FEDERAL BUDGET SUMMARY – 2019
CARRYING ON BUSINESS IN A TAX-FREE SAVINGS ACCOUNT
The tax-free savings account (TFSA) is a registered account that allows Canadians
to earn tax-free investment income on a wide range of investments. However, a
TFSA is liable to pay tax under Part I of the Income Tax Act on income from a
business carried on by the TFSA or from non-qualified investments. Under the
current rules, the trustee of a TFSA (i.e. financial institution) is jointly and severally
liable with the TFSA for Part I tax while the holder of the TFSA is not.
Budget 2019 proposes that the joint and several liability for tax owing on income
from carrying on a business in a TFSA be extended to the TFSA holder.
This measure will apply to the 2019 and subsequent taxation years.
SMALL BUSINESS DEDUCTION – FARMING AND FISHING
Budget 2019 proposes relief for farming and fishing businesses by eliminating the
requirement that sales must be to a farming or fishing co-operative in order to be
excluded from specified corporate income. Instead, any income from the sales of
farming products and fishing catches to any arm’s length corporation will not be
subject to the specified corporate income rules.
This measure will apply retroactive to any taxation years that began after March
INTERGENERATIONAL BUSINESS TRANSFERS
The government will continue consultations with farmers, fishers and other
business owners throughout 2019 to develop new proposals to facilitate the
intergenerational transfers of businesses while protecting the integrity and
fairness of the tax system.
MNP INSIGHT: This clarification will provide greater certainty to agricultural
producers as well as related businesses in the agricultural sector. Specifically,
producers will be able to market their grain and livestock to the purchaser that
makes the most business sense without concern for potential income tax
consequences. The expansion to include any arm’s length corporation as
opposed to solely agricultural co-operative corporations should incentivize
new producer owned agribusinesses to emerge.