Business Tax 101: Why/When Do I Need To Apply For A GST/HST Account?

 

In Canada, most goods and services are eligible for at least one sales tax: the Goods and Service Tax (GST)– some provinces are also subject to the Harmonized Sales Tax (HST). Most Albertans mentally factor in the 5% GST charge to day-to-day transactions, but there is more pressure on businesses to follow federal regulations. If you own or operate a business, it is vital that you do not overlook sales tax requirements. Review the Liu & Associates crash course on GST/HST accounts and contact us today with any questions or concerns.

 

WHAT IS A GST ACCOUNT?

In order to track business taxes, the Canada Revenue Service (CRA) maintains a database of business numbers– known in this case as GST numbers. Your number corresponds to your GST account, through which your business will remit taxable amounts and file returns. Collecting and charging GST falls to the business and they are responsible for mistakes, oversights and any resulting consequences.

DOES MY BUSINESS NEED TO REGISTER?

Regarding GST, businesses fall into two categories: those that are small suppliers and those that are not. The following summarizes the small supplier threshold of taxable supplies for various types of business:

  • Most businesses are considered small suppliers if they do not exceed a $120,000 yearly threshold amount;
  • Most charities, public institutions and service bodies are considered small suppliers if they do not exceed a $200,000 yearly threshold amount;
  • Two notable exceptions are non-residents and taxi/ride share operators, who often qualify as small suppliers regardless of threshold.

AS A SMALL SUPPLIER, WHY SHOULD I REGISTER?

Small suppliers are not legally obligated to collect, charge, remit or file any GST amounts. Still, there can be a major advantage to voluntarily registering for a GST account as a small supplier. Think of the taxes your business pays on expenses, raw material costs or the services it uses. Much of this GST can be refunded as input tax credit if you have already started an account with the CRA, regardless of your business’ size.

The details above are only a brief summary of the complex and thorough GST/HST regulations set out by the government. If the growth and health of your business is on the line, always consult with professionals like the team here at Liu & Associates. Contact or visit us today!

Why Do Home Builders Need An Accountant?

new home construction accounting

From large corporations to small boutique brands, one universal factor for home builders is that their finances can be quite complex. Most employ accountants or accounting firms but some may not understand how crucial these are in the construction industry. If you are curious why home builders need accountancy services, read on for Liu & Associates guide to this complicated issue.

Real Estate & Construction Accounting

Selling real property and constructing or renovating a property are viewed as distinct industries when it comes to finance. Though they share many fundamentals with general accounting, each makes use of different types of reports and strategies.

Contractors & Temporary Employees

The widespread use of contractors and temporary employees in construction makes its accountancy contrast with other fields. When building or renovating a property, a variety of skilled labourers will likely add to the final project– though very few, if any, will be on-site for the entirety. Construction accounting must accommodate and keep track of each worker and their contribution.

Mobile Industry

Construction involves vehicles, equipment, materials, temporary staff and many other dynamic variables. This can be difficult to manage financially without a reliable construction-focused accountant or accounting firm. With this many moving parts, traditional bookkeeping tends to fall short of the comprehensive understanding provided by construction accounting.

Percentage of Completion

As stated above, construction projects require input and effort from many different employees or contractors. The value each contributes must be determined against the final estimate– also known as “percentage of completion.” A good construction accountant can avoid expensive missteps and costly errors when determining this essential element.

GST & Home Construction

Most Canadians know that Goods and Services Tax (GST) is applied to all transactions and construction is no exception! There are intricate rules that determine whether or not you are responsible for the GST. Building, renovating, buying, selling– the definitions and GST responsibility vary between each of these situations. Construction accountants can help decode these complexities and avoid harsh fines or penalties.

As you can see, there are many areas where an accountant specialized in construction can help a home builder navigate the financial waters. Ignoring or forgetting these factors can be extremely expensive, so contact or visit Liu & Associates today! Our firm has years of professional expertise that can aid you, no matter your goals or industry.

Top Three Things to Ask your Accountant When Setting Up a Business

If you are starting your own company, an accountant is an invaluable resource. Depending on how you set up and run your business, it can save you money and time when tax season rolls around. Read on for three important questions to bring up with your accountant to ensure you are setting your company up for success!  

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1. what Structure is Best for my Company?

Depending on your start-ups circumstances and projected profitability, your accountant can recommend the best business structure. Whether you go with a sole trader, partnership or limited company, your accountant can advise you of any potential benefits or drawbacks to each structure.

Common Types of Business Structures

2. What Records do I Need to Keep?

Keeping up to date business records is sure to make your life easier when it comes to tax time or even worse – an audit. Some of the most common things you’ll need to keep track of include:

  • Business expenses
  • Bank & credit card statements
  • Tax filings
  • Payroll
  • Income
  • Invoices
  • Purchase orders
  • Inventory

Other common questions surrounding this topic usually include where should you store these records, and how long do you have to keep them for. Your accountant can give you answers to all these questions are more, as well as offer some tips on how to streamline your record keeping. Here at Liu & Associates, we offer bookkeeping services that can keep this kind of stuff off your plate entirely!

