On December 14, 2017 new changes to the Occupational Health and Safety Act (OHSA) came into force which pack a punch for non-compliant employers.
The most publicized aspect of the new laws was the “elevated heel” prohibition, but there are other changes all employers, including dentists, should know about!
Here are the changes that may affect you:
- Maximum fines per conviction under the OHSA have been hiked up to $1.5 million for corporations; and $100,000 for individuals
- Individuals may now be sentenced with up to 12 months of jail time for non-compliance
- Unless the employer owns the workplace, the employer must now notify the Ministry of Labour if a committee or a health and safety representative has identified potential structural inadequacies of a building or any part of a workplace as a source of danger or hazard to workers
- High heals cannot be mandated by an employer unless an “elevated heel” is required for worker safety (except in the case of employees working in the entertainment and advertising industries)
- The prosecution of non-compliant employers is now limited to 1 year of the occurrence of the last act or default or the day on which an inspector becomes aware of the alleged offence
Please note that the information provided herein should not be considered legal advice and is provided for informational and educational purposes only. If you need advice about the new occupational health and safety laws, please contact me (Ljubica Durlovska), Jonathan Borrelli, David Mayzel or Michael Carabash. We are your legal dental team.
I’m pleased to share with you my article about last year’s Jamaica Dental Outreach Trip, which is being published in the January edition of Oral Health magazine. I’m sure you’ll enjoy the stories (some funny, some sad). If you’re interested in coming down later this year, shoot me an email and I’ll put you on the possible list for next year. We do have a lot of interest already and preference is given to past volunteers. The dates for 2018 are looking like September 1-9 (to be confirmed).
Click HERE to read about our 2016 Jamaica Dental Outreach trip.
Click HERE to read all of our publications.
Happy New Year!
Along with the multitude of changes to the Ontario Employment Standards Act (ESA) in 2018 comes a new ESA poster.
All employers are required to provide the poster to their employees and post it in a conspicuous place in the workplace.
Here is what the new ESA poster looks like:
Make sure you update your office’s ESA poster and provide employees with the new one! You can get your copy by clicking here.
Please note that the information provided herein should not be considered legal advice and is provided for informational and educational purposes only. If you need advice about the new employment laws, please contact me (Ljubica Durlovska), Jonathan Borrelli, David Mayzel or Michael Carabash. We are your legal dental team.
The U.S. just passed a major tax overhaul (the first since 1986) that will decrease corporate tax rates from 35 to 21 percent. The idea here is that the tax savings will be used to create jobs and reinvest in R&D, infrastructure, etc. Some are saying, based on what’s been done in the past with big corporate tax breaks, that the money saved will be used to reward shareholders by paying out dividends or buying back shares. Some companies are already talking about paying bonuses to their employees and going on a hiring spree. Time will tell if cutting taxes results in more and better jobs.
So what’s going on in Canada? It’s been confusing to say the least. First, there was an all-out assault on those greedy dentists, doctors, lawyers, accountants – pretty much anyone who was a professional – because of perceptions that they earned a lot of money. Income splitting? How dare they! Earning passive income in their corporations? Shame on them! Multiplying the lifetime capital gains exemption? How Rude!
But the problem, whether the Liberals could foretell it or not, was that by attacking these professionals, they were attacking EVERY small business owner – including farmers and fishers.
OK, said the Liberals. So we’ll make things better by not going after capital gains and watering down the whole taxation of passive income thing we originally proposed. But we’re keeping our wonky and unclear proposal on income splitting with family members because at least we can do something there…
But then the Liberals started to take a lot of heat – Finance Minister Morneau personally – for what he knew and did with his shares of his family’s pension company and whether it constituted a conflict of interest. So things died down a little bit with the whole ‘let’s go after doctors, dentists, etc.’. And then things got even worse for the Liberals with the Paradise Papers, because it was discovered that BILLIONS of dollars from Liberal campaign financiers were being diverted OFFSHORE. BINGO!!!!
