Back by popular demand… Instead of providing a summary of 2024 tax news and updates (which can be found on the CPA Canada website) we have once again invited our Client Service Leaders to answer the question: “If you had one piece of advice for clients as we move into 2025, what would it be?”
Here are some of their responses:
Given the 2024 increase in the capital gains tax rates, the ‘value’ of a charitable donation has never been higher. If you are looking for a wonderful way to support your favorite registered charity and save some additional tax dollars at the same time, you may want to consider a donation of marketable securities with accrued gains. Not only can this eliminate the capital gains tax that would otherwise apply, it still allows you to claim the donation credit. And, if the donation is made from a corporation, the entire amount of the gain is added to the Capital Dividend Account—permitting a tax-free dividend to shareholders.
– Curtis Link, CPA, CA, TEP, Client Service Partner
As we approach 2025, a key focus should be on integrating automation and Artificial Intelligence to enhance your operational efficiency and security. With cyber threats growing in complexity, organizations can no longer rely solely on traditional security measures. Intelligent systems that adapt and respond in real time are becoming increasingly critical. Additionally, as regulatory bodies and insurance companies further intensify cybersecurity requirements, adopting automated monitoring and AI-driven threat detection will not only be necessary to ensure compliance, but will also provide a competitive edge through more proactive risk mitigation. Embracing these advancements will be essential in maintaining your business resilience and safeguarding valuable assets.
– Greg Koniecek, M.Sc. IT, Client Service Partner
The importance of your business following financial best practices cannot be understated during times of economic uncertainty. As we move into 2025 ensure that you:
- Recalibrate your working capital: Optimize your inventories, tighten up on receivables and manage your payables (do not pre-pay liabilities)
- Cash flow analysis: Do a cash flow sensitivity analysis to better understand your upcoming cash position so your business is better prepared to seize on an opportunity or weather a storm
- Evaluate your pricing and customer profitability: Do your current prices reflect your current costs? Are you able to pass on price increases to all or some of your customers? When was the last time you reviewed your profit by customer? Are you earning your target contribution margin for each significant customer? If not, why not? Should you still be serving your least profitable customers and markets?
- Evaluate your cost structure: Can you negotiate better terms or prices for your inputs? Do you have too much business concentrated with a single vendor? Diversifying vendors may decrease reliance on a particular vendor and provide leverage on terms.
- Evaluate your return on assets and related carrying costs: Avoid sunk cost bias and determine if you should continue to carry such assets. Do you have, or plan to have, excess space? If so, can you sublet it on a temporary basis during an expected period of uncertainty?
- Tax planning considerations: Potential changes to capital gain inclusion rates and the introduction of new programs for enhanced exemptions under Employee Ownership Trusts and the pending Canadian Entrepreneurs Incentive mean it is imperative to ensure your corporate structure and related business is set up properly to qualify for preferential tax treatment available through such programs.
-Michael Rayner, CPA, CA, Client Service Partner
Canadian business owners seeking viable succession options have something to cheer about. The new Employee Ownership Trust (EOT) rules that came into effect on January 1, 2024 offer potentially significant tax benefits to business owners interested in selling their business to their employees (through a trust)—the most significant being the temporary $10M capital gains exemption (for qualifying transfers occurring between 2024 and 2026).
– Pankaj Sharma CPA, CPA (Washington), Client Service Manager – Tax
Employers need to remain aware of their evolving obligations under the Employment Standards Act (ESA), and take action as required to ensure compliance. Ontario’s ESA protects workers’ rights and sets standards for minimum requirements on such things as hours of work, pay, time off, protected absences, terminations, and more. Most recently, Bill 190, the Working for Workers Five Act, received royal assent on October 28, 2024. As with previous Working for Workers legislation, Bill 190 amends several workplace statutes that employers must now apply and adhere to in their workplaces. Penalties for noncompliance and contraventions can total over $100,000.
– Dinah Bailey, CHRP, CHRL, HR Director
The capital gains inclusion rate has increased from 1/2 to 2/3 for taxation years ending after June 24, 2024. This change impacts the taxation of capital gains and losses, as such you might want to consider:
- Reviewing your Investment Portfolios to assess the impact of the increased inclusion rate on capital gains and losses. Consider realizing gains or losses strategically to optimize tax outcomes.
- Utilizing the $250,000 Capital Gains Threshold: Individuals, graduated rate estates, and qualified disability trusts can benefit from a reduced inclusion rate of 1/2 on the first $250,000 of net capital gains each year. Ensure that this threshold is fully utilized to minimize taxable income.
