GST Question
 

I am looking to start a small excavation skid steer business based from our acreage and will be looking to buy some machinery, we are currently not registered for GST and wanted to ask if registration would be of benefit for tax reasons. Thanks for any advice

You need one if you plan on making more than $30k/yr.

Gst
 

Hopefully yes but also want if possible to register from the get go to claim GST back on machinery I will be buying initially

GST account
 

YES do it


before you make 30 K a year have a GST account.




two things CRA audit

Yes! Get the number and claim the ITC.

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Just a heads up you only have 5 years from purchase date to counter claim GST against GST collected Equipment purchases have different rules than CCA with Revenue Canada.

I made a big cash outlay to purchase landscaping equipment back when GST was 7%, Harper cut it back to 5% long story short with all the extra GST spent for fuel, oil, maintenance, repair etc it exceeded GST collected lost about 5k in GST That just ran out of reclaim time.
Wish I had been able to spread purchases out over a couple of years might have recouped a bit more.

System is geared to make you expand company, not Mom an Pop type business friendly.

Gst
 

Thanks for all the info and replies it’s appreciated, I will look into what I have to do for registration as I will my business number first then I am able to register for a GST number from what I understand. Just not sure if I should go sole trader route or incorporated having not done it before in Canada it’s all new to me.

I would stick with sole proprietor until you make serious money. Running (administration) a corp is a lot of work (=expensive).

There a number of reasons to incorporate your business (multiple people/partners/shareholders, insurance or liability reasons) but if you will personally need/withdraw all the net profits out of business, there is no benefit for tax purposes. And generally, incorporation will cost you more year after year than being a sole proprietor (corporate financial statements, corporate and personal tax returns, corporate annual return and lawyers fees, etc).

The benefit of incorporation for tax purposes comes from the deferal of paying personal taxes to future years, but if you withdraw everything personally, there is no deferal available. The example I give people is if the business nets $30,000 profit and they need that $30,000 in their hands personally, it will make little difference in combined taxes whether they are incorporated and pay $30,000 salary/dividends, compared to netting $30,000 as a sole proprietor and already having the net cash in their hands. Now if you net $150,000 and only need $30,000 personally, that's where the benefit of incorporation comes from, because you can defer paying personal taxes on the remaining $120,000, whereas a sole proprietor pays tax on the full $150,000 in that year.

So generally, unless you have a liability or insurance reason to incorporate, or anticipate earning more profits than needed in any given year, operating as a sole proprietor is usually more cost effective.


As far as GST registration goes - once you reach $30,000 gross income you are required to register, so if you think you will get close to that figure, you might as well register before beginning operations.

In your situation, with the large cash outlay and large GST expense, you're correct in your thinking in recouping that cost, so you're better off registering before hand and claiming that cost back.

Fun fact while Mo's talking about taxes. Even as a sole proprietor you have to submit tax installments quarterly. You don't have to file anything you can just pay it like a bill on your online banking.

Gst
 

Spoke to the CRA today and received my business number / GST Number
I registered with CRA as a sole trader for now will see how this will progress and may incorporate in the future, CRA advised me if wish to add a business name to my account ( set up in my personal name at the moment ) that this was possible but advised I go to my local registry to check my choose business is not already being used.

Sole proprietorships don't have to have unique names. Did you incorporate?

Gst
 

No just obtained business / GST number from CRA and registered with them using my personal name/sole trader but the CRA agent told me I could call them back at a future date and add a ‘business name’ to the account