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39 | O akville B eaver | T hursday,M ay 16,2019 insidehalton.com Wherever Business Takes You Business is a journeyfilledwith twists and turns, risks and opportunities.When you'rewondering if you should stay the course or take a detour, we can help you plan the best route now and forwherever business takes you. Tofind an advisor near you, contact JimMolyneux, Regional Managing Partner, at 416.626.6000or jim.molyneux@mnp.ca or visit MNP.ca consumer featureconsumer feature And last, but definitely not least, an estate freeze with a family trust can continue to decrease estate tax of the 'first' generation. Passive Income, Tax on Business Income Two other new rules now apply.The first will restrict access to the low rate of tax on business income for those companies that also own investment assets and are earning investment income.The second relates to the treatment of refundable taxes on corporate investment income. The small business deduction (SBD) is generally available on the first $500,000 of active business income earned in Canada by a Canadian controlled private company.The resulting corpo- rate tax rate on income eligible for the SBD is 12.5 percent compared to 26.5 percent, the general corporate rate. Business owners will see their access to the low rate of tax (SBD) reduced. Under the new rules, the small busi- ness limit of $500,000 is reduced by five dollars for every dollar of invest- ment income earned above $50,000. The reduction will start when passive income in the company and its associ- ated group reaches $50,000.The SBD is eliminated once you exceed $150,000 in passive / investment income. One way to keep the small business deduction limit is to split up a joint professional corporation to reduce the passive income in each company to stay below the $50,000 threshold.This can work for practices co-owned bymar- ried professionals (common among physicians, dentists or veterinarians). Another strategy is to invest in assets that do not generate investment income, e.g., permanent life insur- ance. Income earned inside the policy is exempt from tax when it qualifies as an exempt policy under the Income Tax Act. None of the income earned inside the policy counts towards the $50,000 per year threshold, which can allow you to preserve your SBD. Next Steps The recent changes to the tax rules reduce, but do not eliminate, planning opportunities for business owners. It is important you review your share structure with a trusted professional to determine if a corporate reorgani- zation should be considered. Poten- tial planning could include direct ownership of shares by other family members to allow for dividends to be paid to themwithout attract- ing high rate tax. Shares owned by a family trust could be distributed without tax to family members. An estate freeze using a family trust is still viable. In this way, future growth can be transferred to the next generation and income (estate) tax on the growth can be deferred. Meet with a trusted professional to determine what, if any, changes should bemade to your corporate struc- ture tominimize your tax exposure and optimize tax opportunities. JimMolyneux, CPA, CA is the Regional Managing Partner for Peel Region and DavidThompson, CPA, CA is a Partner, Taxation with MNP, a leading Canadian accounting, tax and consulting firm.They can be reached at 416.626.6000 or jim.molyneux@mnp.ca or dave.thompson@mnp.ca