Small business owners in Ontario may not realize that the Quick Method of accounting for GST/HST can actually increase the bottom line of a small business…

GST/HST registrants who elect to use the Quick Method collect GST/HST as usual; however, rather than claiming input tax credits (ITCs), the registrant would simply use a formula that is a fixed percentage of overall gross revenues (including GST/HST collected).

This would make a lot of sense to do for small business owners that have high revenues (yet, below the threshold discussed below) and very minimal ITCs to claim (minimal expenses where the business has paid GST/HST on the expense).

To illustrate, we can use the example of an IT consultant in Ontario, Jason Smith, who has elected to use the Quick Method of accounting with respect to the 2018 calendar year. We will assume the following facts;

• Taxable revenues for the year – $200,000
• HST at 13% collected on revenues – $23,009
• Taxable expenses incurred – $10,000
• HST at 13% incurred on expenses – $1,300

Based on the Quick Method of Accounting for GST/HST with respect to a service business located in Ontario whose revenue is derived at least 90% from sources within Ontario, the remittance rate is 8.8% of tax-included sales.

Using the Quick Method registrants are entitled to a bonus 1% reduction in the remittance rate which is applicable to the first $30,000 of tax-included revenue for the year.

Therefore, for 2018 Mr. Smith would remit:

• GST/HST included revenues – $200,000
• Amount owing on first $30,000 of GST/HST included revenue ($30,000 x 7.8%) = $2,340
• Amount owing on balance (($200,000 – $30,000) x 8.8%) = $14,960

Total GST/HST for 2018 = $17,300.

Without the Quick Method election, Mr. Smith would remit:

• GST/HST collected minus GST/HST paid.
• $26,000 – $1,300 = $21,709

As you can see, the Quick Method is actually profitable in this scenario. An important note though, is that the Quick Method is not available for everyone. For example, accountants, lawyers, bookkeepers and financial consultants are among those not permitted to use it. Additionally, businesses with revenues exceeding $400,000 are no longer permitted to use the Quick Method either.

Remember to always consult your Toronto Tax Accountant before making any elections, to ensure the optimal tax structure for your small business.