If Trudeau and Morneau want to go after anyone to help raise taxes for their endless spending on infrastructure (with no apparent plan on how much it will cost), they should be going after the offshore entities. They should tell them – like the Americans are now doing – that if you bring in your money back to Canada to invest HERE – that you’ll be taxed at the low corporate tax rate (say 15%) and that’s it. No penalties or interest or anything else. Now you can bring your money back here in 2018 and not worry. And the government now has their tax dollars to use on infrastructure.
But no… that would be a smart move. So the Liberals won’t do that. Instead, they’ll slightly lower the corporate tax rate (from 11% now to 10% in 2018 to 9% in 2019) as a way to give a crumb while stealing the cookie. So they’d rather not go after their friends parking money offshore; but it’s OK to go after the little guy? WTF…
So where are we at now? Well, as of a few weeks ago, the Liberals once again tweaked their proposals to try to persuade people that it (1) won’t affect that many (only 45,000 family businesses) and (2) will help the government raise the taxes it needs for infrastructure and (3) it’s easy and simple to follow. And with respect to the latter 2, I’m highly skeptical…
OK, so what does this mean for dentists?
New tax rules may be coming. They’re called a “Tax on Split Income” and they’re at the highest tax rate! The only way for them not to apply is to fit within an “exclusion” – of which there are “excluded business”, “excluded shares” and earning a “reasonable return”. Let’s talk about each in turn with respect to dentists and their dentistry professional corporations and SIDE corporation (hygiene corps, technical services corps, management corps, etc.).
Well, let’s take a look at the typical professional corporation.
Bottom line: if dividends are paid from a Dentistry Professional Corporation to an adult spouse who owns 50% of the common equity shares (though they are NOT a dentist) AND THEY ARE NOT AND HAS NOT BEEN EVER actively involved in the business, TOSI applies under the proposed rules. Why? Because the Dentistry Professional Corporation is NOT an “Excluded Business” and the Shares upon which dividends are paid to the spouse are NOT “Excluded Shares”.
Here’s the rationale…
FIRST, TOSI doesn’t apply to so-called “Excluded Businesses”. An “Excluded Business” is a business in which the individual receiving the dividends would have been actively engaged on a REGULAR, CONTINUOUS, and SUBSTANTIAL BASIS in the taxation year in which an amount is received OR in any five (5) previous taxation years. An individual will be deemed to be actively engaged if they work in the business at least 20 hours per week during the portion of the year that the business operates or meets that requirement for any five (5) prior years (need not be consecutive). In our hypothetical example, the spouse wouldn’t meet this test because they have NOT EVER been actively involved in the business.
SECOND, TOSI doesn’t apply to “Excluded Shares”. “Excluded Shares” are shares of a corporation that has the following characteristics: (1) less than 90% of the corporation’s business income came from providing services and the corporation is NOT a professional corporation; (2) the shares represent more than 10% of the value and equity of the corporation and (3) all or substantially all (80-90%) of the income of the corporation is not derived from another Related Business in respect of the individual receiving the dividends. So, in our example, the dividends received by the spouse wouldn’t qualify as “Excluded Shares” because the corporation IS a professional corporation. The government is singling out dentists and doctors with this provision.
THIRD, if the person receiving the dividends is 25 years or older and the dividends they receive represents a “Reasonable Return”, then TOSI won’t apply to that extent (that it was a “reasonable return”). A “reasonable return” is hard to define. The draft legislation says it takes into consideration the following factors relating to the relative contributions of the individual receiving the dividends: the work they performed in support of the related business (the dental practice), the property they contributed in support of the related business, risks assumed, and such other factors as may be relevant. WTF??? Likely a dentist’s family member won’t be able to meet this “reasonable return” test because they don’t co-guarantee the loan used to buy the equipment and leaseholds, don’t work in the office with the dentist, and don’t assume much risk (because they’re not the dentist).
What about hygiene, technical services, and management corporations?
