The buildout, planned with the HST left in
Because K-12 tuition and before- and after-care are exempt, the school claims no input tax credits, and the 13% on a classroom fit-out is not a timing difference; it is cost, permanently. It capitalizes into the asset and comes back only as CCA, which makes two ordinary decisions worth real money. First, what counts as a repair you deduct now versus an improvement you depreciate for years: refinishing the gym floor is current, extending the gym is Class 13 or Class 1, and the HST rides along either way. Second, when the work finishes, because CCA starts only once the asset is available for use. A buildout that slips past year end waits a full year for its first claim.
| What the school bought | CCA class | How the HST-inclusive cost comes back |
|---|---|---|
| Classroom and leasehold fit-out | Class 13 | Straight-line over the lease term |
| Desks, furniture, playground equipment | Class 8 | 20% declining balance |
| Computers and servers | Class 50 | 55% declining balance |
| A school van or bus | Class 10 | 30% declining balance |
| The building itself | Class 1 | 4%, or 6% with the separate-class election for non-residential use |
Lease negotiations shift too. A landlord's cash inducement is taxable when it lands, while a rent-free period simply lowers cost. With no ITCs to soften either side, the two offers are further apart than their sticker values suggest. We model both before you sign. Structure sits underneath all of it: a school operated on a not-for-profit basis can qualify as a school authority and recover much of its HST through the public service bodies' rebate, while a for-profit school recovers nothing. That fork is set at Incorporation, and it is worth revisiting before a major buildout, not after.
The September float and the passive-income grind
Collecting a year's tuition in six weeks leaves a large cash balance that sits for months. Invest it and the interest is adjusted aggregate investment income; once AAII passes $50,000, the $500,000 small-business limit shrinks by $5 for every extra dollar, and the roughly 12.2% rate you planned around starts climbing. A school quietly parking its building fund in GICs can grind its own rate without anyone ever deciding to.
So the float needs a policy, set annually: how much stays operational against the thin summer, how much pays down the building mortgage instead of earning taxable interest, and when GICs mature relative to year end so income lands in the year you want it. Where the school genuinely needs a capital fund, we size it, name it and review it — a plan with tax consequences chosen, rather than an accident with tax consequences discovered.
Paying yourself from a school corporation
At small-business rates the salary-versus-dividends decision is rarely dramatic, but the details pay. Salary creates RRSP room and CPP; dividends are simpler and skip payroll cost; most owners land on a mix we revisit each year against the corporation's rate and the family's cash needs. Family members who genuinely work in the school, in admissions, the office or the before-care room, can be paid for that work, and averaging 20 hours a week across the year puts them inside TOSI's excluded-business test, which makes dividends to them defensible too. The pay must match the work; a payroll entry is not a plan.
One timing rule bites schools with summer year ends: a bonus accrued at June 30 keeps its deduction only if it is actually paid within 180 days. We diarize the payment date, because a forgotten December cheque quietly undoes a June deduction.
A plan that lands as a calendar
School tax planning resolves into dates: capital work completed and available for use before year end, instalments re-sized once the AAII grind is known, remuneration set before the calendar year closes for T4 purposes, and the prepaid-tuition reserve schedule agreed with the bookkeeping before filing season opens. That cadence is what Tax Planning & Advisory delivers: the decisions made in winter and spring, so the summer close is arithmetic instead of triage. And when the buildout is bigger than the float, Business Financing Advisory puts lender-ready numbers behind the mortgage conversation, priced in writing after a free discovery call.
