Yes, there is such a thing as good tax news!
In addition to lowering GST rate from 6% to 5%, effective January 1, 2008:
The GST/HST threshold for quarterly instalment payments will be increased from $1,500 to $3,000. If you are an annual filer whose net tax for a fiscal year is less than $3,000, you will not need to make quarterly instalment payments throughout the next fiscal year. – Revenue Canada
Don’t let the word “increased” scare you. This is actually good news! Our GST payable (after deductions) is typically between $3-5K, which easily exceeded the $1,500 threshold. We were forced to either do one big prepayment before filing the GST return so the tax payable would be under $1,500, or suffer through the quarterly instalment payments.
Instalments are not a problem, really, but they are a hassle. And if you’re late with one of the instalments, you’ll be penalized. You’re potentially setting yourself up for 3 penalty occasions a year. I always opted for the prepayment option, which is a much smaller hassle: just 1 extra check and 1 extra form to fill out.
This year we have a bunch more ITC’s (input tax credits), so the GST payable may very well be right under the $3,000 threshold.
In conclusion, while this change doesn’t directly mean tax savings, this little change has the potential to make lives a bit easier.
Photo credit: Andrew Rubtsov (AR Stock)
If you’re running a home-based business and eat your lunch at home most of the time, you may neglect writing off meals thinking “it’s just groceries we’d be buying anyway”. You should keep all your grocery/dining out receipts for the year, and then add a pro-rated amount of meals to your tax return. I didn’t do it in the past either, but for 2007 tax year I’ll be sure to include 1/3 of our grocery bills to our expenses. My 1/3 number is based on “breakfast, lunch and dinner”. Then of course that 1/3 will be further reduced by 50% because you can only write off half the meals (on a Canadian return, anyway).
There’s a lot of new small business tax rules this year, so I can’t use my QuickTax from last year to estimate how much we should buy before the year runs out. I noticed that tax software never goes on sale so I might as well buy it now and do a rough calculation that’s more or less correct according to the new laws.
Interesting data from the Organization for Economic Cooperation and Development as posted in the New York Times:
What’s even more interesting is the percentage-point change. Canadian, German, Dutch and British tax rates have basically remained the same since 1975. Seems to me there must be a relation to the stability of the economy somehow.
I’m not sure how “Tax revenue as a percentage of G.D.P.” translates into actual average tax rate, though. If Canada’s tax revenue is 33.4% of G.D.P. – is this percentage the average tax rate Canadian households pay?