Five Ways To Withdraw Money From Your Business In A Tax-Efficient Manner

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Five Ways To Withdraw Money From Your Business In A Tax-Efficient Manner

You have worked long and hard to build up your business, and now you are ready to withdraw money from your business’ bank account. But you don’t want to get hit with a huge tax bill. So here are 5 ways to withdraw money from your business in a tax-efficient manner.

1) Pay Yourself And Your Family Members

You can pay yourself a salary from your business and pay any family members who work in your business. However, the salary you pay family members must not be excessive – it must be in line with what they would receive for doing the same work elsewhere.

You and your family members will be taxed at the regular personal marginal tax rates on your salaries. However, your corporation can make a deduction based on salaries paid when determining taxable income.

2) Pay Out Taxable Dividends

You can use dividends to distribute money from your corporation to both yourself and family members if everyone holds shares in your corporation. However, when distributing dividends to a shareholder, it is critical to consider both the tax on split income (TOSI) rules and the corporate attribution rules before any distribution is made.

  • TOSI rules – Under the current income tax rules, the TOSI applies the highest marginal tax rate (currently 33%) to “split income” of an individual under the age of 18. In general, an individual’s split income includes certain taxable dividends, taxable capital gains and income from partnerships or trusts. – Canada.ca

  • Corporate attribution rules – Corporate attribution rules may result in additional tax if a transfer or loan to a corporation is made to shift income to another family member. This can result in additional tax for the individual making the transfer or loan.

3) Pay Out Capital Dividends

Another way to pay out dividends is via your corporation’s capital dividend account (CDA). Money in your corporation’s CDA can be dispersed to Canadian resident shareholders as a tax-free dividend, but be sure you are clear on what can legally be allowed in your CDA before you do this.

4) Adjust Your Salary And Dividend Mix

Keeping the right mix when paying yourself a salary and paying yourself via dividends is essential. You need to consider various factors – such as your cash flow needs, earned income for RRSP contributions, and any impact on taxes and other regulatory requirements – paying out salaries and dividends can have.

5) Repay Any Outstanding Shareholder Loans

If you loaned money to your company in the form of a shareholder loan, now may be the time to have your company repay that loan. Any money you receive to settle your shareholder loan will be paid to you as a tax-free distribution.

The Takeaway

Regardless of why you need to take cash out of your business, it is crucial to plan how to withdraw the money so you can do it in the most tax-efficient manner possible. Unfortunately, there is no one-size-fits-all solution for this, which is why talking to a professional advisor is so important.

We can help design a tax-optimized compensation strategy for you. Contact us to set up a meeting today!

2022 Manitoba Budget Highlights

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Manitoba 2022 Budget Highlights


On April 12, 2022, Manitoba’s Minister of Finance delivered the province’s 2022 budget. These are the highlights of it.

No Changes To Corporate or Personal Tax Rates


Budget 2022 did not introduce any changes to Manitoba’s corporate or personal tax rates.

Health Care


Budget 2022 is committing millions of dollars to address various healthcare issues. The money is pledged as follows:

  • $110 million to reduce pandemic diagnostic and surgical backlogs.

  • $9 million increase capacity in Manitoba’s intensive care units.

  • $100 million to triple the size of St. Boniface Hospital’s emergency room.

  • $17 million for supporting mental health.

  • $20 million to implement the Seniors Strategy. 

  • $32 million to implement initiatives from the Stevenson Review, strengthening long-term care.

  • $812 million in continued capital commitment for rural and northern health care.

  • $630 million for the ongoing COVID-19 response and other contingencies.

  • Over $11 million to increase nursing enrolment in Manitoba’s post-secondary institutions.

Health and Post-Secondary Education Tax Levy


Budget 2022 reduces Manitoba’s Health and Post-Secondary Education Tax Levy, a payroll tax, for certain employers. The budget increases the following:

  • The exemption threshold is from $1.75 million to $2 million.

  • The annual threshold for a reduced rate is from $3.5 million to $4 million. 

