Stay Ahead In 2024: Top 3 Relevant Tax-Saving Strategies For Restaurants & Pubs in Canada
Stay updated with current accounting standards, business compliance, tax preparation tips, and latest news.
12 Feb 2024
Restaurants are labor-intensive setups. Thus, when it's time to tighten the belts during the post-holiday lull, staff expenses often become the primary target.
But before you make any drastic changes, consider using Canada's tax laws to your advantage and optimize your staff expenses for maximum tax savings.
While the festive season brings cheer and a bump in sales, January often paints a bleak picture for restaurants and pubs in Canada.
Another strategic move would be to increase "discretionary expenditure" to combat this seasonal dip and benefit from tax savings.
In 2024, restaurant owners can expect continued changes in tax laws and regulations. Thus, it is crucial to do effective tax planning and understand how it will affect your books.
By being aware of the latest developments, restaurant owners like you can ensure compliance, and maximize tax savings, all while running the businesses efficiently
We hope you found these tax-saving tips relevant to your hospitality business in Canada. We at CJCPA strive to provide entrepreneurs like you with the right financial knowledge, so that you can grow your business easily. If you are looking for a Chartered professional accountant near me, we would be delighted to help you!
Don’t forget to Book a Free Consultation with a CPA at CJCPA for any taxation or financial advice. 79
Disclaimer: This information is not a substitute for professional tax advice. It is recommended to conduct thorough research and seek guidance from a certified CPA or tax expert before implementation.
Stay Ahead In 2024: Top 3 Relevant Tax-Saving Strategies For Restaurants & Pubs in Canada
If you own a cafe, restaurant, craft brewery or pub, then this blog is the most relevant thing you will read in 2024. Canada’s Restaurant and pub industry faces various tax and financial considerations, especially as the new year approaches. New year budget and planning, cash flow management, minimum wage increase, HST/GST filing, and payroll management are just a few of them. Furthermore, one can expect a slew of taxation changes, which can directly affect those who run these businesses. This is why we decided to bring the top 5 tax-saving and planning strategies so that you can survive and thrive in your businesses. Besides, you’ll also get to know the latest tax changes, and how they might impact your expectations for the business in 2024. Stay tuned! Before you read further: Have accounting, taxation, or bookkeeping doubts? We’ll resolve it for you! Book your first FREE consultation with top experts at CJCPA and shape your finances the way you want to!Top 3 Tax-Saving Strategies Relevant Especially For Small Restaurants & Pubs Businesses In Canada
1. Taking Advantage of Capital Allowances
The festive season might be over, but the January blues don’t have to apply to your tax bill. Canadian restaurants and pubs can use capital allowances (CCA) to ease the post-holiday slump and boost their bottom line. Here’s how:On Which Assets Can You Make Use of Capital Allowance?
- Kitchen Equipment: Every day used capital assets such as ovens, fryers, refrigerators, dishwashers, and blenders, among others.
- Furniture and Fixtures: Tables, chairs, bar stools, lighting fixtures, decor items, etc.
- Computers and POS Systems: Software licenses, and hardware for desktops and tablets.
- Building Renovations: Improvements to dining areas, kitchens, restrooms, etc.
How Can You Claim CCA?
- With Class Rates: The Canadian Revenue Agency (CRA) categorizes assets into different classes with specific depreciation rates. Restaurants and pubs typically fall under Class 8 (50% rate) and Class 50 (20% rate).
- Through Half-Year Rule: For assets acquired in the last six months of the fiscal year, you can claim 50% of the first year’s CCA. This effectively gives you a head start on tax savings.
Blessing In Disguise: The Post-Holiday Advantage!
- Slow Season Investment: It is understood that January tends to be a slower period for restaurants. As an owner of a food business, you can utilize this time to make strategic investments in equipment or renovations.
- Boost Cash Flow: Get a reduced taxable income, because CCA translates to lower tax payments. You’ll easily free up valuable cash for operational needs or marketing initiatives.
How Will You Enter It In Your Books?
