SUMMER OFFICE HOURS
As in past years the office will be closed on Fridays from June 27 to August 29. You
will be able to leave a message which will be returned the following Monday.
For the first time ever we will also be closing the office for an extended period,
August 1 to August 10. This may seem like a long time but with the office normally closed
Fridays and the Civic Holiday on August 4 the office is only closed an extra four days.
STATUTORY (PUBLIC) HOLIDAYS
A reminder that the following are Public Holidays in Ontario, Canada Day and Labour
Day. Please note that the Civic Holiday, August 4, is not a Public Holiday.
If your employee works any Public Holiday they are entitled to either 2.5 times their
regular pay or 1.5 times their regular pay plus a day off with pay.
As mentioned in previous newsletters the new Employment Standards Act forces employers
to pay Public Holiday pay to all employees effective upon hiring. There is no three month
exemption for new employees. Part time employees receive Public Holiday pay based upon
their average daily hours worked. This formula is daily hours worked in the preceding four
weeks divided by 20. If your part time employee worked 6 days at 7.5 hours per day in the
past four weeks they would be entitled to 2.25 hours of pay for the Public Holiday. Please
remember that all employees must work their scheduled hours before and after the Public
Holiday in order to earn the pay. For part time employees the scheduled hours may be as
much as two weeks before or after the holiday. If they miss working those hours they are
not entitled to Public Holiday pay.
PERSONAL VEHICLE USE
Effective January 1, 2003 the rules regarding standby charge, or the amount a person
using a corporate vehicle must include as personal taxable income, changed.
Previously a taxpayer could reduce the standby charge included on their income only if
the personal use of the vehicle was less then 1,000 km/mo and the vehicle was used for
primarily (90% or more) for business. Now a taxpayer can reduce the standby charge if the
personal use is less then 1,667 km/mo and the vehicle is used for business more then 50%
of the mileage. This change is significant for "spouses" who work for the
business and do minimal driving.
For example an employee who drives 20,000 km/yr total and 10,000 km/yr for business
would be eligible to receive a tax free travel reimbursement of $3,900. If the vehicle was
leased for $600/mo, has car insurance of $100/mo and operating costs of $300/mo the
employee would be net out of pocket $8,100 after tax. The company would save $780 of
corporate tax based on this travel expense. The overall cash cost to the company/employee
is $11,220 after tax.
If the company paid for all the car cost the employee would have a total standby charge
of $3,960. The employee would be liable for $1,584 of personal tax. The company would save
$2,400 of corporate tax based on this travel expense. The overall cash cost to the
company/employee is $11,184.
The net amounts are very close except with the first scenario the employee has to have
after tax dollars of $8,100 to pay for the vehicle. In scenario two the employee only
needs $1,584 of after tax dollars to pay the tax liability.
With these new rules there are certain situations were the owner/employee should have
the car paid for by the business. Please contact the office to review your situation to
determine if a change is required.
A reminder that the allowable vehicle deductions amounts increased on January 1, 2003
to $.42 for the first 5,000 km and $.36 for every km thereafter.
THE TRUE MEANING OF GOVERNMENT
A client e mailed the office with this joke.
A little boy wanted a $100 very bad and prayed for weeks but nothing happened. Then he
decided to write God a letter requesting the money. When the Post Office saw the letter
addressed to God, Canada they sent it to the Prime Minister. The Prime Minister was so
amused he instructed his staff to send the little boy a $5 bill. The Prime Minister
thought that this would be a lot of money for the boy.
When the boy received the $5 he was very excited and sat down to write a thank you note
to God, which read;
Thank you very much for sending the money. However I noticed that for some reason you
sent it through Ottawa and those jokers deducted $95 in taxes.
TAX SHELTER DEDUCTIONS
In the late 1990's charitable donation programs with art pieces were all the rage. The
program was set up whereby the taxpayer purchases a piece of art for $10,000 and donates
the piece to a pre approved charity. The charity would then issue a donation receipt for
$40,000 to the taxpayer. The taxpayer would receive a $13,000 refund from the donation for
net cash in their pocket of $3,000. The program worked great for the charity, taxpayer and
The past few months the CCRA (RevCan) has been reviewing in great detail the entire
charity donation program and in most cases changing the allowable donation amount to the
actual purchase price of the art piece. In the example above the taxpayer would become
liable for an additional $10,000 in tax as the deduction would be reduced by $30,000. The
taxpayer is also liable for interest and penalties. A recent report indicated that there
were 3,000 reviews ongoing presently.
I remember a couple of clients were presented with this donation program in 98/99 and
had the "seller" contact me about the details. The sales pitch focused on how
RevCan has already approved the mechanics of this plan so there was no risk to our
clients. Fortunately none of our clients involved themselves in this program. The risk to
business owners extends beyond the additional taxes and penalties. If the CCRA decides to
perform a personal audit the company(s) they own are likely to be audited also. This
violates the golden rule of business management - never enter into discussions with the
Remember that there are no real tax avoidance programs, think back to the limited
partnership wine development programs or the offshore oil exploration flow through shares.
In the first case the investment never was returned (so you saved tax but lost your
investment) and in the second case the CCRA disallowed substantial expenses years later
and requested additional tax from the limited partners.
SAFETY AND PERSONNEL MANUALS
We have developed a generic personnel manual that is applicable for most small business
corporations. We suggest that every employer have a manual which is presented and reviewed
with each employee. We are able to customize this document to your specific needs with
relative ease. Please contact the office if you want a new manual or to update your
We are also developing a generic safety manual for our customers. As mentioned
previously all companies with more then five employees are required to have a safety
manual and to review and update it yearly. We welcome your suggestions and comments on