This measure is effective as of January 1, 2023.

Education Property Tax Rebate


This year, the education tax rebate for residential and farm properties will rise from 25% to 37.5% and 50% in 2023. This means the average rebate will increase from $371 in 2021 to $581 in 2022 and then to $774 in 2023.

Commercial property owners will continue to receive a 10% rebate. 


Residential Renters Tax Credit


Budget 2022 introduces a new Residential Renters Tax Credit that replaces the renter’s component of the Education Property Tax Credit.

It will provide an annual credit of up to $525 to residential property renters based on the number of months they rent. It will not be income-tested and has expanded eligibility, and is available to renters on Rent Assist and those living in social housing. 

New Venture Capital Funds


Budget 2022 confirms the government will release the $50 million it committed to last year to launch a new venture capital fund. 

Small Business Venture Capital Tax Credit Permanent


The Small Business Venture Capital Tax Credit is now permanent and has been enhanced to support corporations and individuals participating in venture capital funds. 

We can help!


Wondering how tax changes in this year’s budget may impact personal finances or business affairs? Reach out to us – we’re here to answer any questions you may have!

2021 Income Tax Year Tips

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Tax Tips You Need To Know Before Filing Your 2021 Taxes

This year’s tax deadline is April 30, 2022. We’ve got a list of tips to help you save on your taxes!

Claiming home office expenses

You can claim up to $500 under the “flat rate” method if you worked at home due to COVID-19. To claim more, you must use the detailed method to claim home office expenses.

Employer-provided benefits

The CRA will generally not consider employer-provided benefits taxable if your employer reimburses you for certain costs (such as commuting costs, parking, and home office equipment) due to COVID-19.

Repaying Covid-19 support payments

If you repaid COVID-19 benefits, you can deduct the amount on your tax return either for the year you received the benefit or the year you repaid it, or you can split the deduction between both years.

Climate Action incentives can no longer be claimed

As of 2021, Climate Action incentives can’t be claimed as a refundable credit; instead, you’ll receive quarterly payments via the benefits system.

Disability tax credit (DTC)

If you or a family member are DTC claimants, then you should review the updated criteria for the tax credit in regards to mental functions, life-sustaining therapy and calculating therapy time.

Eligible educator school supply tax credit

This tax credit has been increased to 25 percent for eligible supplies (such as books and games) to a maximum of $1,000.

Tax deduction on interest payments

You can claim a tax deduction for the interest you’ve paid on any money you have borrowed to invest. However, you can only do this if you use the money to earn investment income (for example, a rental property).

The digital subscriptions tax credit

You can claim up to $500 as a tax credit if you have a digital subscription to a qualifying Canadian news outlet.

Self-employed? Be sure to set aside enough for personal income tax!

If you’re self-employed, be sure you put aside enough money (we recommend 25% of your income) to pay your tax bill when the time comes. You’re taxed only on your net income (total income minus expenses).

You need to plan ahead for tax changes if you want to retire abroad

Planning to retire abroad? If so, you need to be aware of the tax implications and plan accordingly. If you sell your house and move, you may be considered a “non-resident” and be subject to capital gains taxes on non-registered investments (even if you have not sold them) or have your pension subjected to a withholding tax.

You can stop making CPP contributions if you’re over 65 but plan to keep working

If you’re 65 and already collecting Canada Pension Plan (CPP) benefits but also still working, you may be able to stop making CPP contributions. To do so, you need to fill in the form CPT30.

Need help?

Not sure if you qualify for a credit or deduction? Give us a call – we’re here to save you money on your taxes!

Federal Budget 2021 Highlights

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On April 19, 2021, the Federal Government released their 2021 budget. We have broken down the highlights of the financial measures in this budget into three different sections:

  • Business Owners

  • Personal Tax Changes

  • Supplementary Highlights

Business Owners

Extending Covid -19 Emergency Business Supports

All of the following COVID-19 Emergency Business Supports will be extended from June 5, 2021, to September 25, 2021, with the subsidy rates gradually decreasing:

  • Canada Emergency Wage Subsidy (CEWS) – The maximum wage subsidy is currently 75%. It will decrease down to 60% for July, 40% for August, and 20% for September.

