September 1, 2026,

 

Dear Valued Clients & Friends,

I hope you and your families had an enjoyable summer; warm weather is still here, and we should expect it for another few weeks!

As we enter the final months of 2026, this is one of the most important times of the year to review your tax position, business performance, cash flow, and longer-term financial plans.  One message I continue to emphasize with clients is:  Good tax planning happens BEFORE year-end; not when we prepare your tax return.

By the time your personal or corporate tax return is being prepared, many of the best planning opportunities may already be gone.  If you have not yet completed your tax returns, it is always better to file before CRA makes any notional assessments.  Let us know if you require any assistance with your personal or corporate tax preparation.

For our existing clients in particular, if your income, investments, business, family situation, or financial position has changed materially during 2026, I encourage you to contact us before December 31.

 

Some questions worth asking yourself:

• Has your personal or corporate income increased significantly?
• Is excess cash accumulating inside your corporation?
• Are you taking the right combination of salary and dividends?
• Are you planning a major purchase, investment, or real estate transaction?
• Are you considering purchasing or selling a business?
• Are you carrying significant personal debt?
• Are you planning to retire or transition your business?
• Have you considered whether a Holdco, family trust or estate freeze makes sense?
• Do you know approximately how much tax you will owe for 2026?
• Is your business growing but your cash flow is not?
• Do you know which products, customers or locations are generating your profit?
• Are you considering hiring employees or making a significant capital investment?

 

If you answered yes to any of these questions, there may be planning opportunities worth discussing.

Our role has increasingly expanded beyond preparing tax returns and financial statements. We work with clients throughout the year on tax planning, financing, cash flow, corporate structuring, business advisory, and Fractional CFO services.

 

In this edition of our newsletter, here are the topics that will be reviewed:

1. Economic Update
2. Recent Tax Changes
3. We are Growing Again! ARJCPA is hiring!
4. Is Your Business Growing but You Still Don’t Have a CFO?
5. Don’t Wait Until next tax season – Planning Starts Now!  Before December 31
6. Scientific Research & Experimental Development – SR&ED
7. Need Capital to Grow? Business Financing & Our BDC Relationship
8. Cash Damming – Turn Non-Deductible Debt into Deductible Debt
9. Auto & Business Insurance – When did you last review your Coverage?
10. Your Personal & Business Health Check
11. Stay Connected!

 

If you would like to book a meeting with me please click on the following:  Book time with Ali Raza Jaffer, CPA: Exploratory Accounting & Tax Call

If you have missed any editions of the newsletter, please click on the following link:  AR Jaffer PC Newsletter Archives

We have been working very hard in providing personal tips & accounting, tax, and business content on social media.    Please connect and follow the links to my social media at your convenience (Facebook, Twitter, LinkedIn, Instagram) to stay fully updated on CRA Updates and tax planning tips for individuals & businesses.

 

As a reminder, if you get an opportunity, please also provide a Google Review available at the following link:

AR Jaffer Professional Corporation Chartered Professional Account Google Review

 

Warm Regards,

Ali Raza Jaffer, CPA

 

 

1) Economic Update

Canada’s economy continues to navigate a period of slower growth, trade uncertainty and changing inflationary pressures.  The Bank of Canada is currently at 2.25% maintaining the rate in July, with its next rate announcement scheduled for September 2. While economic conditions have been challenging, the Bank expects economic growth to improve gradually.  For individuals and business owners, interest rates remain important because they directly affect:

• Borrowing costs
• Mortgage payments
• Personal & Commercial real estate
• Business valuations
• Investment decisions
• Consumer spending
• Cash flows

 

The economic environment also reinforces something we frequently discuss with clients: cash flow matters just as much as profitability.  A business can show an accounting profit and still experience cash shortages because of loan payments, tax obligations, inventory purchases, accounts receivable or capital expenditures.   An individual must maintain cash flows and plan for a rainy day and retirement.

This is why individuals and businesses should increasingly be preparing Budgets, Cash Flow Forecasts, Tax Projections rather than simply reviewing historical financial statements once a year.  If your personal net worth or business has grown significantly, we recommend preparing at least an annual budget and cash flow forecast and reviewing actual results against the budget periodically throughout the year.

