A welcome change for small businesses was the 2009 budget’s increase in the small business deduction limit to $500,000. Prior to the budget, the small business deduction reduced the federal corporate income tax rare applied on the first $400,000 of active business income for CCPCs (Canadian-controlled private corporations) to 11%. In order to provide additional tax relief to small businesses, the 2009 budget increased the small business limit (the annual amount of active business income eligible for the reduced tax rate) to $500,000, retroactive to January 1, 2009. Corporations with a non-calendar year-end will be entitled to a pro-rated amount of the new, higher small business limit.

Small businesses that have incomes less than the small business limit receive additional benefits. Therefore this increase to the small business limit would allow more small businesses to take advantage of these benefits which include:

o Eligibility to make quarterly tax installments as opposed to monthly
o Paying corporate taxes by the end of the third month after the end of their taxation year as opposed to two months
o Claw back of the $3M Scientific Research and Experimental Development (SR & ED) expenditure limit to begin at $500,000 and full phase out to take effect at $800,000, as opposed to $400,000 and $700,000

2 Comments for this entry

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