Happy September. I hope everyone is settling into the ‘routine’ of back-to-school.
If you don’t have kids, then I hope you are enjoying the uptick in traffic. 😊
You can now enjoy the traffic slightly more by enjoying our Podcast Tax newsletter.
It’s so exciting. The link is here --> https://open.spotify.com/show/5tjBQrj6bcU3U55Md740oh?si=cb9d81d28d2b4478
As we get ready to close out the last quarter of this year, we really have 3 months left to end the year on a high note. You know we are all doing this for the CRA.
Below is what has been going on while you were busy making money.
Q4 2026 CRA Prescribed Rates
Our wonderful, capable Department of Finance has confirmed that Q4 2026 prescribed interest rates (Effective October 1st to December 31st, 2026) remain unchanged.
This means they are keeping the rates as is. Big surprise.
If the CRA owes you money, the potential interest they would pay you on those funds is unchanged.
Corporate Tax refunds are 3%; personal tax refunds are 5%. These are the rates the CRA will pay you if you overpay your taxes.
However, if you, the taxpayer, owe the CRA, they will charge you 7% in tax arrears, late balances, and quarterly instalment interest.
The game is rigged.
New Changes to Productivity Mega Deduction
The federal government is repackaging the old "Immediate expensing" rules from 2021 to 2023 and making it more "Mega". The new productivity mega deduction is a permanent tax initiative designed to encourage business investment and make Canada great again. The key highlights for business owners:
Immediate Expensing: Businesses can write off 100% of the cost of 'eligible' capital investments in the same year the asset becomes available for use. This applies to property acquired on or after September 15th 2026.
Asset coverage: The types of assets that can be claimed are higher, so around 2/3 of capital asset investments can likely get a write-off. Think Vehicles/Computers etc.
Business Tax rate: There is a METR (Marginal effective tax rate) on business investment dropping from 13% to 6.4%. This drops Canada's effective tax rate well below the Americans at 16.9%
Key rules: To qualify, assets cannot have been previously owned by the taxpayer or a non-arm's length party or transferred via a tax-deferred rollover. So, it's new, new money spent, not existing.
Remember, this has been announced, not put into Law yet. Once it goes into law, the CRA will let us know how this new tax regime will actually work, with more details, so stay tuned!
Unfiled Taxes & Foreign Assets (Don’t wait for the CRA)
In every society, there are some unfiled taxes and some people who have ‘forgotten’ to report on the foreign assets they may or may not own.
If you are holding more than $100,000 CAD, the government would like you to tell them through a form called T1135.
It’s not optional. A federal court case (Catino) showed the CRA handing out $2,500 penalties for late T1135 filings.
The taxpayers argued they delayed because they were owed tax refunds.
So, the court said we don’t care if we owe you money. We want our paperwork done.
There is 1 thing we can understand from this.
Do your paperwork.
Fast forward, the court said We don’t care; taxpayer, you owe us $2,500 because you didn’t file your slips and upheld the full penalty anyway.
If you have unfiled tax returns or unreported foreign assets (Crypto/Real Estate), then reach out and come forward under the “Voluntary Disclosures Program (VDP) before the CRA reaches out.
If you pull this trigger, remember it’s 1 time. It’s 1 shot in the barrel. Make it count.
If you file before the CRA gets you, you can get up to 75% interest relief and zero penalties.
If you wait until an audit brown letter lands in your mailbox, that relief drops to 25%.
The CRA can be so generous.
The TFSA Re-Contribution Trap
Imagine you just finished your quarterly call with us, and we told you to invest in your TFSA.
You actually take us seriously and listen to this advice. I did say imagine.
There’s a classic trap you have to avoid that happens to people every year.
Want to know what it is?
Withdrawing money from a TFSA and putting it back in a few days later.
This is where timing makes a difference. A lot of red tape here.
In a recent Tax Court case (Adelkhou), a taxpayer withdrew $27,000 from her TFSA and, because she didn’t hire Capex, she re-deposited it 4 days later, assuming her room immediately refreshed.
CRA hit her with a 1% per month excess penalty tax plus late filing fees. The court backed CRA 100%.
The Rule: Money you take out of your TFSA does not get added back to your contribution room until January 1st of next year.
We all know the CRA wants some of that juicy, capital gains tax-free money.
Don’t let the CRA take 1% of your gains because of bad timing.
Proof Wins Audits
The CRA does not run on emotions. They run on receipts. So, keep your receipts and logbooks.