 

 

2) Recent Tax Changes

There continue to be several tax developments that individuals and business owners should be aware of.

a. Ontario Small Business Corporate Tax Rate Reduction – Effective July 1, 2026, Ontario reduced its lower corporate income tax rate from 3.2% to 2.2%. For qualifying Canadian-controlled private corporations earning active business income eligible for the Small Business Deduction, this makes incorporation and corporate tax planning even more attractive in appropriate circumstances.  The combined Federal and Ontario corporate tax rates for small businesses is now 11.2%

b. Capital Gains – After considerable uncertainty surrounding the previously proposed increase to Canada’s capital gains inclusion rate, the proposed increase was ultimately cancelled.

 

Capital gains therefore continue to require careful planning, particularly when dealing with:

• Investment portfolios
• Rental properties
• Corporate investments
• Business sales
• Transfers of property between corporations
• Estate freezes
• Departure from Canada
• Succession planning

 

Before selling a significant asset, contact us before completing the transaction. Proper structuring before a transaction can sometimes produce significantly different tax results.

c. Home Buyers’ Plan – The Home Buyers’ Plan currently permits eligible individuals to withdraw up to $60,000 from their RRSP toward purchasing or building a qualifying home.  Recent changes have also extended the repayment grace period from two years to five years for qualifying withdrawals made from 2026 through 2028.

d. Business Investment & Incentives – There have also been continued changes to incentives designed to encourage Canadian business investment, including accelerated deductions and investment tax credits in certain industries.  If your business is planning significant equipment, technology, manufacturing or other capital expenditures, speak with us before making the investment so that we can review the available deductions and determine the appropriate timing.

 

 

3) We Are Growing Again.  ARJCPA is Hiring!

 

Thanks to the continued support and referrals of our clients, our firm continues to grow.

We are expanding our team to support our growing client base and the increasing demand for accounting, tax, and advisory services.

We are particularly interested in experienced accounting professionals with Canadian public accounting firm experience who are looking for an opportunity to grow with our firm.

Our growth also allows us to continue expanding beyond traditional compliance services into:

• Tax planning
• Business advisory
• Fractional CFO services
• Financing
• SR&ED
• Corporate restructuring
• Strategic financial planning

Many of our best relationships have come through referrals.  If you know a talented accounting professional who may be a good fit for our team, please feel free to connect them with us.  And, as always, client referrals are greatly appreciated!

 

 

4) Is Your Business Growing But Your Business Still Does not have a CFO?

 

Many businesses eventually reach a stage where annual financial statements are no longer enough.  You may have a bookkeeper. You may have an accountant.  But who is helping you determine where your business is going?

That is where our Fractional CFO & Advisory Services come in.  A full-time CFO can be expensive and unnecessary for many privately owned businesses.  A Fractional CFO provides access to senior financial expertise when you need it without requiring another full-time executive.

Ask yourself:

1. Do you know your expected cash balance six months from now?
2. Do you know your most profitable customers, services, or products?
3. Do you know your break-even point?
4. Do you have a 12-month budget?
5. Do you review budget versus actual results?
6. Do you have measurable KPIs?
7. Do you know whether you can afford your next employee?
8. If sales increase 20%, do you know what happens to profit and cash flow?
9. Do you know how much financing your business can reasonably support?
10. Do you have a 3–5 year financial strategy?

 

If the answer to several of these questions is no, you may benefit from CFO-level support.

Our Fractional CFO services include:

• Monthly and quarterly management reporting
• Budgeting
• Cash flow forecasting
• KPI dashboards
• Profitability analysis
• Margin analysis
• Break-even analysis
• Financial modelling
• Scenario planning
• Financing proposals
• Bank negotiations
• Business plans
• Internal controls
• Process improvement
• Acquisition analysis
• Due diligence
• Strategic tax planning
• Owner compensation planning
• Business growth strategies

 

Think of us as your financial sounding board.

• Before hiring.
• Before borrowing.
• Before purchasing equipment.
• Before buying another business.
• Before expanding.
• Before making a large distribution from your corporation.

 

Call us first.  Sometimes a relatively short planning conversation can prevent a very expensive mistake.

 

 

5) Don’t Wait Until Next Tax Season – Planning Starts Now!  Before December 31

Tax preparation looks backwards. Tax planning looks forward.  This distinction is extremely important.

