Category Archives: Tax Planning

Odette Morin

CRA wants to know what is happening in your bedroom and it is not just to be nosy.

CRA bedroom








You may be receiving a new questionaire from CRA regarding your true nature of your relationship.  CRA wants to know what is happening in your bedroom and they have a good reason.

Here is why? There are all kinds of tax advantages to be considered spouses.  Some disadvantages as well however.  But in many cases, to be considered spouses, especially with the new “family tax credits” and at retirement with the pension splitting advantages, it may mean several hundred or thousands of tax dollars saved.  CRA want to make sure that you are indeed common law spouses, not just roommates.

Here a link to an article written this week about this.


Odette Morin

Beware Canada Revenue may be closer then you think.

Got a fancy new car? Doing a major renovation to your home? Eating at a lavish new restaurant? Why not let all your friends know what you’re doing by posting this to your social media accounts?

CRA monitors social media websites like Facebook for people who boast about their income or assets and they make sure everything has been properly declared.

You can read more here. 

Odette Morin

Should the RRIF rules be modified?

The CALU (Conference for Advanced Life Underwriting) has recently submitted its recommendations for the 2015 Federal Budget to the House of Commons Standing Committee on Finance.

The submission is based on the fact that approximately 11 million Canadians will reach age 65 by the year 2036. And longevity studies have also shown that seniors are living longer than ever before. Here are two of their recommendations. I am reproducing here the actual recommendations from the link below.

1. RRIF withdrawal rules should be modified.

This would help seniors retain and spread out savings over their lifetimes. These rules should be adjusted periodically (every 20 years or so), based on demographics and economic conditions.

Moshe A. Milevsky, a professor at the Schulich School of Business and managing director of Longevity Extention Corporation, proposes one adjustment model. He suggests the current required minimum distribution (RMD) rates need to be changed to take lower interest rates into account, and the fact that, since Canadians are living longer, they’ll need more income. This doesn’t change the original intent of the RRIF legislation, which was to limit the deferral of income taxation, and spread personal pension payments evenly over a retiree’s lifespan. But, these rules haven’t been updated since 1992, he says.

Milevsky recommends that, each year, the RRIF holder should withdraw a percentage of the RRIF’s value at the start of the year equivalent to what a life annuity would pay at that age (see “Optimal RRIF spending rates in an economic lifecycle,” below). The numbers would reflect changes to interest rates and demographics. This would keep the RMD rates fair.

Optimal RRIF spending rates in an economic lifecycle

RRIF Value at 70: $200,000

Pension Income: $10,000

Survival to Age 95: 28% chance

REAL Interest Rate: 1.50%

Longevity Risk Aversion: High (=8)

Current RRIF rates (%) Age RRIF value Optimal
withdraw (%)
Total spending
5 70 $200,000 4.55 $19,110
7.38 71 $193,960 4.69 $19,080
7.48 72 $187,860 4.84 $19,050
7.85 75 $169,200 5.27 $18,950
8.75 80 $137,128 6.35 $18,675
13.62 90 $72,073 10.4 $17,484
20 95 $42,124 15 $16,300
Source: Conference for Advanced Life Underwriting

2. A federal tax incentive for long-term care insurance should be implemented.

This would encourage Canadians to become more self-sufficient with respect to their long-term health care needs. CALU cites a recent paper by the Canadian Life and Health Insurance Association (CLHIA) and an upcoming report by the C.D. Howe Institute discussing the needs of our aging population. With Canadians living longer, they’re more at risk of contracting chronic diseases and will need support, whether at home or in an institution.

In fact, the chances of requiring long-term care are 1 in 10 by age 55, 3 in 10 by 65, and 1 in 2 by 75, according to Statistics Canada. And more than 750,000 Canadians over the age of 65 will reside in health care institutions by 2036. CALU recommends allowing long-term care insurance to qualify as an investment for an RRSP or RRIF, or letting investors withdraw up to $2,000 per year from RRSPs or RRIFs to purchase long-term care insurance.

