Quick Tax Notes 0

Posted On October 25, 2022, by Admin

Some quick Tax and Business Thoughts for October 2022

Every month which search the CRA website and press releases for information pertinent to running your business.  Here is October’s quick tax update.

CRA’s Prescribe Interest Rate Rising

August 31, 2022, CRA raised the prescribe rate for income tax purposes for the fourth quarter of 2022 by 1%, such that they are 3% for taxable benefits and corporate refunds, 5% for personal refunds and 7% for arrears and instalment interest.

Other releases

September 13, 2022, the Prime Minister’s office issued a new release (Making Life More Affordable for Canadians) in respect to the GST Credit, dental benefits, and housing support.  The proposals were as follows:

  • Doubling the GST Tax Credit for 6 months – a one-time, lump sum tax-free payment equal to 6 months of GST/HST credits would be made to all current GST/HST credit recipients – payments should be made before the end of 2022.
  • Introducing the Canada dental benefit program for children – the benefit would provide up-front tax-free payments to cover dental expenses for children under 12 without dental coverage. Up to $650 could be received per eligible child where the adjusted family net income is up to $70,000.  Family incomes above $70,000 would receive a reduced benefit, and no benefits if the family income was over $90,000.  The program should be in place by December 1, 2022 but cover expenses after October 1, 2022.
  • Providing a one-time $500 Canada housing benefit top-up to low income renters (net income of less than $35,000 for families and $20,000 for individuals. This program is expected to be implemented before the end of 2022.

Director’s Personal Liability

A Tax Court of Canada Case in August found that just asking the question as a Director “has the source deductions been paid?” is not sufficient nor duly diligent to relieve the director from personably liable for the unremitted payroll deductions.

The taxpayer (Director) argued that he was duly diligent as he asked at the director’s meeting each month whether the tax remittances were up to date and received oral confirmation that they were.

The Court ruled that the taxpayer was not duly diligent in preventing the failure to make adequate payments, and he was found personably liable for over $78,000 of source deductions, interest and penalties.

Executor/Trustee – Whether you should accept these roles

Individuals may be asked to take on various roles in respect of loved ones, friends, clients or others.  Two roles that are particularly riddled with challenges include the role of trustee for a family trust and the role of executor of an estate.  While an individual may carry out their duties in an appropriate manner, it is important to consider the risks of unhappy beneficiaries and any other undesirable outcomes, including litigation and / or strained relationships.

Here is an example:

Executor and personal liability.

A Tax Court of Canada case from March 2022 reviewed whether the taxpayer was personal liable for the estate’s tax debts.  On the death of the taxpayer’s father in 1994, the taxpayer and his brother became executors of the estate.  The taxpayer argued that he renounced his role of executor two months after the death of his father and therefore should not be held liable for the estate’s tax debts.

The father left most of his estate to the taxpayer’s brother, as well as a portion to grandchildren and great-grandchildren.  The taxpayer accepted this decision but wanted to ensure that his daughter received her share of the estate.  To this effect in 2010, the taxpayer and his brother took steps to distribute a balance of $240,000 payable to the taxpayer’s daughter, secured by a mortgage against one of the estate’s properties.  That is, the taxpayer’s daughter was essentially provided a $240,000 receivable from the estate.  No clearance certificate was obtained and the estate was in arrears with it taxes.  In 2016, the bother died.

While the Court acknowledged that the taxpayer may not have understood everything about being an executor or every aspect of a land transfer, the Court believed he understood that he was signing as an executor.  As he was the executor when the mortgage was secured and did not obtain a clearance certificate, he was held personally liable for the estate’s tax debts.

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This blog is not meant to provide specific advice or opinions regarding the topic(s) discussed above. Should you have a question about your specific situation, please discuss it with your GBA advisor.

GBA LLP is a full-service accounting firm in the Greater Toronto Area, but we primarily service all of Ontario as well as the rest of Canada virtually, except Quebec. Our team of over 30, provides Audits and Reviews of financial statements, and Compilations of  financial information, as well as corporate tax returns.  We provide specialized corporate tax and succession planning for small and medium businesses, in addition to general advisory services.

If you would like to schedule a call to discuss your accounting or tax needs with one of our team members, please complete the free no obligation meeting request on this page.

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