  • Canada Emergency Rent Subsidy (CERS) – The maximum rent subsidy is currently 65%. It will decrease down to 60% for July, 40% for August, and 20% for September.

  • Lockdown Support Program – The Lockdown Support Program rate of 25% will be extended from June 4, 2021, to September 25, 2021.

Only organizations with a decline in revenues of more than 10% will be eligible for these programs as of July 4, 2021. The budget also includes legislation to give the federal government authority to extend these programs to November 20, 2021, should either the economy or the public health situation make it necessary.

Canada Recovery Hiring Program

The federal budget introduced a new program called the Canada Recovery Hiring Program. The goal of this program is to help qualifying employers offset costs taken on as they reopen. An eligible employer can claim either the CEWS or the new subsidy, but not both.

The proposed subsidy will be available from June 6, 2021, to November 20, 2021, with a subsidy of 50% available from June to August. The Canada Recovery Hiring Program subsidy will decrease down to 40% for September, 30% for October, and 20% for November.

Interest Deductibility Limits

The federal budget for 2021 introduces new interest deductibility limits. This rule limits the amount of net interest expense that a corporation can deduct when determining its taxable income. The amount will be limited to a fixed ratio of its earnings before interest, taxes, depreciation, and amortization (sometimes referred to as EBITDA).

The fixed ratio will apply to both existing and new borrowings and will be phased in at 40% as of January 1, 2023, and 30% for January 1, 2024.

Support for small and medium-size business innovation

The federal budget also includes 4 billion dollars to help small and medium-sized businesses innovate by digitizing and taking advantage of e-commerce opportunities. Also, the budget provides additional funding for venture capital start-ups via the Venture Capital Catalyst Program and research that will support up to 2,500 innovative small and medium-sized firms.

Personal Tax Changes

Tax treatment and Repayment of Covid-19 Benefit Amounts

The federal budget includes information on both the tax treatment and repayment of the following COVID-19 benefits:

  • Canada Emergency Response Benefits or Employment Insurance Emergency Response Benefits

  • Canada Emergency Student Benefits

  • Canada Recovery Benefits, Canada Recovery Sickness Benefits, and Canada Recovery Caregiving Benefits

Individuals who must repay a COVID-19 benefit amount can claim a deduction for that repayment in the year they received the benefit (by requesting an adjustment to their tax return), not the year they repaid it. Anyone considered a non-resident for income tax purposes will have their COVID-19 benefits included in their taxable income.

Disability Tax Credit

Eligibility changes have been made to the Disability Tax Credit. The criteria have been modified to increase the list of mental functions considered necessary for everyday life, expand the list of what can be considered when calculating time spent on therapy, and reduce the requirement that therapy is administered at least three times each week to two times a week (with the 14 hours per week requirement remaining the same).

Old Age Security

The budget enhances Old Age Security (OAS) benefits for recipients who will be 75 or older as of June 2022. A one-time, lump-sum payment of $500 will be sent out to qualifying pensioners in August 2021, with a 10% increase to ongoing OAS payments starting on July 1, 2022.

Waiving Canada Student Loan Interest

The budget also notes that the government plans to introduce legislation that will extend waiving of any interest accrued on either Canada Student Loans or Canada Apprentice Loans until March 31, 2023.

Support for Workforce Transition

Support to help Canadians transition to growing industries was also included in the budget. The support is as follows:

  • $250 million over three years to Innovation, Science and Economic Development Canada to help workers upskill and redeploy to growing industries.

  • $298 million over three years for the Skills for Success Program to provide training in skills for the knowledge economy.

  • $960 million over three years for the Sectoral Workforce Solutions Program to help design and deliver training relevant to the needs of small and medium businesses.