When we prepare your tax return, we are reporting transactions that have already occurred. Tax planning gives us an opportunity to consider what should happen before the transaction takes place.

For an individual, planning could include:

• RRSP contributions
• TFSA and FHSA planning
• Charitable donations
• Capital gains and losses
• Investment planning
• Real estate transactions
• Family income planning
• Retirement planning
• Estate planning

 

For business owners, the opportunities can be considerably broader:

• Salary versus dividends
• Corporate tax instalments
• Shareholder remuneration
• Holding companies
• Family trusts
• Estate freezes
• Capital Dividend Account planning
• Refundable Dividend Tax on Hand planning
• Corporate investments
• Business succession
• Life insurance strategies
• Capital Gains Exemption planning
• Purchase versus lease decisions
• Corporate-owned vehicles
• Business acquisitions
• Financing strategies

 

One question every incorporated business owner should ask:  “Am I simply filing my taxes — or am I actually planning my taxes?”  There is a major difference.

We encourage our corporate clients to speak with us at least annually about tax planning and more frequently when their business or personal circumstances are changing.

 

As we approach year-end, consider whether any of the following applies to you:

□ My income is significantly higher than last year.

□ My corporation has accumulated excess cash.

□ I haven’t reviewed salary versus dividends recently.

□ I am planning to buy or sell real estate.

□ I am planning to sell my business in the next few years.

□ I have significant investments inside my corporation.

□ I have significant personal debt and operate a business.

□ I am thinking about setting up a Holdco.

□ I haven’t reviewed my corporate structure in several years.

□ I need financing for my business.

□ My business is growing but cash remains tight.

□ I don’t have a budget or cash flow forecast.

□ I don’t know my company’s key performance indicators.

□ I am considering buying another business.

□ I am approaching retirement.

□ I haven’t reviewed my estate or succession plan.

□ My company performs research, development, software development, or product/process improvement.

 

If you checked even two or three boxes, let’s have a conversation.  The purpose isn’t necessarily to create a complicated strategy.

Sometimes the best planning involves making a few relatively simple decisions at the right time.

 

Plan Before You Pay:

Our philosophy has always been to look beyond simply preparing tax returns.  Compliance tells us what you owe.  Planning helps determine what you should do before you owe it.  Advisory helps determine where you should go next.  Whether you are an individual looking to improve your tax and financial position or a business owner trying to grow, improve cash flow, secure financing, or prepare for the future, our team is here to help. Before making a significant financial decision, talk to us.  A conversation today may identify opportunities that will no longer be available when we prepare your tax return next spring.

Please contact our office if you would like to arrange a Tax Planning, Financial Health Check or Business Advisory meeting.

 

 

6) Scientific Research & Experimental Development – SR&ED

Does your business innovate?  You may be surprised by what can qualify for Canada’s Scientific Research & Experimental Development (SR&ED) tax incentive program.

SR&ED isn’t limited to scientists working in laboratories.

Businesses involved in the following areas may qualify:

• Software development
• Manufacturing
• Engineering
• Product development
• Process improvements
• Technology
• Medical products
• Automation
• Prototype development

 

The program can provide valuable investment tax credits where qualifying expenditures and activities exist.

ARJ CPA Now Offers SR&ED Services

Our team can assist with:

• Initial eligibility assessments
• Identification of qualifying projects
• Identification of eligible expenditures
• Technical documentation
• Financial calculations
• Preparation of the SR&ED tax schedules
• Integration with your corporate income tax return
• CRA review support

 

One of the biggest SR&ED mistakes is discovering after the fact that a project may have qualified, but the business did not maintain sufficient documentation.

If your company is developing or improving something and encountering technological challenges along the way, speak with us early.

 

 

7) Need Capital to Grow? Business Financing & Our BDC Relationship

Growing businesses require capital.  We have developed relationships with financial institutions and financing professionals, including the Business Development Bank of Canada (BDC), to help our clients obtain financing.  Financing can potentially be used for:

• Working capital
• Equipment purchases
• Technology investments
• Business expansion
• Commercial real estate
• Business acquisitions
• Growth initiatives
• Cash flow requirements

 

We have previously assisted clients with BDC working capital financing starting around the $100,000 range, as well as larger and more customized financing requirements.   But obtaining financing isn’t simply about completing an application.  Banks want to understand where is the business going, and how will the loan be repaid?

