Year: 2024

Psychotherapy and Counselling Therapy: GST/ HST?

Posted on by dflanagan

As of June 20, 2024, certain psychotherapy and counselling therapy services have become exempt from GST/HST. This means that those providing these exempt services are no longer required to collect GST/HST on their services, and these service providers are no longer able to claim input tax credits (ITCs) on inputs acquired to provide these services.

Psychotherapy and counselling therapy services are now exempt if the provider:

  • is licensed with a provincial body responsible for the regulation of psychotherapy services (regulated only in Ontario) or counselling therapy services (regulated only in New Brunswick, Nova Scotia, and Prince Edward Island); or
  • operates in a province with no regulatory body but has the equivalent qualifications required to meet the licensing requirements in a regulated province.

In addition, to be exempt from GST/ HST, those providing the services must do so within the profession’s scope of practice in the respective regulated province.

If all of a registrant’s services are GST/ HST exempt, they may close their GST/ HST account with CRA. If only some of their services are exempt, they must keep their account open and continue to charge GST/HST on nonexempt services and goods.

In addition, on June 20, 2024, there may be a deemed sale and repurchase of certain capital property (e.g. computers, furniture) used in the provision of these services due to the change from a taxable to exempt supply. This generally means that the taxpayer will have to repay all or part of the GST/HST they claimed (or were entitled to claim) as an ITC when they bought the property and when they made any improvements to it. The required repayment of GST/HST is adjusted if the assets have declined in value since the acquisition.

If psychotherapy or counselling therapy services are provided, consideration should be provided to determine if the supply is now exempt.

Agribusiness Labour Force Management Initiative Summary

Posted on by dflanagan

The governments of Canada and Ontario have created the Labour Force Management Strategies Initiative to attract and retain Ontario agri-food workers. This $4-million investment, funded by the Sustainable Canadian Agricultural Partnership (Sustainable CAP), will strengthen Ontario’s agri-food workforce for years.

Producers and processors can receive up to 50% cost-share support, with a maximum of $40,000 per project. Industry organizations can receive up to a maximum of $100,000 per project.

The key components of the initiative include:

  • funding for job training and recruitment marketing campaigns;
  • introduction of worker supports such as ridesharing programs and language training; and
  • support for on-site amenities and recreational facilities.

Applications are now being accepted for eligible primary producers, processors, and industry organizations. The deadline to submit applications is September 2, 2025.

For more information about this new initiative:

Governments investing in initiatives to attract and retain agri-food labour – Canada.ca

Labour Force Management Strategies Initiative | ontario.ca

CEBA: Collection Process

Posted on by dflanagan

Where borrowers cannot repay their CEBA loan in full when it becomes due, the loan may be assigned from the taxpayer’s financial institution to the CEBA program for collection. CRA is assisting with the collection of loans that are assigned and began said work in the Spring of 2024. Loans may have been assigned if they are in default for reasons such as:

  • not repaying the principal or interest when due;
  • becoming insolvent; or
  • failing to observe the terms of the loan.

When a loan is assigned, a loan assignment notice will be mailed to the taxpayer containing details on how to make payments and how to set up a payment arrangement with CRA. A 12-digit CEBA identification number commencing with “967” will be issued for use in registering for a CEBA portal account. The portal provides information on the outstanding balance, the payment arrangement, payment history, charge history, monthly statements, and contact information. Payment and charge history for only the period that commenced with the assignment to the CEBA program is available on the portal.

While CRA may contact the taxpayer to set up a payment arrangement, taxpayers may also initiate communications by contacting the CRA CEBA contact centre (1.800.361.2808) once the loan assignment notice has been issued.

Payments made to an assigned CEBA loan are applied in the following order:

  • fees outstanding;
  • interest outstanding;
  • principal outstanding; and finally
  • interest accrued.

Authorized third parties, such as a family member, accountant, or lawyer, can request information about the loan through the general CEBA call centre (1.888.324.4201), but they cannot access the loan or sign into the taxpayer’s CEBA portal account. To authorize new third parties or manage existing third parties, the taxpayer must contact the CRA CEBA contact centre.

The CEBA program also provided the following guidance in respect of changes to an entity’s business.

  • Business closure – Taxpayers must repay the loan even if the business is closed.
  • Ownership change – The impact of a change in ownership of the borrower depends on the business’s legal structure (e.g. whether the business is a sole proprietor or a corporation) and the type of ownership change. The general CEBA call centre should be contacted for more information once loans are assigned.
  • Insolvency – The CEBA FAQ stated that the CEBA program cannot provide insolvency advice.
  • Bankruptcy/consumer proposal/ receivership – If a business has filed for bankruptcy, the appointed licensed insolvency trustee can contact the CEBA call centre. The process for entering into payment arrangements does not apply to insolvent taxpayers.

Ensure that a reasonable repayment schedule is established if satisfying the full outstanding CEBA loan immediately is problematic.

GST/HST New Residential Rental Property Rebates – Where Do We Currently Stand?