Supplementary Highlights

Federal Minimum Wage

The federal budget also introduces a proposed federal minimum wage of $15 per hour that would rise with inflation.

New Housing Rebate

The GST New Housing Rebate conditions will be changed. Previously, if two or more individuals were buying a house together, all of them must be acquiring the home as their primary residence (or that of a relation) to qualify for the GST New Housing Rebate. Now, the GST New Housing Rebate will be available as long as one of the purchasers (or a relation of theirs) acquires the home as their primary place of residence. This will apply to all agreements of purchase and sale entered into after April 19, 2021.

Unproductive use of Canadian Housing by Foreign Non-Resident Owners

A new tax was introduced in the budget on unproductive use of Canadian housing by non-resident foreign owners. This tax will be a 1% tax on the value of non-resident, non-Canadian owned residential real estate considered vacant or underused. This tax will be levied annually starting in 2022.

All residential property owners in Canada (other than Canadian citizens or permanent residents of Canada) must also file an annual declaration for the prior calendar year with the CRA for each Canadian residential property they own, starting in 2023. Filing the annual declaration may qualify owners to claim an exemption from the tax on their property if they can prove the property is leased to qualified tenants for a minimum period in a calendar year.

Excise Duty on Vaping and Tobacco

The budget also includes a new proposal on excise duties on vaping products and tobacco. The proposed framework would consist of:

  • A single flat rate duty on every 10 millilitres of vaping liquid as of 2022

  • An increase in tobacco excise duties by $4 per carton of 200 cigarettes and increases to the excise duty rates for other tobacco products such as tobacco sticks and cigars as of April 20, 2021.

Luxury Goods Tax

Finally, the federal budget proposed introducing a tax on certain luxury goods for personal use as of January 1, 2022.

  • For luxury cars and personal aircraft, the new tax is equal to the lesser of 10% of the vehicle’s total value or the aircraft, or 20% of the value above $100,000.

  • For boats over $250,000, the new tax is equal to the lesser of 10% of the full value of the boat or 20% of the value above $250,000.

If you have any questions or concerns about how the new federal budget may impact you, call us – we’d be happy to help you!

What’s new for the 2021 tax-filing season?

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Tax season is upon us once again. But since 2020 was a year like no other, the 2021 tax-filing season will also be different. Both how we worked and where we worked changed for a lot of us in 2020.

Some Canadians got to work from home for the first time but saw no other disruption to their jobs. There was a much bigger disruption for other Canadians – they faced temporary or permanent job losses and had to supplement their incomes wide side gigs and emergency government programs.

The Canadian government has introduced some new tax credits and deductions in response to these changes. We’ve covered some of the highlights below.

Claiming home office expenses

With a sudden shutdown happening across the country in March 2020, many Canadians stopped commuting to the office and started working from home. As a response to this, the Canada Revenue Agency (CRA) has offered a new way to claim home office expenses. If you:

  • Worked from home due to COVID-19 – for a minimum of 50 percent of the time for at least four consecutive weeks AND

  • Your employer did not reimburse you for your home office expenses.

You can claim $2 for each day – to a maximum of $400 for the year.

If you have more complicated or higher home office expenses, then your employer must provide you with a T2200 form, with a list of deductions included.

New Canada Training Credit

Suppose you are between the ages of 25 and 65 and taking courses to upgrade your skills from a college, university, or other qualifying institution. In that case, you can claim this new, refundable tax credit.

You can automatically accumulate $250 annually – and the new Canada Training Credit has a lifetime maximum of $5,000. You can claim this credit when you file your taxes.

Pandemic emergency funds

The emergency support programs helped a lot of Canadians avoid financial disaster. If you were one of the Canadians who received pandemic emergency funds, you must be aware of the tax implications.

If you received the Canada Emergency Response Benefit (CERB) or the Canada Emergency Student Benefit (CESB), no taxes were withheld at source, so you will be taxed on the full amount. If you received the Canada Recovery Benefit (CRB), Canada Recovery Sickness Benefit (CRSB), or Canada Recovery Caregiver Benefit (CRCB), the CRA withheld a 10% tax at source, so you may not owe additional taxes on this income.

