Ontario Disability Support Program (ODSP)

Finance intends on raising the amount a person with a disability on the ODSP can earn, from $200 to $1,000 per month, without impacting their income support benefits. This measure would encourage people on ODSP who want to increase their work hours to do so and promote more participation in the workforce. For each dollar earned above $1,000, the person with a disability would keep 25 cents of income support.

For those who are unable to work, Finance increased ODSP rates by 5% and plans to adjust ODSP rates to inflation beginning in July 2023.

Increasing Financial Support for Seniors

The government plans to double the Guaranteed Annual Income System (GAINS) payment for all recipients for 12 months starting in January 2023.  This measure would increase the maximum payment to $166 per month for single seniors and to $332 per month for couples, a maximum increase of almost $1,000 per person in 2023. They are also looking to introduce measures to expand eligibility in the coming months. Currently, eligibility is determined automatically for individuals who receive Old Age Security and the Guaranteed Income Supplement.

Temporary gas tax and fuel tax cuts

The economic outlook confirms the government’s intention to extend the temporary gas tax and fuel tax cuts for an additional 12 months. The government previously cut the gas tax and fuel tax rates on July 1, 2022 by 5.3 cents per litre. The government is proposing to extend the cuts to the gas tax and fuel tax rates so that the rate of tax on gasoline and fuel (diesel) would remain at 9 cents per litre until December 31, 2023.

Non-Resident Speculation Tax Rate

Effective October 25, 2022, the government increased the non-resident speculation tax rate from 20% to 25%. This tax applies to the purchase of a home located anywhere in Ontario by foreign nationals, foreign corporations or taxable trustees. Rebates remain available for foreign nationals who become permanent residents of Canada within four years after the tax became payable, if eligibility criteria are met.  Rebate details are available on the Ontario NRST website.

Tax Credits

Ontario Seniors Care at Home Tax Credit

The Ontario Seniors Care at Home Tax Credit is a refundable personal income tax credit to help seniors with eligible medical expenses, including expenses that support aging at home. The credit provides 25% of claimable medical expenses up to $6,000, for a maximum credit of $1,500. This amount will be reduced by 5% of family net income over $35,000. Individuals’ resident in Ontario that are 70 years of age or older or that have a spouse/common law partner 70 years of age or older are eligible. A detailed list of eligible expenses is available on the Ontario Seniors Care at Home Tax Credit website.

Film, Television and Media

The government is expanding Ontario’s film and television tax credits to professional film and television productions distributed exclusively online. In the coming months, proposed regulatory amendments to implement this measure will be provided for public review and comment. Furthermore, the government is looking to modernize various cultural media tax credits to encourage film and television production, computer animation and special effects activities, interactive digital media product development and book publishing in Ontario.

Budget Measures

The economic outlook also confirmed the government’s intention to mirror various federal measures including immediate expensing for capital asset purchases and increasing the range to $10 million to $50 million for which the small business tax rate is phased out.

As we move into the new year, the Canadian government has released its new tax brackets for 2022. This year, there are a few changes that could impact your bottom line. Here’s what you need to know about the new tax brackets Canada 2022.

The first change is that the personal exemption has been increased from $12,069 to $13,229. This means that you can earn more income before being taxed. The second change is that the basic personal amount has been increased from $9,136 to $9,822. This is the amount of money you can earn before paying taxes.

The third change is that the Canada Pension Plan (CPP) contribution rate has been increased from 9.10% to 9.50%. This will impact employees and employers. The fourth change is that the Employment Insurance (EI) premiums have been increased from 1.58% to 1.62%. This will also impact employees and employers.

The fifth change is that the GST/HST credit has been increased from $400 to $600. This is a refundable tax credit that helps offset the cost of goods and services tax (GST) or harmonic sales tax (HST). The sixth change is that the maximum age for RRSP contributions has been increased from 71 to 72. This means that you can continue to contribute to your RRSP until you turn 72 years old.

The seventh change is that the TFSA contribution limit has been increased from $6,000 to $7,000. This is the maximum amount you can contribute to your tax-free savings account (TFSA) in a year. The eighth change is that the first-time home buyer’s tax credit has been extended until September 2023. This is a refundable tax credit that helps with the costs of buying a first home.