Both issues are critical and timely. We should lobby and discuss these recommendations with our parliamentarians. We also should let clients know what our professional association is doing on their behalf. I say we should take this opportunity, in these pre-budget days, to support CALU and its recommendations.


We will keep you updated on any RRIF changes. Here is the link to the full report.



Odette Morin

New “family tax cut” announced

The Harper government has announced new family tax cut measures to fulfill his promise for income splitting and other tax relief for families during the last federal election. Here is a brief outline of the changes:

  • The Universal child care benefit will be raised from $100 per month per child to $160 per month per child up to age 6.
  • A new credit of 60 per month for children aged six to seventeen years is also being introduced.
  • The new tax measures will take effect on January 1st, 2015 but will only start being paid in July 2015 with a retroactive cheque of $420 per child under age 18.
  • A new “Family Tax Cut” will allow an eligible taxpayer to transfer up to $50,000 of income to his or her lower income spouse in order to collect the new non-refundable federal tax credit.  The new tax break will be capped at $2000 per year.
  • The government will allow families to take advantage of this tax break in the current 2014 tax year.

More details later when we find out exactly how the new “Family Tax Cut” and credit will work for typical taxpayers.

Stephen Harper;  Laureen Harper

Terry Broaders

Should I Delay CPP ?

Beginning in 2012, anyone who paid into CPP and reached the age of 60 could choose to begin receiving CPP benefits regardless of employment status. Previously, in order to qualify for retirement benefits one had to cease employment. There are significant financial incentives for delaying CPP.   Under the new rules, the monthly penalty for taking the CPP early (before 65) will increase gradually from 0.5% in 2012 to 0.6% a month by 2016 and the monthly benefit for delaying CPP increased from 0.5% a month to 0.7 % a month in 2013. Taking CPP early at 60 will mean you will receive 36% less than if you take it at 65 and you’ll get 42% more if you start taking it at 70 instead of 65.The maximum CPP payment for 2014 is $1,038.33, or 12,459.96 a year.

Deciding when to take CPP benefits is best based on each individual’s circumstances, but there are a number of factors to consider.  One has to do with your marginal tax rate.  If you are in a high marginal tax rate from age 60 to 65 but will be in a significantly lower rate after age 65 it may be best to delay CPP beyond age 65.  Another consideration is your life expectancy and what is known as the cross over date. This is the age you need to attain to get the benefit of delaying receiving the benefits to get the larger amount. For example, if you delayed taking CPP at 65 and took the enhanced benefit at 70, the cross over age is 80.2 years.  You need to live beyond 80 to compensate for not taking any CPP benefits at age 65.  If you’re in good health and longevity is in your family, it may be a good idea to delay because you may have a better chance of reaching that cross over age. On the other hand, if you need the cash benefit or are in questionable health it may make sense to begin receiving reduced early benefits and take the after-tax proceeds and invest them in a Tax Free Savings Account.  Also keep in mind that if you are retired and are collecting your CPP then you have to take less withdrawals from your other investments, leaving your money there to grow.   

While generally speaking we suggest taking the CPP early and potentially reinvesting it completely or partially there is simply  no one answer that fits all.  We can help you analyze your specific  situation to determine what is best for your circumstances.

Anthony Sabti

Clarifying TFSA contribution rules

If you maximized your TFSA contribution each year, you would have contributed $31,000 to the account for 2014.

Now let’s say that your investments in the TFSA have grown in value to $50,000. You then withdraw the full $50,000 from your TFSA at the end of 2014.

How much is added back to your contribution room at the start of 2015? $31,000 or $50,000?

The answer is $50,000. In 2015 you can contribute $50,000 to your TFSA plus your annual contribution amount of $5,500.

The formula for determining your contribution room the following year is as follows:

Unused TFSA contribution room to date + Total withdrawal made in this year + next year’s TFSA dollar limit = TFSA contribution room at the beginning of next year

A few more examples from Canada Revenue Agency (CRA):