Category Archives: Tax Planning

Odette Morin

2016 TFSA limit reduced to $5500


It’s official. Finance Minister Bill Morneau announced yesterday that for 2016, the TFSA limit will be brought back to $5500. The 2015 limit will remain at $10,000.

If you have already signed a form to process your contributions in January, we will adjust the contribution amount to $5500 to ensure that you stay within the limit.

If you have not made your 2015 TFSA contribution, $10,000 will be added to your TFSA carry forward amount. You can maximize that limit or past years, anytime in the future.

Please remember that you can invest your TFSA as a long-term investment or save it for the short-term depending on your needs and personal situation.

Please contact us if you have any questions regarding your TFSA contributions and personalized planning.

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Odette Morin

How will the new Trudeau government affect your pocket book?

Trudeau PM

History was made this week with the stronger than expected come back of the Liberals lead by the high value and enthusiastic Justin Trudeau. With a majority government in hand, he has all the political power he needs to implement his party platform unimpeded.

Trudeau and his Cabinet will be sworn in on November 4, and it will likely be months before the new government releases its budget or starts passing legislation.

Here’s what you can expect from the Liberals once Parliament gets into full swing:

How will personal tax rates change, if at all?

  • Middle class tax rate decrease: Rate for taxable income between $44,700 and $89,401 would drop from 22% to 20.5%, for tax savings worth up to $670 a year per person.
  • High income marginal tax rate increase: Marginal tax rate for income above $200,000 would increase from 29% to 33%. On a $250,000 income, this would mean paying up to $1,329.50 more.

Will any tax credits or deductions change?

The Liberals have promised the following changes:

  • TFSA: Return TFSA contribution rates to $5,500 from $10,000.
  • OAS at 65: The Liberals have said they would not go ahead with plans to gradually raise the eligibility age to 67. This will restore eligibility at age 65 for everyone born from 1958.
  • Child benefit: the Universal Child Care Benefit will be replaced with the Canada Child Benefit, a tax-free monthly benefit for the middle class. Families would receive up to $6,400 a year per child under six, and up to $5,400 a year per child aged six to 17. The amount would decrease as family income rises. Families with incomes of $200,000 or above wouldn’t get a benefit.
  • Employment Insurance: Eligibility will be enhanced and premiums reduced.
  • Create a Teachers School Supply Tax Benefit: teachers and educational assistants who buy their own classroom supplies will benefit from a refundable credit worth up to $150.
  • Home buying: Allow Canadians to put RRSP money toward buying a house more than once. The Home Buyers’ Plan currently focuses on first-time buyers; people would additionally be able to use it multiple times when moving for work, after the death of a spouse, after a marital split or to take in an elderly relative.
  • CPP Enhancement: The Liberals have talked about working with the provinces to bolster Canada Pension Plan benefits.
  • Student loans: Grads would not have to repay student loans until they have earned at least $25,000 a year, with interest paid by the federal government during that period; also, the maximum Canada Student Grant for low-income students would rise to $3,000 annually for people studying full time.

How about income splitting?

  • Pension income splitting will be kept.
  • Income splitting for families with children under 18 will be eliminated.

I own a small business. What happens to me?

  • The small business tax rate is expected to drop from 11% to 9% by 2019.

These were promises made. There is no way to know if and when these will be effective. We will continue to keep you up to date through these blog posts. Keep reading us regularly!

Terry Broaders

Near Year End Tax Tips

The problem with year- end tax tips is that if you wait until year end it is usually too late to take any action. Now is the time to begin your near year end planning so you are truly set for year- end.  Here are  important points to ponder.

Health Expenses – If you have expensive medical or dental work coming up that you have to pay out of your own pocket consider having it done before December 31. You will be able to claim the credit on your 2015 tax return in spring 2016. If you wait until January you will not be able to use the tax credit until you do your 2016 tax in spring 2017.  A $3,000 dental bill for example will save you approximately $175 to $300 in taxes.

Donations – Donations made before December 31, 2015 can be claimed on your 2015 tax return in the spring of 2016.  A $300 donation saves you about $85 to $130 in taxes.

Tax Loss Selling – Do It Now – If you’ve got investments that have dropped in value, consider selling these to realize the capital losses before year-end (place trades by Dec. 24 if you want them to settle in 2015). This makes the most sense if you reported capital gains on your 2014, 2013 or 2012 tax returns. You’ll be able to carry your capital losses back up to three years to offset gains in those years and recover taxes you paid.

Tax Gain Selling – Do It Later – It’s almost always better to pay tax later, rather than sooner. If you’re thinking of taking some profits on the winners in your portfolio, consider waiting until January to sell. This will push the payment of your tax bill on the sale to the spring of 2016.

If one part of your portfolio is in a gain and another component is in a loss position of the same size you can sell both before year end. The loss can offset the gain leaving you in a neutral tax position.

