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Physicians in her area have also had to cut back on basics like flu clinics. “Many doctors would run flu clinics, where they have additional hours set aside or a nurse that would help to administer the shots. Many have cancelled that entirely.”

Don Paton, who owns an industrial machine shop called Ontario Crane Service, was irate when passive income rules were first proposed in August 2017, which took effect on the first dollar earned.But he says concerns like his have been addressed by the government.

“The way they legislated after all the complaints wasn’t too bad, actually. It allowed for up to $50,000 per year which was more than most businesses can generate,” he says. “They did listen to small business owners across the country.”

Some are getting hit by one (tax) and some hit by the other. Some by both Sarwar Qureshi, Small Business Association Canada

However, passive income wasn’t the only tax change for small business owners. Last January, the federal government effectively removed the marginal tax rate for dividend payments. This means that small businesses can no longer pay, say, a spouse or adult child dividends at a reduced income tax rate unless they can navigate a complex set of rules to prove that they have been working for the business or are heavily enough invested in it.

Using income splitting to help fund children’s education is particularly problematic, says Qureshi. He says healthcare professionals are a prime example: Instead of banking money in an RESP, they often put it into their companies, then split income with their children when they turn 18.“When their kids go to university, they would help fund those post-secondary years by paying a dividend.”