New digital news subscription tax credit

This is a new, non-refundable tax credit that is calculated at 15 percent – and is eligible for up to a maximum of $500 in qualifying subscription expenses. To qualify for this credit, you must subscribe to one or more qualified Canadian journalism organizations – and you could save up to $75 a year thanks to this credit.

I’m here to help you understand where you owe taxes and how you can lower your tax bill. Give me a call today!

Government of Canada to allow up to $400 for home office expenses

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For the 2020 tax year, the Government of Canada introduced a temporary flat rate method to allow Canadians working from home this year due to Covid-19 to claim expenses of up to $400. Taxpayers will still be able to claim under the existing rules if they choose using the detailed method.

Eligibility

From the canada.ca website:

Each employee working from home who meets the eligibility criteria can use the temporary flat rate method to calculate their deduction for home office expenses.

To use this method to claim the home office expenses you paid, you must meet all of the following conditions:

  • You worked from home in 2020 due to the COVID-19 pandemic

  • You worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020

  • You are only claiming home office expenses and are not claiming any other employment expenses

  • Your employer did not reimburse you for all of your home office expensesWhat if your employer has reimbursed you for some of your home office expenses

You need to meet all of the above conditions to be eligible to use the Temporary flat rate method.

New eligible expenses

For the detailed method, the CRA has expanded the list of eligible expenses that can be claimed as work-space-in-the-home expenses to include reasonable home internet access fees. A comprehensive list of eligible home office expenses has also been created.

Click For Full details and Claim Forms

Highlights of the 2020 Federal Fall Economic Statement | Additional $20,000 CEBA loan available now

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On November 30, Finance Minister Chrystia Freeland provided the government’s fall economic update. The fall economic update provided information on the government’s strategy both for dealing with the COVID-19 pandemic and its plan to help shape the recovery. We’ve summarized the highlights for you.

Corporate Tax Changes

Information on several subsidy programs was included in the update. These changes apply from December 20, 2020 to March 13, 2021.

  • The government has provided an increase in the Canada Emergency Wage Subsidy (CEWS) to a maximum of 75% of eligible wages.

  • If you are eligible for the Canada Emergency Rent Subsidy (eligibility is based on your revenue decline), you can claim up to 65% of qualified expenses.

  • The Lockdown Support Subsidy has also been extended – if you are eligible, you can receive a 25% subsidy on eligible expenses.

Also, there were two other significant corporate tax changes:

  • Starting January 1, 2022, the government plans to tax international corporations that provide digital services in Canada if no international consensus on appropriate taxation has been reached.

  • The tax deferral on eligible shares paid by a qualifying agricultural cooperative to its members has been extended to 2026.

Personal Tax Changes

The following personal tax changes were included in the update:

  • The update confirmed the government’s plan to impose a $200,000 limit (based on fair market value) on taxing employee stock options granted after June 2021 at a preferential rate. Canadian-controlled private corporations (CCPCs) are not subject to these rules.

  • If you started working from home due to COVID-19, you could claim up to $400 in expenses.

  • The Canada Child Benefit (CCB) has temporarily been increased to include four additional payments. Depending on your income, you could receive up to $1200.

  • Additional modifications were proposed to how the “assistance holdback” amount is calculated for Registered Disability Savings Plans (RDSP). The goal of these modifications is to help RDSP beneficiaries who become ineligible for the Disability Tax Credit after 50 years of age.

Indirect Tax Changes

GST/HST changes impacting digital platforms were included in the update. They will be applicable as of July 1, 2021:

  • Foreign-based companies that sell digital products or services in Canada must collect and remit GST or HST on their taxable sales. Also, foreign vendors or digital platform operators with goods for sale via Canadian fulfillment warehouses must collect and remit GST/HST.

  • Short-term rental accommodation booked via a digital platform must charge GST/HST on their booking. The GST/HST rate will be based on the province or territory where the short-term accommodation is located.

