2024 Second Quarter Tax Tips & Traps: Key Highlights and Updates

Welcome to the 2024 Second Quarter edition of Tax Tips & Traps by Lekadir LLP. This publication provides a high-level summary of the latest tax developments relevant to business owners, investors, and high-net-worth individuals. For those interested in a more detailed analysis, click here to read the full report.

Capital Gains Inclusion Rate: Proposed Increase

The 2024 Federal Budget proposes increasing the capital gains inclusion rate from 50% to 2/3 for gains realized after June 25, 2024. Individuals can still benefit from the 50% rate on the first $250,000 of annual gains. Corporations and trusts should consider accelerating gains to access the current rate. This proposed change could significantly impact your tax strategy, so it's essential to review and possibly adjust your plans to optimize tax benefits.

Mandatory Electronic Filing for GST/HST Returns

Starting in 2024, most GST/HST registrants must file returns electronically. Penalties will apply for non-compliance, making it crucial for businesses to adapt to this change. Ensuring your GST/HST returns are filed electronically will help you avoid these penalties and streamline your tax filing process.

New Tax Rules for Short-Term Rentals

From January 1, 2024, new rules will deny tax deductions for expenses related to non-compliant short-term rentals. This includes operating without necessary permits. Verifying your compliance with these regulations is essential to retain your tax deductions and avoid unexpected tax liabilities.

GST/HST Issues on the Sale of Short-Term Rental Properties

The sale of short-term rental properties may attract GST/HST, according to recent court rulings. Understanding the tax implications of selling such properties is critical. Consulting a tax professional before making any sales can help you navigate these complexities and ensure compliance.

Director Liability and the Importance of Formal Resignation

Directors can be personally liable for unremitted taxes even after resignation if they continue to act in a director’s capacity. To limit personal liability, it is crucial to ensure a formal and complete resignation process. Directors should take the necessary steps to officially step down and avoid future tax-related issues.

Motor Vehicle Allowances: Carpooling Rules

The CRA clarified that vehicle allowances must be based solely on kilometers driven for employment to remain non-taxable. Structuring these allowances appropriately is vital to avoid unexpected tax liabilities for employees and employers alike.

CRA’s Unnamed Persons Requirement (UPR)

The CRA has been using UPRs to obtain information from businesses like Shopify to detect tax non-compliance. Ensuring full compliance with tax obligations is essential to avoid enforcement actions. Businesses should be prepared to provide the necessary information and maintain accurate records.

Employee Online Reviews: Disclosure Requirement

Under the Competition Act, employees must disclose their connection to the business when posting online reviews. Non-compliance can lead to legal issues. Training employees to disclose their affiliations in online reviews can help your business stay compliant and avoid potential fines.

Maintaining Non-Profit Organization (NPO) Status

NPOs must operate exclusively for non-profit purposes to retain their tax-exempt status. Investing in taxable subsidiaries may jeopardize this status. It’s important to review your organization’s investments and activities to ensure compliance with CRA regulations.

Quick Tax Tidbits

• Taxpayers can register for the CRA’s My Account for immediate access, avoiding the wait for a security code by mail.

• A portion of the federal carbon tax will be returned to Canadian-controlled private corporations (CCPCs) with fewer than 500 employees who file their 2023 tax return by July 15, 2024. The rebate will be based on the number of employees and will be paid automatically in certain provinces.

• Depositing cryptocurrency with a trading platform could constitute a disposition, resulting in a taxable event.

For a comprehensive review and additional details on these topics, please read the full report here.