– Kristen Woods, CPA, CA, Senior Client Service Manager – Tax
If you are still using a traditional phone line system, consider switching to the more modern VoIP (Voice over Internet Protocol) technology. VoIP provides more flexibility, scalability, and advanced features at a fraction of a cost—allowing phone conversations from anywhere in the world with internet connection through a mobile app or computer.
– Luis Bondoc, B.Sc. CoE, Client Service Manager – IT
2024 has been a year of upheaval and change. The recent political and economic uncertainty is merely a continuation of the theme. The 2024 federal budget that was presented in April
proposed to increase the capital gains inclusion rate from 1/2 to 2/3. There is an exception for individuals with respect to the first $250,000 of realized gains in a particular year, however corporations and trusts are not eligible for this exception.
The legislation to implement these changes has not yet passed, and there is no certainty that it will, leaving us in state of upheaval. Planning is difficult, not knowing what tax rate will ultimately apply to transactions undertaken in the latter half of 2024, or indeed in the coming year.
If you have significant unrealized capital gains, it may be prudent to consider realizing some of them before year end, to avoid recognizing more than $250,000 of gains in 2025 (although this will accelerate the tax payment). The tax team at S+C Partners can also assist with tax estimates to help you navigate the potential cost of either course of action.
– Paul F Keul CPA, CA, TEP, Client Service Partner – Tax
The end of December is a time when many individuals reflect on their past year to set goals and make plans for the new year ahead. Why should this be any different for your business? Having a plan will allow you to better prepare for any big changes or transactions that you want to make. But remember: most big changes and transactions will have tax implications that go well beyond any cash exchanged. Understanding these consequences will help ensure that your business continues to function efficiently. An important first step of any big planned change or transaction should be to discuss it ahead of time with your accountant or tax advisor. Ensure that you keep your advisor in the loop as you make plans for 2025.
– Kamil Niemczyk, CPA, Client Service Manager
The world of accounting and taxation becomes increasingly complex each year, making it essential to regularly review your succession and estate plans with your advisors. Take the time to revisit your will and ensure that it reflects any changes in your life. If you’re unclear about any planning that was done previously, ask your advisor to explain the rationale behind it, suggest improvements, and highlight any associated risks, so you can make informed decisions. Changes in laws and regulations can often render previous strategies outdated, which can potentially lead to complications if not promptly updated.
The need to implement succession and estate plans often arises during stressful times, or following a significant life event, such as illness, loss, or major life transitions, in which case a quick decision may be necessary. These moments can feel overwhelming, which is why it’s so important to have a clear, strategic plan in place ahead of time. By doing so, you can avoid unnecessary delays and make swift, confident decisions when the time comes. Preparing in advance reduces stress during critical moments, allowing you to focus on what truly matters.
– Christine Laros CPA, CA, Senior Client Service Manager
For many, the past year has felt like treading water financially. Many of our best intentions were abandoned in order to survive. Moving forward, rate adjustments and other positive financial news will hopefully allow us all to get back on track. 2025 should be a year of refocusing on the basics:
- Create a budget that allows for the repayment of debt we needed to just get by in 2024
- Leave room in the budget for fun/mental health
- Build an emergency fund
- Ensure you are properly insured (home, auto, cyber, renters, flood, disability…)
- Save for retirement
– Greg Rawn, CPA, CA, CBV, Client Service Partner
As we approach the end of 2024, it is crucial to take a moment and reflect on an often-overlooked aspect of our lives: estate planning and personal affairs. While it may not be the most cheerful topic, ensuring that your affairs are in order is one of the most responsible and caring actions you can take for yourself and your loved ones. Having a will in place will ensure that your assets are distributed according to your wishes, and having adequate life insurance can cover potential taxes and provide financial security for your family. Consult with your legal, financial and tax advisor to ensure that your plan is aligned with your wishes and protects your legacy.
– Annick Ouellet CPA, CA, Client Service Partner – Tax
Beginning March 2025, the CRA will be transitioning to online mail as their default method of delivering business correspondences and all business tax notices and other correspondences will be sent via ‘My Business Account’. If you don’t already have one, you may want to spend time over the holiday season setting up a My Business Account. If you already have a My Business Account, take time to ensure that the email address attached to the account is still correct.
-Mojisola Ogungbola, CPA, CGA, Client Service Manager, Private Enterprise
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