Example: Sophia owns a fast-food restaurant near Peace Arch Provincial Park in Surrey. She bought a new oven for $10,000 in January. Here’s how she’ll record it in her books:- Purchase:
- Debit Equipment (Asset account) - $10,000
- Credit Cash/Payables - $10,000
- Year-End CCA (assuming Class 8 rate):
- Debit Accumulated Depreciation - Equipment - $5,000
- Credit CCA Expense - $5,000
2. Optimize Staff Expenses
Restaurants are labor-intensive setups. Thus, when it's time to tighten the belts during the post-holiday lull, staff expenses often become the primary target.
But before you make any drastic changes, consider using Canada's tax laws to your advantage and optimize your staff expenses for maximum tax savings.
What Are The Rules & Eligible Deductions?
- Payroll deductions and remittances: You must stay up-to-date with Canada Revenue Agency (CRA) regulations regarding payroll deductions for income tax, Employment Insurance (EI), and Canada Pension Plan (CPP).
- Eligible deductions: Claim deductions for staff-related expenses like wages, salaries, benefits, training costs, and uniforms. (if company policy requires).
Some Post-Holiday Strategies For Optimizing Staff Expenses:
- Reduced hours: Instead of layoffs, consider adjusting staff hours based on the slower post-holiday demand. This keeps valuable employees while minimizing labour costs.
- Training and development: Utilize the slower period to invest in staff training and development. Quite often, you can deduct these expenses.
- Employee benefits: Review your employee benefits package and optimize it for cost-effectiveness. Consider alternative or flexible benefits that employees value while remaining tax-deductible.
Bookkeeping Tips To Gain Tax Relief On Staff Expenses
Remember, proper documentation is crucial. Maintain detailed records of staff hours, salaries, benefits, training expenses, and uniform purchases. This becomes indispensable evidence for claiming deductions when filing your tax return. By implementing these strategies and keeping meticulous records, you can turn the post-holiday slowdown into an opportunity to optimize your staff expenses and boost your bottom line through tax savings. Bonus Tip: Get in touch with CJCPA for bookkeeping for restaurants. They have professionals specializing in the restaurant industry.3. Increasing Discretionary Expenditure Post-Holiday
While the festive season brings cheer and a bump in sales, January often paints a bleak picture for restaurants and pubs in Canada.
Another strategic move would be to increase "discretionary expenditure" to combat this seasonal dip and benefit from tax savings.
What Are Some Eligible Activities Where You Can Save Tax?
- Marketing & Advertising: Efforts to boost engagement with themed campaigns (New Year’s resolutions, Valentine’s Day), using social media, emails, and local partnerships.
- Building Maintenance & Renovations: Revamp the patio and lighting for a fresh ambiance. Ensure accessibility with ramps, wheelchair-friendly facilities, and braille menus for a wider audience and potential tax deductions.
- Community Engagement & Donations: Partnering with local charities through food drives or discounted meals. Sponsoring cultural events or sports teams for visibility, building community connections, and potentially claiming deductions for sponsorship expenses.
What Are Some Basic Tax Considerations You Need To Know?
Whether it is bookkeeping for restaurants or accounting strategies, it’s better to consult a tax professional first. To secure better tax savings on your discretionary expenditures, you must maintain receipts, invoices, and contracts for all expenses to substantiate your claims. Also, take time and understand the distinction between capital and revenue expenses. Major renovations (capital) are depreciated over multiple79 years, while smaller repairs (revenue) are deducted from the year’s income.Wrapping Up!
In 2024, restaurant owners can expect continued changes in tax laws and regulations. Thus, it is crucial to do effective tax planning and understand how it will affect your books.
By being aware of the latest developments, restaurant owners like you can ensure compliance, and maximize tax savings, all while running the businesses efficiently
We hope you found these tax-saving tips relevant to your hospitality business in Canada. We at CJCPA strive to provide entrepreneurs like you with the right financial knowledge, so that you can grow your business easily. If you are looking for a Chartered professional accountant near me, we would be delighted to help you!
Don’t forget to Book a Free Consultation with a CPA at CJCPA for any taxation or financial advice. 79
Disclaimer: This information is not a substitute for professional tax advice. It is recommended to conduct thorough research and seek guidance from a certified CPA or tax expert before implementation. 
