The British Columbia “Health Tax” a Blessing in Disguise
The new “Health Tax announced in the reading of the 2018 BC provincial budget made it clear that the NDP/Green government wants to transfer the burden of the health care system onto the backs of BC businesses.
The $500K payroll exemption excludes micro businesses from the new tax burden. However, based on an average annual income in Surrey of $45K a business with as little as eleven employees will feel brunt of this new tax as they will owe .98% of their payroll over $500K and increasing to 1.95% on a payroll over $1.5M which will typically affect businesses with over 33 employees which is still very much considered a small business. The bottom line is that a business with a payroll of $1.5M will owe about $30K.
Depending on the industry, a business with a $1.5M payroll will generate sales of about $5M making $30K in taxes seem like a drop in the bucket. Based on my discussions with business owners many are struggling to make a profit and if they do they are fighting to every dollar they make so the $30K tax is a serious burden for many Surrey businesses.
If there is a blessing in disguise for this new tax it is that if forces business owners to review their operations to look for opportunities to reduce costs (including payroll) to offset the tax burden. As we are now in the 2nd half of 2018 the time to start the review is now! If you are not currently measuring the productivity of every person in your business start doing it now. Based on my own reviews of dozens of businesses I have found that a high number of businesses with over 10 employees are carrying at least one too many employees. This one review alone could save you over $45K.
If reducing your employee headcount doesn’t fit your business, there are many other strategies such as renegotiating prices with suppliers. Also talk to your accountant about strategies to lower your own or family member’s salaries to reduce your payroll and withdrawing cash in dividends or other financial mechanisms. If you would like more information on how to take advantage of this opportunity to improve profits send an email to email@example.com and I will send you my “magic profit formula” that will give you a template to work from.
Treat this new tax as a catalyst to increase profits. You might surprise yourself and find your increased profits will not only offset the new tax but make your business more profitable then ever. Get started now as 2019 is fast approaching.