3. Do I Need to Register for a GST/HST Number?

If you provide a taxable property or service in Canada and you no longer qualify as a small supplier, you will need to register for a GST/HST number.

What Qualifies as a Small Supplier?

If you have sales under $30,000 in the current calendar quarter, as well as the last four calendar quarters, your business has small supplier status. This means that you do not have to collect and pay GST/HST. Once you exceed $30,000 in a single quarter, you lose small supplier status and must begin to collect and pay GST/HST.

Regardless of your business’ income, you can voluntarily register for a GST/HST number. A GST number will allow you to claim input tax credits. Your accountant can explain when the best time to register for a GST/HST number is depending on your business’ situation.

Contact an Accountant Today!

Regardless of what stage of business planning you are in, the expert team at Liu & Associates can help! Give us a call to book a consultation with one of our accountants today.

Income Tax Guide To Working from Home

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 If your business operates out of your home or living space, you may be eligible for credits that can help reduce the taxes you owe each year. Canada Revenue Agency honours your home office or workspace, if you meet one of these two conditions (quoted from CRA’s website in italics):

  1. The workspace is where you mainly (more than 50% of the time) do your work.
  2. You use the workspace only to earn your employment income. You also have to use it on a regular and continuous basis for meeting clients, customers, or other people in the course of your employment duties.

Read on for a summary of tax credits and requirements for those that work from home.

 

DO I QUALIFY?

Along with the above CRA guidelines, you may be required to provide a form from your employer that specifies the need for you to work from home. Self-employed or small business tax returns generally do not require such a form.

 

WHAT CAN I CLAIM?

Income tax credits for a home office are very wide-ranging. Here are just a few of the deductible expenses that may be available to those that operate workspaces out of their home:

 

  • Home insurance
  • Property taxes
  • Utilities
  • Maintenance costs
  • Rent/mortgage payment
  • Housekeeping/cleaning costs

 

Depending on usage, some or all of these may be entitled to a full or partial tax credit. Examine your home expenses closely and get the best possible tax return.

 

HOW MUCH OF MY HOME IS CONSIDERED WORKSPACE?

CRA allows you to use a “reasonable basis” to determine the percentage of your home or living space that is used for your work. For example: in a five-bedroom home with one dedicated workspace, you are entitled to claim a fifth of your deductible expenses. Another example: you use an existing living space as a workspace for 12 hours of the day, so you are entitled to claim half of the expenses.

 

The above guidelines only address a portion of the requirements and credits for those that work out of their homes. For more details, consult the CRA website or your Liu & Associates financial expert. We can help ensure your home-based business will have a maximized tax return every year.

Income Tax Guide To Self-Employed or Small Businesses

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In Canada, there are a variety of tax credits available to the self-employed and proprietors of small businesses. In fact, the Canadian Revenue Agency (CRA) deems any self-employed person as the proprietor of a business. As long as you have not incorporated your business (thereby creating a corporation), you may be eligible for the following tax claims. Read on for Liu & Associates’ guide to getting the most out of your self-employed or small business tax return.

EXPENSES

“You need to spend money to make money–“ if it’s been said once, it’s been said a million times… And it’s absolutely true! As any self-employed person or operator of a small business knows, everything from buying equipment to building a client base can make a significant impact on your funds. Luckily, CRA offers tax credits for such expenses. Generally, a non-depreciating expense (ie: stationery, inventory, etc.) is eligible for its full credit for the tax year in which you purchase it. Depreciating expenses (ie: vehicles, furniture, etc.) must have their credit spread over the lifetime of the asset; this involves multiple tax years and is covered under Capital Cost Allowance (CCA).

CAPITAL COST ALLOWANCE (CCA)

If you run a small business or maintain self-employment, major purchases are a fact of life. CRA allows credits for these expenses, but significant items such as real estate, furniture, equipment and vehicles often outlive the tax year in which they were purchased. To account for this, major purchases qualify for Capital Cost Allowance (CCA): a yearly amount– adjusted for depreciation– that can be credited against your tax commitments.

HOME OFFICE

A huge number of successful businesses originally grew out of the homes or living spaces of their founder(s). Modern self-employers or small business operators can claim several different credits. These are available to those that use part of their home as a dedicated workspace or those that consistently work in their living space. Rent/mortgage payments, maintenance costs, utilities, property tax and home insurance are just some of the expenses you can claim if you make use of a home office.

OTHER TIPS

  • All proprietors should familiarize themselves with the GST/HST requirements for Self-Employed or Small Business
  • Sole proprietors only need their SIN to file business earnings as part of their tax return; partnerships and corporations require a Business Number from CRA, as well as a CRA Business Account

Still have questions? Contact or visit Liu & Associates today. Our experts will guide you to the best possible tax return for your self-employment or small business.