Posted on by dflanagan

On September 14, 2023, the Department of Finance announced a new enhanced GST/HST New Residential Rental Property Rebate (“NRRPR”) for certain New Purpose-Built Rental Housing (“PBRH”).  The purpose of the enhanced rebate is to provide relief on the GST costs related to building new residential rental properties in order to assist with stimulating build of PBRH.

Background

The rental of a residential complex or a residential unit in a residential complex is generally exempt for GST/HST purposes. Therefore, builders cannot claim HST paid in relation to these properties.  Typically, the major GST/HST cost is paid or payable on the purchase of a residential complex from a builder or that they accounted for on the “self-supply” of the complex.

However, eligible residential builders can file for the NRRP Rebate for the GST up to a maximum of 36% of the GST payable on the purchase or self-supply of a qualifying residential unit (an Ontario NRRP HST rebate is also available in that province). The amount of the NRRP Rebate is progressively reduced when the fair market value (“FMV”) of the property exceeds $350,000 (no NRRP Rebate is available if the fair market value is $450,000 or more).  Further, the Ontario NRRP Rebate becomes capped at $24,000, which can result in significant GST/HST costs to builders.

Pursuant to the PBRH Rebate rules, to the extent the new residential rental project meets certain requirements, the rebate percentage is increased from 36% to 100%. Moreover, the PBRH Rebate does not have any phasing-out rule or the $450,000 fair market value limitation per unit.

PBRH – What Properties Qualify?

The PBRH Rebate is only available for a residential unit that qualifies for all the following conditions:

  1. Construction has begun after September 13, 2023, and on or before December 31, 2030;
  2. Construction is substantially completed by December 31, 2035; and
  3. It is in a building with at least:
    a. Four private apartment units (i.e., a unit with a private kitchen, bathroom, and living areas), or at least 10 private rooms or suites; and
    b. 90% of residential units designated for long-term rental.

An “addition” to an existing building also qualifies to the extent that such addition includes 4 or more residential units and at least 4 of those units contain private kitchen, bath, and living area (or 10 or more private rooms or suites).

The purpose of this legislation is to increase the supply of new residential properties, therefore, existing residential complexes that undergo a substantial renovation do not qualify for the PBRH.

What is Considered “Construction” to the Canada Revenue Agency (“CRA”)?

Those involved in the construction industry will know there are various stages of “construction”, and this is a crucial element of builders being eligible for the PBRH.  The term “construction” is not defined in the Excise Tax Act (“ETA”) which has left many builders wondering what CRA considers “construction”.

On June 20, 2024, the CRA published new GST/HST Notice 336 (“336”). Included in 336 is the CRA’s comments and administrative view that states CRA’s position is that the construction of a residential complex is generally considered to begin at the time the excavation work pertaining to the property. CRA also implies that the signing of a purchase and sale agreement relating to a newly constructed units prior to September 14, 2023, would not prevent the builder’s eligibility for the PBRH Rebate if the construction of the complex began after September 13, 2023, but before 2031. CRA also confirms that newly constructed long-term care facilities that otherwise meet the relevant conditions would be eligible for the PBRH Rebate.

Although the CRA announcement from June of 2023 is welcomed, there is still remains some subjectivity.  The CRA announcement is an administrative position, meaning, it isn’t legislation – which comes with some element of risk.  For instance, there are many stages of excavation work, including the initial clearing of land.  It appears that further clarification will still be required, which will likely come in the form of taxpayer’s disputing what “construction” is, as CRA challenges these rebate filings.

 

Canada Pension Plan: Changes to Certain Benefits

Posted on by dflanagan

Several changes have been introduced to targeted measures and benefits under the Canada Pension Plan (CPP). None of the below changes are expected to impact contribution rates.

Death benefit

The CPP death benefit is increased to $5,000 (from $2,500) where all of the following criteria are met:

  • the estate would otherwise be eligible for the regular death benefit;
  • the deceased had not received any retirement or disability benefits, or similar benefits under a provincial pension plan; and
  • no survivor’s benefit is payable as a result of the individual’s death.

The increased benefit applies to deaths after December 31, 2024.

Children’s benefits

Prior to the change, the CPP surviving child benefit was only payable to children of a deceased parent if the child was under 18 or between the ages of 18 and 25 and was a fulltime student. While this benefit is still available, a similar benefit has now been introduced for part-time students, equal to 50% of the amount payable to full-time students.

In addition, eligibility for the disabled contributor’s child benefit is extended such that it continues to be available even when the disabled parent reaches age 65. Previously, the benefit ended when the disabled parent reached age 65.

Survivor benefits

Previously, couples who were legally separated but still married or in a common-law relationship could be eligible for CPP survivor pension on their partner’s passing. However, after this change, the survivor pension is not payable after a legal separation where there has been a division of their CPP pensionable earnings following the separation.

Ensure you apply for these enhanced benefits if you are eligible.

Application Intake Starting Soon for Agri-food Producers and Processors Funding Program

Posted on by dflanagan

On October 8, 2024, the Government of Canada and Ontario announced $4M in funding that will be available for agri-food producers and processors. Funded through the Sustainable Canadian Agricultural Partnership (Sustainable CAP), the investment will strengthen Ontario’s agri-food workforce.

