Accounting for tutors & education services.

Questions worth getting ahead of

• Working out whether your lessons are exempt from GST/HST
• Keeping proof that a course is approved or follows a designated curriculum
• Separating taxable and exempt services in one business
• Watching the $30,000 small supplier limit
• Tracking which purchases relate to exempt lessons

Start with whether your lessons are exempt

The CRA says tutoring or instructing an individual in a course that is approved for credit by, or follows a curriculum designated by, a school authority is an exempt supply. The exemption covers elementary and secondary courses and does not apply to courses at the post-secondary level. Music lessons are separately treated as equivalent, and a few other categories are listed in the same section of the law. The student does not have to be the one who pays, so a parent can be the customer. Because exemption depends on what you teach, list each service you offer and bring it to a conversation with an accountant.

Show the connection to the school course

For the exemption to apply, the CRA says there must be some direct connection between the tutoring and the course approved for credit or the designated curriculum. Tutoring may include general concepts or material from lower grades if it helps the student understand the course material. Where a course is approved for credit by a school authority for particular students, the CRA expects the supplier to keep documentary evidence of that approval. Write down which course or curriculum each program supports, and keep any letters or confirmations from schools. A vague description such as general study skills may be harder to support.

Treat other subjects and mixed programs separately

Not every lesson is exempt. The CRA’s second-language rule, for example, covers instruction in English or French as a second language when supplied in the ways it sets out. It does not cover other courses about English or French, or instruction in other languages, which may be exempt or taxable under other provisions. If your business sells exempt tutoring alongside taxable services, you generally need to charge GST/HST on the taxable part and not on the exempt part. Set up separate revenue accounts for each type of service from the start, so the invoices, the bookkeeping and the return can follow the same lines.

Check the small supplier limit and registration

A small supplier, according to the CRA, is generally someone whose total worldwide taxable revenues, together with those of associates, are $30,000 or less in a single calendar quarter and in the last four consecutive quarters. Exempt supplies are not taxable supplies, and the CRA says you generally cannot register if you make only exempt supplies. A tutor with both kinds of income should therefore track taxable sales on their own and review them every quarter. Registration, if required, comes with invoicing and filing duties that are easier to plan for than to correct afterwards.

Know what you cannot recover on exempt services

When you make exempt supplies, the CRA says you generally cannot claim input tax credits for GST/HST paid on property and services used to provide them. That can matter for software, materials, rent and advertising when you teach exempt lessons. If you also make taxable supplies, the expenses may need to be split by use. Keep invoices that show the GST/HST paid, note which service each purchase supports, and ask your accountant how to allocate shared costs such as a website or a rented room.

Support to discuss with Sora