The ninth change is that the age limit for the Registered Disability Savings Plan (RDSP) has been increased from 59 to 60. This is the maximum age at which you can open an RDSP. The tenth change is that the minimum withdrawal amount for Registered Retirement Income Funds (RRIFs) has been decreased from 7.38% to 5.28%.

This change will impact seniors who are withdrawing from their RRIFs. The eleventh change is that the maximum age for contributions to an RESP has been increased from 21 to 31. This is the maximum age at which you can make contributions to an RESP. The twelfth and final change is that the maximum amount you can contribute to your TFSA has been increased from $5,500 to $6,000.

This is the total amount you can contribute to your TFSA in a year. These are the new tax brackets Canada 2022. Be sure to consult with a tax professional to see how these changes will impact your taxes.

E-Commerce Bookkeeping

Bookkeeping, simply put, is the act of recording the money that enters and exits the firm/business. Regarding bookkeeping and accounting, owning an e-commerce firm is similar to operating a traditional retail store. Accounting for an online retail firm entails concentrating on inventory and cash flow while relying on retail accounting software to fill in the gaps.

Bookkeeping is a necessary part of running an e-commerce firm. The company’s items will be available to a wide range of customers at all times. The store can reach a big audience and fulfill drop-ship orders while maintaining a modest physical footprint by using the internet.

While creating a website and a store are essential first steps, the store will fail to acquire momentum without financial preparation. To ensure the success of the e-commerce firm, the following are the bookkeeping areas that must be carefully managed.

Bookkeeping Management Focus Areas 

For business owners, e-commerce bookkeeping may be complicated, but the managers can choose the best solution for the organization after understanding how these difficulties might affect e-commerce bookkeeping.

Managing Alternate Payment Options

While most clients will pay using credit cards, the e-store may choose to accept alternative forms of payment. If this way has opted, the e-commerce platform should be able to track these sales. Checks, cash, and gift cards may be accepted in addition to credit cards. Taking other payment types may make bookkeeping more complex, yet it may make purchasing more straightforward for the clients. Payments made by cheque or cash, for example, will not appear in the records until the funds are deposited. It is crucial to maintain and manage these alternate payment lines.

Managing Fees

The e-business almost certainly has to pay merchant fees if they pick an e-commerce platform to host the online business. Using one of these platforms for the e-commerce firm may provide a variety of advantages, ranging from a speedy launch to easy search optimization. However, the platform will take a percentage of each sale in return for these benefits.

Deposits in the bank account are net sales rather than gross sales, making bookkeeping more difficult. To manage this, the business manager needs to note the gross sale in the e-commerce bookkeeping, then capture the difference between the gross and the net to document the merchant fees.

Tracking Inventory

Another issue with e-commerce bookkeeping is keeping track of inventories across platforms. Many e-commerce platforms include inventory monitoring built-in, making it easier to keep track of and manage the online stock. However, if the store sells the goods on numerous platforms, these sites will not track inventory changes from outside transactions. As a result, having a single location to keep track of inventories is critical. An outsourced bookkeeper may use the information to create an accurate record of sales, restocks, and returns in the store’s books.

Managing Third-Party Payments

The e-commerce store may employ third-party payment processing systems, making bookkeeping more difficult, especially when it comes to exchanges and refunds. Did the third-party e-commerce platform, for example, keep track of product returns? Or did the refund get recorded in the company’s accounting system?

Furthermore, even if a buyer returns an item, reclaiming the merchant charge the company paid is unlikely. As a result, the merchant charge becomes a loss, which must be accounted for in the company’s books.

Bottom Line

An e-commerce business, like any other business, needs proper financial and non-financial management to run smoothly and prosper exponentially. Bookkeeping, if broken down to more straightforward tasks of recording, compiling, segregating, and presenting, can lead to easy and value-adding financial books. These records then add towards better management and future growth of the e-commerce business.

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As part of your remuneration, if you receive a bonus or other lump-sum payment, you might want to ask your employer to send them directly to your RRSP without withholding income tax.

