How Do You Take Advantage of the Small Business tax Credit?
As a small time Toronto business owner, no doubt you would receive good tax news from our government with open arms. When we read statements like a new tax move could save small businesses more than $550 million over the next two years it really seems impressive.
This is referring to the Small Business Job Credit that was recently announced by the Minister of Finance, Joe Oliver. While this sounds exciting reality now sets in and as the small business owner, as to how does this affect you in a positive way, or does it really?
First, you need to understand what this credit is. It is only going to be beneficial to you if you have employees for which you are making Employment Insurance premium contributions. If so then you are currently paying a rate of $1.88 per every $100 of insurable earnings that your employee is making. This newly announced credit is going to be applicable over a two year period. So if your EI premium bill amounts to $15,000 or less in those two years then you are going to receive the credit.
It has been estimated that about 90% of the businesses who currently pay EI premiums in Canada will receive this credit. It is said that it will almost reduce the EI payroll taxes to around 15%.
What may be equally good news is that any business that is eligible for this credit isn’t going to be stuck with additional paperwork. This may sound like it means nothing, but any seasoned business owner will tell you that a lot of potential business credits demand so much extra paper work that it eats into any potential tax savings, because someone has to be hired or paid to complete the proper paper work. So this is really an additional bonus with this particular credit.
The Government was also quick to point out that many employers and employees are going to benefit from a good reduction in the Employment insurance rate in 2017. This is the year when the new seven year break even rate takes effect. This is supposed to make sure that EI premiums don’t go above what is need to pay for the IE program over time.
Only you as a small business owner can really determine if this particular tax break has any real significance to you. One of the reasons a lot of small or start up business owners are reluctant to hire is because of the tax burdens that are associated with hiring. In this case this really is a significant tax break and may be one that you should consider as you are making your decision about hiring.