Canadian 2018 Fed Budget: Tech + R&D

Another year went by and another budget was passed. The good news the deficit will be reduced to about $12b by 2023 and liberals have backtracked on a lot of controversial changes they wanted to pass just few months ago.

Parental Leave

So let’s start with not so techie but important for a lot of startups and entrepreneurs out there – parental leave. Government has passed $1b+ to create a 5 weeks program for fathers to be able to take parental leave with a maximum of 40 weeks (up from 35) for both parents and cap it at 55% of 2nd parent income for as much as 12 months as long father takes the 5 weeks. Lose it or use it – they call it.

Small Businesses Tax Changes

The government has decided to push through with their passive income changes. Basically meaning that if you earn passive income in your business – you will not be able to take advantage of low small income corporate tax rate of 9% but would need to pay full 15% corporate tax rate used for big corporations.

Hold on a second, I am a bit slow – what is a passive income you ask? Basically if you earn income as part of your active business activities it is not considered passive income. So if you sell $10m of widgets and earned $1m – it is NOT a passive income but just income. If now you have decided to reinvest that $1m of income to buy say shares of Amazon and Facebook, and made 5% over a calendar year it would be considered an income earned from investments—stocks, ETFs, bonds, etc., as many smart business owners use for long term savings—then it is passive income.

So back to passive income. Government has decided to be “nice” and will allow you to use small corporate rate when applied to first $50k of passive income. However, from $50k to $150k, you will now need to pay more than small corporate rate, and maximizing it at 15% full corporate rate at $150k of passive income or more.  You will not be affected if you are making less than $50k passive income.

If you reinvested your $1m to buy stocks and those stocks increased by say 20% at $200k in passive income – you will be required to pay the same tax rate as the big boys. So basically government wants all of your money.

Innovation Boost to Science

Government has decided to commit almost $4b over next 5 years to give boost to science specifically physical and life sciences, social sciences and health research. The scientists will receive about half a billion dollars more to do their research through university and government funding.

Females Lead the Way / Big Data

The feds have decided to be nice to female business owners as well committing almost $100m to help them grow their businesses as well as almost $600m to provide advanced computing and big data resources. Canada is a world leader in that.

Cybersecurity Project

Government has decided to allocate over $500m to cybersecurity threats. It will be used to develop a central body to oversee cyber security. Cyber attacks have cost Canadian businesses billions of dollars and government is trying to reprimand that. Even the government itself and several universities were a target of Russian and Chinese hackers and ransomware over the last few years.

Newspapers / News Websites / Blogs

Canadian government has decided to help out underfunded and declining newspaper industry by providing them with a non profit status. as well as $50m subsidy to support local journalism. So now if you run a newspaper or a blog , you will potentially be able to register as a non profit.

Did we miss anything? Let us know.


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