HOW TO DO IT

When your company sends you a bonus or other lump sum payment (such as vacation pay or an ineligible retirement allowance), they must normally deduct withholding tax at source. If you have enough contribution room, you can then contribute the net amount to your RRSP. In the year you claim the deduction, the amount of your RRSP contribution can be deducted from your taxable income, lowering your taxes.

If you contribute to an RRSP, you’ll get a refund or a decrease in taxes owed the following year. There is, however, a method to make the most of your RRSP contribution.  For spousal contributions, you can ask your employer to direct all or part of your bonus or lump sum payment to your RRSP or your spouse’s RRSP.  Your employer may contribute directly to your RRSP. If certain conditions are met, you will not be required to withhold income tax on that contribution. The advantage of sending the funds immediately without withholding tax is that you can put the entire amount in your RRSP. 

Let’s take a look at a hypothetical situation. Let’s say you get a $20,000 bonus this year and have $20,000 in RRSP contribution capacity. Assume you pay a 40 percent marginal tax rate. Since your employer is required to deduct $8,000 ($20,000 x 40%), if you contribute directly to your RRSP, you will only have $12,000 to contribute. If this is the case, you will save $4,800 ($12,000 x 40%). However, you will have to wait until next year to receive your refund and deposit the additional funds into your RRSP. As an alternative, if you asked your company to donate your bonus directly to your RRSP, it may contribute the entire $20,000 to your RRSP. This will help you to save $8,000 in taxes ($20,000 x 40%). The $8,000 tax savings will be in your RRSP, where it will grow tax-free until you remove the money.

The method is even more useful if you receive a bonus or lump sum payment early in the year.  Obviously, assuming your income level is relatively constant. If your employer makes a direct contribution to your RRSP within the very first 60 days of the year, you will be able to deduct the contribution in the prior year. As a result, you will not owe tax on the bonus until the following year.

You should be aware that your employer will be deducting Canada Pension Plan (CPP) and Employment Insurance (EI) even if you receive a bonus or lump sum payment early in the year. By the end of the year, you may have already reached the maximum yearly CPP and EI benefit amounts. As a result, your RRSP contribution may be larger.

HOW IT WORKS 

Your employer must have reasonable reasons to assume that you can deduct the RRSP contribution for the year. It may be sufficient for your employer’s records to provide a copy of your most recent Notice of Assessment (NOA). The NOA will show your RRSP deduction limit. Alternatively, your employer may ask you to sign a form confirming that you can deduct the contribution for the year. For this direct contribution, there is no CRA form to fill out.

The company is under no obligation to provide you with this service so as to reduce the withholding tax. In fact, some businesses may give you the amount minus withholding tax.

AN OPTION FOR LOWERING COMPENSATION WITHHOLDING TAX 

You can also contribute to your RRSP during the year if you like. Tax withholding on your regular income, bonus or other lump-sum payment can be lowered by asking your employer. Your employer may ask you to give them authorization from the CRA to lower withholding tax. This way they will be able to cut withholding tax. You must submit a completed Form T1213, Request to Reduce Tax Deductions at Source, to the CRA in order to receive approval. Ensure that you attach supporting documentation. The CRA may reject your application if you haven’t filed and paid all of your prior tax returns. 

CONCLUSION

Your employer can instantly contribute your bonus or lump sum payment to your RRSP. Furthermore, donating directly allows you to make your RRSP contribution sooner, substantially increasing the growth of your RRSP. Making early contributions will allow your RRSP assets to grow tax-deferred for a longer period of time.

Many employees are delighted to get financial bonuses over the holiday season. However, many employees (and even some employers) are not aware of the tax consequences of cash or near-cash holidays bonuses.

When an employee receives a taxable benefit, the employer must include the amount in the employee’s income and deduct income tax, CPP, or EI from the employee’s paystub. The sort of present you give will decide whether or not it is a taxable benefit to your employee and which deductions you must make. The sort of present you give will decide whether or not it is a taxable benefit to your employee and which deductions you must make.

