The government in Ottawa announced its 2023 federal budget on March 28.
Small business owners across the country were looking for support for what it would do to alleviate their challenges, given the ongoing financial impacts of the pandemic coupled with rising interest rates, inflation, and a labour shortage.
The challenges small businesses face are many, including:
- Repaying Canada Emergency Business Account (CEBA) loans of up to $60,000 that were offered at the height of the pandemic. CEBA loans are interest-free or up to one-third is forgivable if repaid by December 31, 2023. However, data from Export Development Canada shows of the $50 billion in CEBA loans distributed to an estimated 900,000 businesses, only $5.7 billion or 13% of businesses have repaid their loans as of last November.
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- Levelling the playing field for credit card transaction fees imposed by financial institutions issuing the cards. Small businesses are estimated to pay as much as 50% more in interchange fees than large businesses.
- Relief from high small business tax rates, and support for fuel and energy, employee wages, insurance, equipment, and raw materials costs.
- Stable Employment Insurance (EI) premiums. There was an EI premium increase last January. Small businesses need to be able to focus on rising costs elsewhere.
- Making it easier and quicker for temporary foreign workers to qualify for permanent residency.
- Reducing or freezing the federal carbon tax for small businesses. The Canadian Federation of Independent Business estimates that only 0.17% ($35 million) of $22 billion worth of carbon tax revenue collected since 2019 went back into the pockets of entrepreneurs and small business owners.
Meanwhile, Canada’s economic landscape remains somewhat uncertain. Inflation sat at 5.2% in February, well above the Bank of Canada’s (BoC) 2% target, and the BoC’s benchmark interest rate is 4.5% currently.
5 Ways the 2023 Federal Budget Will Help Small Businesses
Though this budget may have fallen short of what some business owners hoped for, here are five things that may prove beneficial to small businesses:
1. Lower credit card transaction fees
This may be the biggest win for small business owners. Ottawa is focused on reducing small business credit card transaction fees, which may save small businesses up to $1 billion over five years. More details are forthcoming, including what businesses are eligible to benefit from the move.
2. Green energy support
The budget includes $20 billion to support clean electricity investments and clean energy projects. The feds will provide a 15% clean electricity investment tax credit and a 30% credit applied to new equipment used in clean tech manufacturing. These measures were made to compete with the U.S. Inflation Reduction Act and help ensure not all green energy investments and manufacturing go south.
3. The creation of Employee Ownership Trusts
Employee Ownership Trusts (EOTs) are common in the U.S. and the U.K. They are designed to let business owners who are retiring to transition their companies to an EOT, allowing groups of employees to purchase businesses over time while leveraging tax credits. Think of it as a succession option for business owners – it’s estimated 75% of small business owners will retire in the next decade. Details on this initiative are forthcoming. EOTs will roll out on January 1, 2024.
4. A cap on alcohol excise duties
The feds are capping the hike in excise duties on beer, spirits, and wine at 2% for 2023. Unfortunately, the government hasn’t committed to ending automatic tax increases on alcohol, but the cap on excise duties should still be welcome news for restaurant and bar owners and other hospitality businesses. This measure came into force on April 1, 2023.
5. Tax deduction increase on tools for tradespeople
General contractors and skilled trade workers will be pleased to know the government is increasing the tax deduction for tradespeople from $500 to $1,000 per year when buying new tools to help them combat rising costs.
Additionally, the federal government did not hike existing EI premiums.
Here’s where the government published the full details of the 2023 federal budget.
Managing Your Risk With a Customized Business Insurance Policy
If fears of a recession and other financial pressures threaten your bottom line, you may be forced to make difficult decisions. From a risk management and business insurance perspective, you can review your insurance policy with a Zensurance broker.
Get in touch with us. We can explain your insurance details, coverage limits, deductibles, and exclusions. It’s possible we can help you lower your annual premium by making a few minor adjustments or helping you find a different insurance provider.
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