isless a crackdown on the wealthy, more anattack on middle-class Canadians . . .”

So, what do those owners of small andmedium-sized businesses need to knownow that the dust has settled?

Good News:

The measures are not as punitive as theywere initially. But, if the government hadwaited for that year recommended by theSenate, they could have arrived at bettersolutions.

TOSI is the tax imposed when a firm’sowner improperly splits income amongnon-employee family members to reducethe owner’s income tax.

When people go into business, they puteverything on the line. They have nopension plan and initially, at least, areoften not drawing a full salary. Incomesplitting with a family member offers somefinancial support to the entrepreneur.

I concede that some tightening of theTOSI rules was justified.

Some wealthier people were abusingincome splitting, so to a degree, you couldunderstand the need for changes. But thegovernment measures went way beyondwhat was necessary.

Small Business and the Tax Revolt - The Dust Has Settled: Where dowe Stand?

By Chad Saikaley, CPA, CA, TEPPartner and Head of Tax at GGFL LLP

The bad news today is that the tax pictureis bleaker for small and medium-sizedbusiness owners.

The good news is that tax reduction anddeferral opportunities are still available.

Even with the passive income rules, youcan still defer tax for an operating busi-ness that uses earnings to reinvest in thebusiness.

And don’t abandon the idea of a familytrust, he advises. They still have value.

At the outset, many incorrectly assumedthat there was no longer a benefit tohaving a family trust. We never believedthat at GGFL, because there was alwaysmore to a trust than income splitting.

There are financial and non-financialbenefits that are still available, dependingon individual circumstances.

(continued on page 4)



Small Business and the Tax Revolt - The dust has settled: Where dowe stand?

Among other benefits, a trust can offercreditor protection of assets, provideopportunities to move wealth from onegeneration to the next, and minimize thetax implications on death.

The dust that cleared has since beenreplaced by mists of uncertainty – partlybecause of that massive U.S. tax reduc-tion and the assumption that provinceswould fall into line behind the federalproposals.

Post-election changes in provincialgovernments – notably in Ontario – haveproven that assumption wrong.

Our finance minister is now scrambling toremain competitive with the Statesbecause the Americans went in exactlythe opposite direction, making it lessattractive to invest in Canada. To com-pensate, Morneau is offering accelerateddeductions on certain capital investmentswithin Canada, but will it be enough?

The bottom line is that the federalchanges have left small and medium-sized Canadian businesses worse off,but not without the opportunity to alleviatetheir tax burdens.

The changes do make it less attractive tobe an entrepreneur in Canada.

You have to be more sure of your finan-cial prospects, and that means less risktaking. The passive income changesfurther widen the gap between employeeswith guaranteed pension plans and jobsecurity versus the self-employed whomust take care of their own financialfuture.

This article was originally posted on theOttawa Business Journal website https://obj.ca/article/GGFL-small-business-and-tax-revolt.

(continued from page 3)


This year on Valentine’s Day, staff ofNoseworthy Chapman and Janes &Noseworthy wore red in support ofFebruary Heart & Stroke Month.

Other activities included a cupcakesale and gift basket draw with all pro-ceeds going to the NL Chapter of theHeart & Stroke Foundation.

Thanks to our staff members PamelaHarding and Krista Riddle and Pam’sdaughter Trista for their efforts as wellas those whose purchases raisedfunds for such a worthy cause!

February is Heart & Stroke Month

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