Starting at PWM Tax and Accounting last winter was my 21st year practicing as an accountant. When I started, we had just emerged from one of the worst droughts in Saskatchewan and BSE was just about to be found in Saskatchewan. After 10 years of practicing, I could recall what impacted agriculture the most in just about every year, whether it be low prices, a commodity boom, drought, or too wet, or other circumstances that led to more and/or less prosperity for my clients. However, as I look back on the last 10 years, I am reminded of all the changes to income tax and the accounting industry that have affected not only the Agriculture industry but every other industry and individual taxpayer in Saskatchewan and Canada. The amount of time and effort to be compliant has increased dramatically and I thought I would share a brief history of the major changes I have witnessed over the last couple of years.
While attending my third and final year in residence of the CPA In Depth Tax Course, the Finance department made a major announcement regarding proposed tax measures designed to “improve the fairness of Canada’s tax system…”. The rule changes affected the Lifetime Capital Gains Exemption by restricting availability of the LCGE for some taxpayers but increasing the exemption limit for other individuals, restricting income splitting among family members (TOSI) and taxing privately held corporations that have excess high passive investment income. This was major news for all of us tax nerds and some of the concepts we had studied in the prior two years were no longer relevant, not to mention the countless tax plans that advisors had developed with their clients to minimize their taxes. For me, this was the beginning of a new era of changes in the tax and accounting world.
In 2018, as Accountants scrambled to understand the new rules, the Finance Department sprinkled in a few new enhancements to personal income taxes and increased their tax support for clean energy. In 2019, there were measures introduced to increase the amounts to the RRSP that first time home buyers can access, incentives to increase housing supply, skills training credit, and included enhanced CCA for specific capital purchase investments. Of course, in 2020 the COVID pandemic was upon us and a whole set of benefits were offered to the taxpayer to support the stay-at-home orders. Those incentives and benefits were not always easy to understand and many who thought they should qualify for benefits often did not. In 2021, as the Government reigned in support, the national accounting body implemented new standards to implement the Compilation report that replaced a typical “Notice to Reader” many clients had prepared for their business. Those new standards required an Accountant to do additional work for accepting, conducting and reporting on compilation engagements.
In 2022, in response to affordable housing and foreign investment, the government introduced the Underutilized Housing Tax to penalize foreign investors that were not living or had vacant properties in Canda. Unfortunately, this tax initiative affected almost every Canadian that had rental property and imposed harsh penalties if those individuals did not report even if they did not own property. In 2023, the bare trust rules for Canadians finally came to fruition, which require those individuals’ holding property on behalf of others to report those arrangements by filing a T3 Trust Return. At the 11th hour in March of this year, the government back pedaled allowing Canadians to not report those arrangements for the current year as they revisited the rules. And finally, not too long ago in June of 2024, the capital gains inclusion rate was changed, with new rules that will create some winners and losers when it comes time to calculate their capital gains.
This brief history only scratches the surface of the changes since 2017, and certainly, there were many changes prior to these. In this new era of tax and accounting, compliance has become a very real challenge for most Canadians and there has been a suggestion that the income tax act should be overhauled to make taxes simpler.
As an Advisor, we spend many hours learning and understanding the rules so that we can advise our clients on how to be compliant and avoid any noncompliance issues. Often, clients only see their information as simple and preparing a tax return that has been the same for many years. However, an Advisor must make every effort to understand your unique circumstances by not only getting to know you but also be able to advise you as to how the old rules and the new rules might affect your unique situations. Fortunately, the Counsel at PWM Financial Services Inc. and PWM Tax and Accounting have many years of experience and can provide our clients with the expertise they require.