TFSA  –  If you are planning to make a withdrawal from your tax-free savings account (TFSA), consider doing this now rather than in early 2016. If you delay until the new year, you will not regain the equivalent amount of TFSA contribution room until 2017. This is because amounts withdrawn from a TFSA are not added to your contribution room until the beginning of the year after the withdrawal is made.

Leaving the Province?  Now Or Later? –  If you are planning to move provinces and if your scheduling permits it, then strategically plan your move time.  If you are moving from a low tax province to a high tax province delay your move until 2016. You are taxed in the province where you are resident on December 31, 2015.  If you are moving from a high tax province to a low tax province make your move before December 31, 2015.  For example a single person earning $75,000 per year pays about $15,944 tax  in British Columbia (a low tax province) but would pay about $20,785 tax in Quebec (a high tax province). That’s a difference of $4,841.

Get Organized Now –  Many, many dollars are lost because the taxpayer “could not find the receipt”. It’s never too early to start organizing now.  Running around like a chicken with its head cut off trying to find all your slips the day before the tax deadline is never a good thing. If you haven’t already started an envelope or folder to hold all your tax slips and receipts, then do so now. You can still procrastinate a little, but at least all your slips will be in one spot and you won’t miss claiming anything.

Remember, advance planning is tax dollars saved! Get ready now!  Before you know it people will be joyously greeting each other with cries of “Happy Tax Season! “   Don’t get left out of the party !

Odette Morin

Should you incorporate or remain a sole proprietor?

Inc or not

Setting up a professional corporation can be easy and financially beneficial, but before you decide to incorporate, it helps to consider the pros and cons and make sure that your profession allows it.

There are many advantages to being incorporated which I will list below but it may not be needed just yet unless there is a potential liability. For many self-employed individuals, there is rarely a need to be incorporated unless they make an income greater than what is needed to live. For most very successful self-employed, it is not a matter of if they should be incorporated, it is a matter of when they should do it. Here are the details.

There are two main reasons to incorporate:

1.Liability potential: Can you be held legally responsible for the work you do? Could you be sued and potentially lose a significant part of your personal assets? If the answer is yes, you need to incorporate now to protect these assets regardless of the tax situation. This just makes sense.
2.Tax saving: The rule of thumb regarding the tax aspect of incorporation is that you need to keep in the corporation about $50k. The resulting tax saved by keeping that $50k in the corporation will offset the annual costs of accounting and bookkeeping. In other words, if you need all of the money you make to pay bills and pay for your lifestyle and nothing gets saved in the corporation, there is no tax advantage to incorporating. If you only need to draw a portion of the self-employment income and at least $50k can stay within the corporation, the personal and corporate combined tax owing will be less. Please remember that you would also be able to direct funds from the corporation to your RRSP tax-free effectively transferring money from the corporation to you personally without immediate tax. Therefore, the $50k is after the RRSP contribution. If you do make enough to draw the salary you need, maximize your RRSP and still have $50k left in the corporation, you should incorporate. The funds left in the corporation not required in the short-term can be invested for retirement as well.

If you are just starting out, I would wait at least a year before incorporating unless there is a large liability potential. You will know by then whether you like being self-employed and how much money you will be making. Incorporating will cost you anywhere from $2500 to $5000. This is a one-time up-front cost. The accounting fees are generally about $2500 to $3000 per year.

Here are more details on how a professional corporation can help with your tax planning.

1. Tax deferral on corporately retained earnings:

·As long as the money earned by shareholder in his corporation, stays in the business, personal tax won’t be due on the amount until it’s paid out to shareholders (you, your kids or spouse). Your money doesn’t need to be paid out; it can stay in the business for years.

·It’s best to leave at least $50,000 a year in the business to justify the cost of incorporating.

2. Income splitting:

·Some professions allow family members to hold non-voting shares. In these cases a spouse or child (over 18) who is not active in the business can share a part of the professional corporation’s after-tax income by receiving dividends on shares they own directly or indirectly.

·If your children are 18 or older and earning income that puts them in a low tax bracket, the family will pay less tax overall than if the professional personally earns all the income.

·Accumulation of equity: With more after-tax income inside the business, you can accrue assets faster than if you used your money on personal expenses.

·Dividend-sprinkling shares: This is a cost effective alternative to trusts involves issuing various classes of common shares to each family member, permitting the corporation to pay dividends on one class of shares to the exclusion of others. Paying family members dividends instead of a salary should be considered in some cases because salaries paid are subject to reasonableness tests. Dividend payments are not subject to the same test.

3. Tax savings with cheaper non-deductibility

·Consider having the corporation incur non-deductible expenses such as life insurance premiums. Since a professional corporation pays tax at a lower rate than an unincorporated professional, the cost of non-deductibility is less.

The benefits of incorporating don’t end there. Setting up a professional corporation can help professionals in their retirement years as well.