Many dentists have used another corporation to provide services to the dentistry professional corporation for years, as a way of income splitting with spouses and family members (parents, children, etc.). Well dividends paid from that “SIDE corporation” to a dentist’s spouse who IS NOT AND HAS NOT BEEN involved in will LIKELY be subject to TOSI. Here’s why:
FIRST, TOSI doesn’t apply to an “Excluded Business”. In our example, unless the family member of the dentist who received dividends from this SIDE corporation are actively involved in the business (e.g. providing administrative functions like bookkeeping / payroll / reception services, perhaps is a hygienist or an assistant, etc.), they will NOT meet the 20 hour threshold rule. The CRA is of the view that the individuals receiving the dividends should keep timesheets, schedules or logbooks to prove that they’ve been meeting this 20 hour threshold rule. An excluded business is one that the individual receiving the payment is engaged on a regular, continuous and substantial basis in the activities of the business in that current tax year or any five (5) prior tax years. The last part is a somewhat saving grace. That suggests that, if the taxpayer receiving the dividends TODAY was at some point in the past 5 years, contributing at least an average of 20 hours per week during the portion when business operated, then they could receive dividends and those dividends wouldn’t fall under TOSI. So hypothetically, if an adult family member of the dentist DID work an average of 20 hours per week THIS year in the SIDE Corporation, they could stop working and still receive dividends for the next 4 years without working at all in that SIDE Corporation? Could this be a regular habit of having a family member work once every 5 years just to avoid TOSI? Just keep in mind that the proposed definition of an excluded business means a business where the individual receiving the dividends is engaged on a regular, continuous and substantial basis in ANY five (5) prior taxation years.
Second, what about “Excluded Shares”? Well, the individual receiving the dividends can clearly own more than 10% of the votes and value of shares of the SIDE Corporation; and this SIDE corporation likely isn’t a professional corporation. So we’re good there to avoiding TOSI according to the definition of “Excluded Shares”. But what about the other 2 tests? That’s where we run into trouble. First, it’s more than likely that 90%+ of the business of this SIDE corporation is to provide services. And second, all or substantially all of the income of the corporation is income that IS NOT derived from a related business. What’s a “related business“? Well, that’s a business carried on by the dentist (an individual who is RELATED to the individual getting dividends in the SIDE Corporation). So if the dentistry professional corporation (carried on by the dentist) is providing all or substantially all of the SIDE Corporation’s income and the shareholder of the side corporation is related to the dentist, then that shareholder wouldn’t be holding “Excluded Shares”.
Third, what about a “Reasonable Return” exclusion? Well, once again, this is going to be difficult to justify given that the dentist’s family member earning those dividends from the SIDE business didn’t (per our example) work or contribute property or assume risks to help support the related business (i.e. the dental practice).
The Ontario Government has made a small amendment to the Occupational Health and Safety Act (OHSA) that impacts all employers in Ontario. Read more
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David Mayzel is your legal risk manager. He is a trained courtroom lawyer and has spent many years resolving disputes both in and out of court. He knows how to prepare documents and execute transactions in a way that avoids or mitigates legal risks. He can be reached at 416.528.5280. or firstname.lastname@example.org.
Michael Carabash is your business law adviser. He is an entrepreneur at heart who helps you see the big legal picture. He drafts clear and effective agreements that protect your rights while promoting your interests. He can be reached at 647.680.9530. or email@example.com.
Ljubica Durlovska is your transition lawyer. She helps you with staff and associates, maintaining your corporation, and other business matters. She can be reached at 416.443.9280, extension 206 or firstname.lastname@example.org.
Jonathan Borrelli is your employment lawyer. He helps you with staff and associates matters, including hirings, terminations, switching staff to written contracts and resolving disputes. He can be reached at 416.443.9280, extension 204 or email@example.com.
Benjamin Kong is an experienced business law clerk. He assists David and Michael with corporate matters and purchase / sale transactions. He can be reached at 416.443.9280, extension 207 or firstname.lastname@example.org.
Julie Whitehouse is an experienced business law clerk. She assists David and Michael with corporate matters and purchase / sale transactions. She can be reached at 416.443.9280, extension 203 or email@example.com.
David, Michael, Ljubica, Jonathan, Ben and Julie are a truly dynamic team. Their diverse knowledge, skills, and experiences will help you get the best deal possible while promoting your interests and protecting your rights. You can read dentist testimonials here.