And some good news on a GST/HST removal! As of December 6, and until further notice, the government will not charge GST/HST on eligible face masks and face shields.

The Takeaway

A lot of changes came out of the fall update – and you may be feeling overwhelmed. But help is at hand!

Contact us to learn more about how these changes could impact your personal and business finances.

Canada Emergency Business Account (CEBA) $20,000 expansion available now

The Government of Canada website has been updated with the new CEBA requirements and deadlines:

  • As of December 4, 2020, CEBA loans for eligible businesses will increase from $40,000 to $60,000.

  • Applicants who have received the $40,000 CEBA loan may apply for the $20,000 expansion, which provides eligible businesses with an additional $20,000 in financing.

  • All applicants have until March 31, 2021, to apply for $60,000 CEBA loan or the $20,000 expansion.

Apply online at the financial institution your business banks with:

To get the full details:

CEBA Loan Details

Tax Loss Selling

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Over the last few weeks, the financial market has taken a downturn amidst fears over Coronavirus.

Understandably, you are concerned with your portfolio, it’s important to stay level-headed to avoid making financial missteps. However, staying level-headed doesn’t necessarily mean you sit there and do nothing. In fact, one consideration you can look is taking an active tax management approach.

Tax loss selling is a strategy to crystallize or realize any capital losses in your non-registered accounts so it can be used to offset any capital gains. There is no benefit to selling in your tax free savings account (TFSA) or registered retirement savings plan (RRSP).

You can apply capital losses back 3 years or carry them forward indefinitely, therefore we’ve outlined several situations that make sense for tax loss selling.

To better understand how tax-loss selling works, imagine a scenario in which someone invests $100,000, putting $50,000 in “Investment A” and $50,000 in “Investment B.”

At the end of one year, Investment A has risen by $10,000 and is now worth $60,000. Investment B has declined by $10,000 and is now worth $40,000.

Without tax-loss selling, the investor has a realized gain of $10,000 from Investment A, and has a potential tax bill of $1,500 (assuming he or she sells the shares and pays the 15% capital gains tax on the profit).

On the other hand, with tax-loss selling, selling Investment B to offset gains from Investment A. At the end of the year, instead of paying a $1,500 tax, the investor only has a potential tax bill of $0, for a potential tax savings of $1,500.

With the investor’s tax liability reduced by $1,500, that savings becomes money that can be invested back in the portfolio, used to maximize RRSP contributions, pay off debt, or spend as one pleases. 

What Situations make sense for tax loss selling?

  • If you have an investment with a considerable capital gain, review through your current investments to see if there are any investments to sell at a loss.

  • Receiving a tax refund for a previous year. Keep in mind, you can apply capital losses back 3 years, therefore if you sold a property within the last 3 years for a considerable gain and paid the tax. This year, you could sell other investments at a loss and apply them back and get some tax paid back.

  • For tax deferral, with tax losses you can apply these losses back 3 years or carry them forward indefinitely, therefore you may want to trigger a loss today because if you are planning to sell that property in the next year or so, it may rebound and therefore you will lose the chance to offset the gains.

  • Lastly, you may have an investment in your portfolio that’s a dud. It might be time to move on and put your money into a different investment so that you can apply the loss in the future.

Tax Loss Selling is Complicated

There are specific conditions required by CRA that must be met in order for this strategy to work such as making sure your loss is not declared a “superficial loss” (these rules are very restrictive). A superficial loss is when you sell and trigger a capital loss, you cannot deduct the loss if you or an affiliate purchase an identical security within 30 days before or after your settlement date.

Another condition is that the sale of assets is prior to the year-end deadline (this varies by calendar year). You also need to make sure you have accurate information on the adjusted cost base (ACB) of your investment. When you file your taxes, any losses must be first used to offset capital gains in the current tax year, then any remaining losses can be carried back.

Before engaging in tax loss selling, you should contact us directly so we can make the strategy works for you.