 

We can assist with:

• Business plans
• Financial forecasts
• Cash flow projections
• Financing proposals
• Historical financial analysis
• Debt-service calculations
• Bank presentations
• Financing strategy

 

If you are considering financing in the next 6–12 months, it is generally better to start preparing before you urgently need the money.  We can connect you with the appropriate bank professional to make it happen!

 

 

8) Cash Damming – Turn Non-Deductible Debt into Deductible Debt

This remains one of the tax strategies that generates significant interest when we discuss it with investors and rental property owners.  The concept is relatively straightforward.

Interest on your home mortgage or other personal borrowing is generally not tax deductible.  However, interest on money borrowed for the purpose of earning income from investments or rental properties may be deductible, provided the applicable tax requirements are met.  A properly structured cash damming strategy can potentially allow an individual to gradually replace non-deductible personal debt with tax-deductible investment or rental-property debt.

 

The strategy may be particularly attractive where an individual has:

• A significant mortgage or other personal debt
• One or more rental properties
• Regular rental property expenses
• Investment income-producing assets
• Strong taxable income
• Sufficient cash flow to systematically reduce personal debt

 

For example, a rental property owner may normally use rental income to pay expenses such as:

• Property taxes
• Condo fees
• Repairs and maintenance
• Insurance
• Utilities
• Property management fees
• Other eligible rental expenses

 

With a properly designed cash damming strategy, available rental cash flow may instead be directed toward reducing the individual’s non-deductible principal residence mortgage, while separate borrowing is used to pay eligible rental property expenses.  Over time, the composition of the individual’s debt may gradually change as personal non-deductible debt decrease.  This results in investment or rental-property debt with potentially deductible interest to increase.

The individual’s overall level of debt may initially remain similar, but the tax treatment of the interest can become significantly more favourable.  For higher-income individuals, the resulting interest deduction can potentially create meaningful annual tax savings.  However, cash damming must be structured very carefully.  CRA’s interest deductibility rules generally focus on the direct use of borrowed funds, which makes proper tracing and documentation extremely important.

 

This typically means maintaining:

• Separate borrowing facilities
• Separate bank accounts where appropriate
• Clear records showing how borrowed funds were used
• Proper documentation of investment or rental expenses

 

Mixing personal and investment borrowing can make the interest deduction much more difficult to support.  Do not implement a cash damming strategy without professional advice.

If you have a significant home mortgage and own rental properties or other income-producing investments, contact us. We can review your circumstances and determine whether cash damming may be appropriate as part of your overall tax and debt-reduction strategy.  We can then connect you to our cash damming expert, Sylvia Ho.

 

 

9) Auto & Business Insurance – When did you last review your Coverage?

Continuing the theme of cash flow management, insurance is one of those expenses many people automatically renew each year without reviewing it.  With the cost of auto and other insurance continuing to increase, it is worthwhile periodically reviewing both price and coverage.  The cheapest policy is not necessarily the best policy.

 

Depending on your circumstances, you may want to review:

• Automobile insurance
• Home insurance
• Commercial insurance
• Professional liability
• General liability
• Property coverage
• Business interruption insurance
• Life and disability insurance

 

We work with a network of professionals and have trusted insurance contacts to whom we are happy to refer our clients.  If you would like a second opinion or insurance referral, please contact us and we will connect you with the right professional.

 

 

10) Your Personal & Business Health Check

We have discussed Financial Health Checks in previous newsletters, and we continue to believe they are extremely valuable.  Your financial situation today may look completely different from five years ago.

 

Here are possible scenarios for you to consider a financial health check:

• Your business has grown substantially
• Your income has increased
• Your mortgage has changed
• You own additional real estate
• Your investments have grown
• Your children are approaching university
• Retirement is getting closer
• Your corporation has accumulated significant assets
• You are thinking about succession

 

Yet many people continue following a financial structure established years earlier.  We can assist with reviewing the following:

Personal

• Net worth
• Cash flow
• Investments
• Debt
• Retirement objectives
• Tax exposure
• Real estate
• Estate considerations

 

Business

• Revenue growth
• Profitability
• Cash flow
• Corporate investments
• Debt
• Tax structure
• Shareholder remuneration
• Business value
• Succession planning

 

Your accountant should not simply tell you what happened last year.   We can also help you determine what should happen next.