Dividends after retirement

·It’s not imperative that a person closes their professional corporation when they retire; funds can be left in the professional corporation to grow. The company can retain the earnings and pay them out as dividends.

Individual pension plans (IPP)

·An incorporated professional can have a pension plan established by the corporation for their benefit. Contributions are made to this plan instead of an RRSP.

Probate tax

·In some provinces, creating a corporation can significantly reduce probate taxes at death, using a secondary will to address the transfer of shares after death.

While there are some great benefits to incorporating, there are a few drawbacks as well.

·Start-up and annual costs are high
·A lawyer is needed to set up a professional corporation. In some situations this can cost upwards of $3,500.
·The cost of moving existing assets into a corporation can run between $5,000 and $7,500.
·Additional tax returns are needed
·Your client will be required to fill out a T2 for corporate returns. They’ll also need to file an annual corporate financial statement, which can cost $1,500 – $3500.

Please contact us to further discuss your situation. You can reach us at 604-878-0702 for Anthony, Odette or Terry.

Please note remember that we are not accountants. This is only a very general summary of the advantages and disadvantages of incorporating. It is provided in a financial planning perspective. Only a qualified accountant can give you professional advice.

Odette Morin

NEW lower RRIF minimum payment rules effective now: consider your options


We are writing to advise all annuitants of Registered Retirement Income Fund (RRIF) held with us of changes to the required minimum annual withdrawal amounts as a result of regulations introduced in the Federal Budget released April 21, 2015.

Specifically, the budget introduced a reduction to the prescribed required minimum annual withdrawal factors for RRIF annuitants 71 to 94 years of age. Starting in 2016, this reduction will result in decreasing the amount that RRIF annuitants will be required to withdraw as a minimum amount during those age years.

This applies to RRIF accountholders who are setup to receive the minimum payment only. If you are setup to receive a fixed amount (ex. $500 a month), you will not be affected.

The table below provides a comparison of the new and old RRIF factors.


All RRIFs 2015+ Post-1992 RRIFs
prior to 2015
71 0.0528 0.0738
72 0.0540 0.0748
73 0.0553 0.0759
74 0.0567 0.0771
75 0.0582 0.0785
76 0.0598 0.0799
77 0.0617 0.0815
78 0.0636 0.0833
79 0.0658 0.0853
80 0.0682 0.0875
81 0.0708 0.0899
82 0.0738 0.0927
83 0.0771 0.0958
84 0.0808 0.0993
85 0.0851 0.1033
86 0.0899 0.1079
87 0.0955 0.1133
88 0.1021 0.1196
89 0.1099 0.1271
90 0.1192 0.1362
91 0.1306 0.1473
92 0.1449 0.1612
93 0.1634 0.1792
94 0.1879 0.2000
95+ 0.2000 0.2000

Generally speaking there is about a 2% decrease in required minimum withdrawals. For example, if you are 75 years old and you have a RRIF with a $100,000 balance, the old minimum amount $7,850 and the new minimum

is $5,820. In this example, you have $2,030 less in taxable income.

Since this change was introduced well after the start of the year but is effective for 2015, you have a few options for 2015:

  1. Minimum Amount – You can choose to take this year’s minimum payment based on the old calculations, in which case you do not need to do anything further (recommended action).
  2. Re-contribute – If you have already, or by the end of the year will have received the required minimum annual withdrawal amount based upon the old factors, you have the option of re-contributing the excess amount to your RRIF. The deadline to make a re-contribution is March 1st, 2016. You will be issued a T4 for the amount withdrawn and an offsetting contribution slip for the re-contribution for your 2015 tax filing (we do not recommended this action, enjoy the extra money for 2015!)
  3. Adjust Payments – You can choose to adjust any minimum payment(s) not yet paid to reflect the new lower calculation. In this case we will require formal updated instructions from you.

No action is required on your part unless your payment(s) are based upon the minimum required withdrawal and you wish to take advantage of the lower required minimum withdrawal for 2015, or wish to re-contribute the excess withdrawals for 2015.

Most RRIF accountholders who are setup to receive the minimum will likely welcome the decrease in payments.

Odette Morin

Enhanced Child Care Benefit starts today!


Many Canadians are about to receive the largest one-time benefit payment in federal history. The Harper government is sending out its enriched Universal Child Care Benefit (UCCB) starting today.

And since the payments are retroactive to January, families will receive cheques or direct deposits representing a total of  $3-billion payout.

The UCCB was increased to $160 per month for each child under the age of six.  The retroactive payment will be $360 per child.

The UCCB was expanded to children aged 6 through 17.  Formerly none were paid. Parents will receive a benefit of up to $60 per month for each child in their care aged 6 through 17.  The retroactive payment will be $360 per child.

How will you spent the enhanced Child Benefit?  or will you be saving some of it?  Let us know your plans!

Find out the details here