In a recent case, a taxpayer (Chennekunnath), a sales guy, lost virtually all his claimed vehicle, phone, and internet expense deductions simply because he had no vehicle mileage logs and no signed T2200 from his employer.
CRA even reassessed him past the normal 3-year clawback they have. The Taxpayer said he didn’t review his own tax return. He said it was too dry and not exciting. I bet he finds Tax exciting now.
On the flip side, two business owners lost all their original paper receipts in a flood. I’m feeling it for those Vaughan storm-hit people. Those social media videos were wild.
Anyways, back to the receipts, these 2 business owners lost all their original paper receipts in a flood during a $100,000+ Business loss. They won in court because their accountant kept detailed transaction working papers and backup reports.
When you hire good accountants, they can even save you from floods. Financially.
Moral of the story: Keep your receipts or make sure your accountant has detailed working papers to back you up. We do this automatically for our Starter, Growth and CFO clients.
Price Adjustment Clauses in Business Freezes
This one was exciting. For real.
If you are restructuring your business or doing an “Estate Freeze”.
If you don’t know what this is, you need to focus on getting your revenue over $1M.
This is a rich person’s problem.
Sometimes, rich people need to do a restructure of their business to kind of use tax magic to save long-term tax savings. It’s all legit.
You restructure your business by doing an estate freeze; it’s always good to make sure you have made a fair effort to establish “Fair Market Value (FMV) with a CPA and CBV. I recommend a CBV – Chartered Business Valuator because they are third-party specialists and their models/memos stick up in court so the CRA can't sniff away.
In a recent case, the CRA tried to challenge a corporate share valuation. Valuation is what a business is worth. The CRA disallowed the price adjustment clause (PAC), triggering huge capital gains tax.
This means if you skip out on doing this right, the CRA slaps you with a tax bill you could legally avoid.
The tax court rules for the business owners, confirming that because they made a genuine, good-faith attempt to value the company, the price adjustment clause was legally valid and adjusted the share prices without triggering immediate tax.
The point is, if you want to do fancy tax planning. Keep a budget for a team of experts.
The tax savings are worth it, but this stuff is complex.
We do tax advisory and transaction advisory.
In a simple way of understanding what we do. We know a lot of Tax nerds.
Using AI in your Business? Keep it Smart
I have been swimming in this AI ocean for the past few years. I have been building the technology Operating system that is now running at Capex. How does it feel to run Capex nowadays? It feels like we went over a Mushroom while playing Mario Kart. We are faster, smarter and a lot more edgy.
AI Tools are fantastic for drafting emails or summarizing long files, but please don’t upload confidential corporate numbers, payroll data, or client information into public AI models.
This includes the tax returns we sent you. That stuff is private.
If you can’t take a document and post it in the community center closest to you, then you shouldn’t be sending it to your favourite chatbot.
I solved this for my firm by buying the entire AI Supercomputer. Our firm now owns an Nvidia DGX Spark 128GB computer. It’s the fastest computer I have ever used, and it runs all of our AI Agents team.
My Agents team all say hi; Jarvis, Alfred & Edith wanted me to let you know. All systems go.
The best part is that all your information with us is run through AI that never leaves our infrastructure.
Your information is always secure.
We have a full cybersecurity team, and they test us all the time by playing bad actor roles.
The internet is a dangerous place. A lot of bad actors have tried to get into my email, calendar, Zoom calls, and even voice calls. They can clone your voice now.
We just never click on any links.
Use AI, but remember: AI is only as smart as the user using it.
Your laptop is a good example. The same laptop can be used for Engineering, Finance, Law, Medical, Commerce, and Education. The Laptop can do a bunch of things.
The person asking the question needs to know what to ask.
In order to know what to ask, you need to be educated in the details.
The Tax Savings. They sit in the details.
The Income Tax Act was written for rich people, to be used by rich people.
We use the Income Tax Act for rich people.
Jag’s Book Recommendation
I have been having a hard time getting to reading lately. My son has been keeping me quite busy. I am currently reading/listening to “Software as a Science – Dan Martell”. I am listening to this because of the technology I’m building at Capex. I plan on releasing this technology to my own clients to help them speed up their businesses too.
Soon, all of our Capex clients will be swerving around Super Mario Kart style.
Closing Note
If you got this far. This tells me you're a real one.
Thanks for supporting us. Our business grows through word-of-mouth.
If you know a business owner looking for Accountants who aren't boring. Please send them our way.
Wishing you a great, productive autumn season.
Jag Shergill