Applications for this initiative will be accepted on October 22, 2024, for eligible primary producers, processors, and industry organizations.

Program Benefits

  • Eligible producers & processors can receive up to 50% in cost-share support per project, up to a maximum of $40,000.
  • Eligible industry organizations and collaborations between or among businesses can receive up to 50% of their eligible costs, up to a maximum of $100,000 per project.

Learn more about this new funding program.

The Importance of Bookkeeping for Your Business

Posted on by dflanagan

Starting a business can be a stressful time for business owners with many tasks to sort through from accounting, marketing, hiring employees, and general operations – each of these tasks are important and influence the success of your business.

Bookkeeping usually ends up low on the priority list, as does the bookkeeping system that is utilized.  Often the year-end reporting is due and you find your shoebox or drawer is full of receipts, and then it becomes both daunting and overwhelming to deal with.  Creating a bookkeeping system early on can make the difference between a successful business and a failure.

A solid bookkeeping method, in conjunction with a bookkeeping system, can make it easier for you to manage your books.  Not only will this save you time, but money as well, leaving you time to work on the business.

Finding the right accounting program is just as important as finding the right accountant or lawyer.  Online accounting software such as QuickBooks and Xero can offer you the ability to run accurate and real-time reports.  The better the setup, the more meaningful the reports.

Bookkeeping is an essential part of any business and when done correctly can offer many benefits.  This task should be done as often as possible to ensure accuracy.   If time is constrained, you may want to look at outsourcing your bookkeeping to a professional. Outsourcing can reduce error and be very cost-effective.

Contact us today to learn more about how we can help!

Business Receipts: What is Sufficient?

Posted on by dflanagan

In a recent Tax Tip, CRA stated that an acceptable receipt for income tax purposes must contain all of the following:

  • the date of the purchase;
  • the name and address of the seller;
  • the name and address of the buyer;
  • the full description of the goods or services purchased; and
  • the vendor’s business number if the vendor is a GST/HST registrant.

Credit card statements are not generally acceptable unless they contain all the above information.

To avoid disputes when claiming deductions, ensure that receipts contain all the required information.

TFSA: Caution with Over Contributions

Posted on by dflanagan

Taxpayers who contribute excess amounts to their TFSA are subject to a penalty tax of 1%/month that the excess contribution remains in the TFSA. If subject to the tax, an individual may apply to have the tax waived. If the individual is unsuccessful after the CRA’s first and second review of the application, the individual may apply for a judicial review of the denial in the Federal Court.

Moving Funds between TFSA Accounts

In an April 9, 2024, French Federal Court case, the taxpayer withdrew $40,000 from a TFSA at one financial institution and deposited it into another TFSA at a different financial institution at a time when he only had a TFSA contribution room of $6,270, leading to an overcontribution. Withdrawals from a TFSA are only added to an individual’s contribution room at the start of the following year. Had the taxpayer directly transferred $40,000 between the two TFSAs, there would have been no overcontribution. CRA held that the overcontributions were not the result of a reasonable error, so they could not waive the penalty tax.

The Court noted past cases that supported CRA’s interpretation that neither ignorance of the tax law nor bad advice constitutes a reasonable error. The taxpayer’s failure to transfer funds by direct transfer between the two TFSA issuers resulted in the penalty tax being properly applied CRA’s decision to deny relief was reasonable, and the application for judicial review was dismissed.

Relying On CRA Portals

In a March 27, 2024, Federal Court case, the taxpayer made TFSA contributions in line with the available TFSA room listed on CRA’s My Account; however, the balances online did not reflect some contributions, resulting in the taxpayer making excess contributions. CRA alerted the individual after the excess contributions were made. As the individual continued to contribute based on the values posted on My Account, the Court found CRA’s decision to deny relief on the penalty tax reasonable.

Do not overcontribute to your TFSA, as the penalty tax can become costly and difficult to pay. Balances posted in My Account may not be timely nor accurate.

Canada Pension Plan: Timing of Starting Payments

Posted on by dflanagan

Individuals can start collecting Canada Pension Plan (CPP) retirement benefits as early as age 60. However, benefits are decreased by 0.6%/ month (7.2% per year) prior to age 65 for a maximum reduction of 36%. They are increased by 0.7%/month (8.4% per year) that CPP is delayed past age 65 to a maximum increase of 42% if collection is deferred to age 70. In other words, monthly retirement benefits are more than 2.2 times as large for someone who waits until age 70 rather than collecting at age 60.

A recent National Institute on Aging report indicated that an individual with median CPP benefits and an average life expectancy loses over $100,000 of CPP benefits, in current dollars, by starting CPP at age 60 instead of 70. The report noted that 9 out of 10 individuals opt to start CPP by age 65 or earlier.

The report also noted that collecting earlier may be a rational decision for individuals with financial hardship or poor health, resulting in reduced life expectancy. However, it suggested that most individuals would be better off drawing on other savings (such as RRSPs) to bridge the gap until reaching age 70. The report indicated that 4 in 5 individuals with RRSPs or RRIFs would receive higher lifetime income using this approach.

Consider the lifetime benefits and costs when deciding at what age to commence CPP payments.