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You may find that your partnership needs to file a return this year |
Many planning points are also available to individuals who carry on business.
Pay reasonable salaries to family members before year-end
If your spouse or children work for you, consider paying them salaries. Salaries paid reduce your income and are taxed in their hands, possibly at lower marginal tax rates than if the income had been paid to you. They also provide family members with earned income for RRSP contributions.
Any salary paid must be reasonable given the services performed. A good rule of thumb is to pay them what you would have paid a third party. A record should be kept of the time actually spent and the services actually performed.
Also, whenever you pay salaries to your spouse or children, ensure that withholdings for income tax, Canada/Québec Pension Plan (CPP/QPP), Employment Insurance (EI) (where an exemption is not available) and any applicable provincial payroll taxes are remitted as required. The salary and the amounts withheld for 2011 must be reported on T4 slips, which are due on or before February 29, 2012.
Purchase capital assets before year-end
If you’re planning to purchase capital assets in the near future, consider doing so before the end of your fiscal year. If the assets are acquired and in use before year-end, you can claim one-half the usual CCA rate. Even if you’re in a loss position this year, purchasing the asset now will allow a full year’s CCA claim next year. Bear in mind that title to the asset must be acquired and it must be available for use in order to claim CCA.
Ensure that the new filing requirements for Partnership Information Returns are met
If you’re a member of a partnership that was previously exempted from having to file a Partnership Information Return (Form T5013 including schedules and slips) because there were less than six partners, you may find that the partnership needs to file a return this year. Previously, the CRA’s administrative policy generally exempted partnerships with fewer than six partners from filing a return. However, the CRA has changed their filing requirements for partnerships with fiscal periods ending on or after January 1, 2011. Partnerships will now be required to file a Partnership Information Return for each fiscal period that they meet certain criteria. These criteria are based on size of the partnership, except that tiered partnerships, partnerships with a trust or corporation as a partner and certain resource partnerships will not be exempt based on size. As the filing criteria are based on current year results and not the prior year, you may find that at the end of the year, you have a filing requirement that you weren’t expecting. For further information, read our Tax Factor 2011-01 article “New Filing Requirements for Partnership Returns” and speak with your BDO advisor for assistance in complying with this new filing requirement.
Next section: Owner-manager considerations
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