A new survey from Mackenzie Investments shows how tough it is for small businesses to keep up with complex and changing tax and estate planning trends.

As October is Small Business Month, Mackenzie today released the results of the Mackenzie Small Business Tax Test, a new customized survey that tested business owners on their tax knowledge.

The survey asked 337 small business owners across Canada 10 true or false questions testing their tax knowledge. Respondents scored an average three out of 10 correct.

Only 8% of small business decision makers were able to answer seven or more out of 10 questions correctly.

“Knowledge is power for small business owners; and in the complex and changing world of taxes, more power is needed,” says Sandy Cardy, senior vp, tax and estate planning, Mackenzie Investments. “Entrepreneurs have multiple details to attend to each day, but a general understanding of tax rules can help them save tax dollars today in order to preserve equity in their business.”

The questions focused on a mix of tax, retirement, estate and contingency planning issues.

Some questions stand out for Cardy: “Question number 2 refers to the fact that you can split business income with a spouse, and number 10 shows that you can split dividend income with an adult child. These are important for incorporated business owners to know, for example, because income splitting can significantly reduce the family’s overall tax bill.”

“Whether you’re starting to grow your business or are approaching retirement, a better understanding of these topics means a better chance of future success for you, your family and your business,” Cardy says.

“A small business owner might have a team of accountants and financial advisors working for them. But tax knowledge helps them play with that team, not just sit on the sidelines,” Cardy adds. “Both the company’s and the entrepreneur’s future depends on his or her ability to help develop workable tax, estate, and succession plans for the business.”

The survey results are based on a Leger Marketing national online survey with a representative sample of 337 small business owners between Oct. 6 and 16, 2008. The businesses have between 5 and 50 employees, and are either incorporated, in a partnership or sole proprietorship. A sample of this size will provide results that can be considered accurate for the population overall to within plus or minus 5.3%, 19 times out of 20.