5 Key Things to Consider When Planning Your Company’s Fiscal Year-End

5 Key Things to Consider When Planning Your Company’s Fiscal Year-End 

 

An Accountant’s Viewpoint – Part 10

 

  1. Income splitting with family members – this planning area is currently at risk under the tax changes proposed by the Department of Finance back in July 2017, and subsequently revised twice since then. The government intends to proceed with eliminating certain income splitting measures effective January 1, 2018. You can still pay a reasonable salary to family members based on their labour contribution in 2017. Furthermore, dividends paid to family members are still okay for the remainder of 2017.

 

  1. Consider accruing a bonus in 2017 – bonuses may be deducted by your company in 2017 and paid out in 2018. Keep in mind that bonuses must be paid out eventually and deferred no longer than 180 days from the date they are declared.

 

  1. Purchase capital assets before your fiscal year-end – this will allow you to deduct the capital cost allowance (CCA) for tax purposes in the year you acquire the asset, and position you to claim a full year of CCA in 2018.

 

  1. Consider offsetting current-year capital gains by triggering a capital loss. If you happen to have incurred a capital gain during the year and you have no capital losses carrying over from prior years, you might want to review your investment portfolio for losses that you can trigger to reduce the tax you would otherwise pay on the capital gain.

 

  1. Office social events – business meals and entertainment expenses are normally limited to a 50% tax deduction. However, this does not apply when the social event is provided to all employees as long as you don’t exceed six events in a given year. If the costs of the event are less than $100 per person, this will not be considered a taxable benefit to the employee. However, if the cost of the event exceeds $100 per person, it is considered a taxable benefit and should be included on the employees’ T4s accordingly.

 

This article provides a brief overview of what to consider as part of your year-end tax planning. The issue is complex, and the tax consequences significant. It is always best to discuss such tax-filing considerations with your accountant, or reach out to me at BDO, to discuss which strategy is right for you.

Comment provided by:

Jonathon (Tug) McGraw, BCOMM, CPA, CA

BDO Canada LLP

Jonathan can be reached at: jmcgr

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