At the beginning of the year, it’s easy to get overwhelmed with preparing and filing tax returns for the previous year, but you also need to get ready for the current tax year. For tax year 2018, Saskatchewan is ushering in a number of changes that could affect you, your accounting firm, and your clients. To help you prepare, here’s an overview of the changes you need to know.
Changes to Corporate Tax Rates
The small business tax rate allows small corporations to save a huge amount of money on income taxes, and as of Jan. 1, 2018, your corporate clients stand to save even more money. In the past, the threshold was $500,000, but in 2018, it’s increasing to $600,000. This means your qualifying clients only have to pay 2% provincial income tax on their first $600,000 of taxable corporate income. They can also save a bit on earnings over that threshold, as the general corporate rate in Saskatchewan is falling to 12%.
Education Savings Grants Are Suspended
To save money, Saskatchewan is no longer accepting payments through the Saskatchewan Advantage Grant for Education Savings. In previous years, when people made contributions to their children’s education savings accounts through this fund, they received a 10% grant, worth up to $250 per child per year. As of February 2018, the program has not ended, but it is paused indefinitely. If you have clients who were using this program, you may want to help them find alternatives. In particular, as of 2018, the Canada Education Savings Grant matches 20% of Registered Education Savings Plan contributions up to a maximum of $500 per year. For example, if your clients put $2,000 in a RESP for their child, the CESG contributes an additional $400 to the account.
Incentives for Buying Cultivated Crown Land
If you have clients who lease land from the Crown, they can qualify for a purchase discount until March 31, 2018. This refers to land that’s currently or formerly cultivated. To explain, if you have clients who are renting land from the government for homesteading or ranching, they can qualify for the incentive and save 10% on their purchase. If the land is listed for $300,000, they only have to pay $270,000.
If they decide not to buy the land, they can continue to lease it, but unfortunately, they have to pay a premium. The premium has been rising steadily since 2016, and it increases to 45% in 2018. If the rent was normally $1,000, your clients were paying a 30% premium in 2017, making the rent $1,300. If they continue to rent in 2018, they have to pay a 45% premium, driving up the rent to $1,450. As your clients may be able to save money by buying, you may want to help them explore other funding options for farmers to help with the cost.
Helping your clients understand the impact of tax law changes is one of the most important services you can offer. In addition to letting them know about changes, offer them tips and ideas on how to make the changes work for them. For instance, if you have a corporate client that is likely to save up to $60,000 with the new increased small business income threshold, you may want to help it explore how to reinvest those funds into its business’ future success.