Also, keep in mind that when an employee receives a bonus as part of the remuneration and has RRSP contribution capacity, the employee can ask the employer to send the bonus directly to the RRSP.

The following is a list of the various sorts of holiday bonuses or gifts you may present to your employees:

• Cash Holiday Bonus

  A cash bonus on a paycheck is a taxable benefit for the employee. On their pay stub, you’ll have to subtract income tax, CPP, and EI premiums. For example, you deduct the CPP, IE, and tax withholding to arrive at a gross bonus of $100 net pay. So they receive $100 in cash, but their pay stub and T4 may reflect $130 minus CPP, EI, and tax withholdings. 

• Gift Cards and Gift Certificates

  If you wish to offer your employee a gift card or a gift certificate instead of cash, the CRA will still consider it a taxable benefit to the employee. On their paystub, you must subtract income tax and CPP, but not EI premiums.

You might perhaps think of a non-cash gift as an alternative:

• Non-Cash Gifts

  Non-cash gifts can be provided to an employee for a special occasion with a total fair market value (not the employer’s expense) of up to $500 per year, including HST, and are not taxable benefits to the employee. If the value of the present or gifts exceeds $500, the employee receives a taxable advantage. Non-cash gifts include tickets to a certain event on a specified date and time. Items with little monetary value, such as t-shirts, mugs, coffee, or plaques, are exempt from this computation.

All of these gifts are tax-deductible in the bookkeeping of your firm.

Happy Holidays!

Here is a closer look at how using personal assets to earn revenue impacts your taxes.

Airbnb income: How to report it

Your tax return must include gross rental income and any related expenses.

Tax law distinguishes between property income and business income, and it is not always obvious which one applies to your rental income. Canada Revenue Agency (CRA) determines this based on the types and number of services you provide to your renters.

When you rent space and provide basic services, such as heat, light, parking, and laundry, you generally earn rental income. In this scenario, you must record your rental income on form T776 (Statement of Real Estate Rentals) and declare it on line 126 of your personal income tax return in this case.

If, on the other hand, you operate more like a bed and breakfast and provide extra services to your guests, such as cleaning, security, and meals – you will need to record any revenue as business income on your personal tax return. The more services you offer as a host, the more likely you will be regarded as a company.

Is GST/HST required?

It’s possible that your revenue from the rent on Airbnb is liable to GST/HST. The reason for this is that short-term dwelling rent is subject to GST/HST. Long-term rentals do not require GST/HST. You must register and collect GST/HST if your short-term rental revenues (including income from any other commercial business you may have on a related basis) reach $30,000 in a 12 month period. A short-term home rental might also be subject to provincial sales tax or other local taxes.

Consider voluntarily registering for GST/HST before earning more than $30,000 if you purchase a new or substantially renovated residence that is subject to GST/HST and will be used only for short-term rentals. 

You must remit GST/HST to the CRA rather than pay it to the seller prior to closing your acquisition. If you are qualified for a complete GST/HST recovery, you would claim it on the same return, resulting in no net GST/HST payment. This is often preferable to paying GST/HST to the vendor and then submitting a GST/HST return asking a refund from the CRA, especially considering that banks would not normally finance recoverable GST/HST amounts.

A mixed-use property, such as short-term and long-term accommodations in one property, will be subject to a more complex set of rules, and you should consult a tax specialist to confirm the appropriate sales tax treatment.

How to deduct Airbnb expenses

A capital expense or a current expense may result in different tax treatment:

• Current Expenses: recurring expenses such as energy that don’t generate a long-term return
• Capital Expenses: often provide a long-term gain or advantage

Renovations and repairs needed to make your house leaseable, as well as expenditures that have a long-term impact on its functionality, are usually classified as capital costs.

What are the Current Expenses?

When you rent out your house on Airbnb, you may claim a prorated percentage of many current expenditures. Among these costs are:

• Mortgage
• Utilities
• Property taxes
• Supplies for the purposes of renting (new sheets, soap and shampoo, dishes, etc)
• Maintenance (painting, housekeeping, electrical and plumbing repairs, etc)
• Home insurance
• Condominium fees (if the rental income is from a condominium unit)

How to Calculate the current expenses

If you rent out your entire house on Airbnb, you must compute the number of weeks or days you welcomed guests as a percentage of the total time you owned the property in the year. You must next prorate your charges based on that proportion. For example, if you rented out your house in March and April, you might claim around 17% (61/365 or 2/12) of eligible expenses.

