By: Deanne Gage | Globe Advisor | December 6, 2023
Read More, and see what Scott Plaskett says about How to prepare for intergenerational business transfers before key tax-related changes kick in.
Scott Plaskett, certified financial planner and chief executive officer at Ironshield Financial Planning in Toronto, notes that even though capital gains have a 50 percent inclusion rate after the LCGE is used up, the AMT calculation will likely push the amount of taxes business owners pay much higher.
He is using these upcoming tax changes as an opportunity to examine whether his applicable clients have structured their businesses efficiently, from a tax perspective, so they qualify for the LCGE in the first place. He notes that a lot of owners are so focused on the business, they fail to consider that issue.
To qualify for the LCGE, Mr. Plaskett says the business must be incorporated at the time of a sale when the shares are sold. Also, more than 50 per cent of the business’s assets must have been used in an active business in Canada for 24 months prior to the sale.
He adds that incorporation likely makes sense for businesses that make more money than is paid out to the owner and employees.
“There’s no sense in paying personal taxes on all that money when you can retain it in the company at a lower tax rate,” he explains.