If you merely rent out a portion of your home, you can deduct the portion of your costs that are related to the rented section. For example, by renting out 1,500 square feet of a 3,000-square-foot house, you would be able to deduct 50% (1,500/3,000) of the costs that were previously prorated at 17 percent. To determine your acceptable cost, you can also use the square metres or the number of rooms in your house.

What are the Capital Expenses?

To fully deduct capital expenses as capital cost allowances (CCA) you will need to spread them over several years. You can claim CCA depending on the type of rental property you own and when you bought it. Simply put, you can deduct a percentage of capital cost of the property over a period of years.

Last things before renting your property

When you rent out a property other than inadvertently or infrequently, you’ve altered the usage of the property for income tax purposes. As a result, there are important tax implications to consider.

Not to mention the enormous GST/HST implications that might emerge if you rent out your house. You may lose your property’s status as a “residential complex” if you rent 90% of the time for less than 60 days. In this scenario, the subsequent sale would be subject to GST/HST, which may shock potential purchasers when GST/HST is required to be paid on the sale.

If, subsequently, you wish to terminate or reduce the rental of the house, the CRA will require you to pay GST/HST based on the fair market value of the home. You may be able to request a refund to recoup part of this tax in certain situations.

Every Canadian Business owner is obliged to disclose business income when filing their taxes each year, and many of these business owners are also obligated to charge and remit sales tax on these earnings.

To do so, company owners must create a GST/HST account, whether they are sole proprietorships, partnerships, or corporations.

In some cases, a company owner is not needed to open a an account and so is not oblige to (and cannot) charge GST/HST.

The information below will assist you in determining if you need to create a GST/HST account.

Small Business Suppliers

In general, if you earn less than $30,000 in taxable sales, leases, or other supplies in any four consecutive quarters (which do not have to be in the same year), you are considered a small supplier and are exempt from registering for a GST/HST account.

This implies you don’t have to charge and submit GST/HST on your sales, but you also can’t collect Input Tax Credit (ITCs), which allows you to recoup sales tax paid/payable on purchases and operational costs. This does not preclude you from applying for a GST/HST account; you may do so independently.

However, this criteria has one exception. Even if you make less than $30,000 as a self-employed taxi or commercial ride-sharing driver, you must register for a GST/HST account.

Tax-Free Goods and Services Supplier

You are typically not permitted to register for a GST/HST account, freely or otherwise, if you exclusively sell tax-exempt supplies or commodities, such as legal aid services, music lessons, and child care services.

Tax-exempt goods and services, such as basic groceries and some medical gadgets, must not be confused with zero-rated goods and services. Even if you don’t collect taxes on sales, if you sell zero-rated items or services, you may be entitled for ITCs on property and services expended to sell these supplies. For tax-exempt products and services, this is not the case.

When must you open a GST/HST Account?

If you earn more than $30,000 in four consecutive calendar quarters, you must register for a GST/HST account and, as a result, file the remittances on a regular basis, such as monthly, quarterly, or yearly.

You must add the entire amount of all revenues (before costs) from the sale of all of your business’s global taxable goods and services to see if you’ve reached the $30,000 level.

How to open a GST/HST Account?

Before enrolling for your GST/HST account, three pieces of information are required.

1. The registration’s start date
   1. If you’re required to register, this is often the day you stop being a small supplier (earning less than $30,000 per year)
   2. If you’re voluntarily enrolling, this is the day you sign up or up to 30 days before that date
2. For GST/HST purposes, the fiscal year ends on December 31 for the majority of enterprises
3. Total annual revenue

After collecting these information, the Form RC1 must be filled.

Once registered, you must charge GST/HST on taxable goods and services, submit the returns, and pay as needed.

Contact us today for additional information on remitting GST/HST or for help managing your account.