Hear Ali Raza Jaffer, President AR Jaffer Professional Corporation, who gives advice on how to financially discipline ourselves to attain our goals for the future including tips on how to approach our cashless society, credit cards, good debt vs bad debt, dual incomes and guidance on RRSP/RESP/TFSA options.
Here is a helpful checklist to help you for your tax preparations. If you have any questions feel free to contact us at 905-629-7720.
As you may have heard in the news, the government is proposing tax changes that affect private corporations. I have attended a number of town hall sessions and seminars on the proposed changes and have summarized the impacted tax planning areas:
Business owners currently can split income to family members to reduce the overall family tax burden. The government wants to restrict this by expanding the ‘kiddie tax’ rules and preventing dividends paid to children at a lower tax rate. More specifically, the government wants to restrict the ability to pay salary or dividends to adult children between the age of 18 and 24 by extending the Kiddie Tax rules ( “Tax on Split Income” (TOSI) ). Furthermore, a reasonableness test will be introduced to determine if the amount received by the family member is commensurate with the labour and capital contributions by the family member.
Holding Passive Investments Inside a Private Corporation:
The government is planning to change the rules to prevent the use of corporate tax deferrals to hold passive investments inside a corporation. The existing rules allow shareholders to decide when they receive dividends allowing them to control when the personal taxes are paid. This tax deferral was intended by the government as an incentive for Canadian controlled private corporations to invest within their business. The government opines that the current system allows corporations (paying tax at a lower rate) to retain cash within the corporation and invest the excess funds at an unfair tax advantage. They have not determined what the specific rate will be, but are looking at a specific tax rate for passive investments.
Converting Income into Capital Gains:
The Government has proposed new measures which seek to eliminate tax plans that convert dividend income into low taxed capital gains. Within the tax rules is the theory of integration in which income earned in a corporation is taxed at the corporate level and once again when the individual shareholder receives a dividend. The after-tax amount in the individual’s hand after removing the funds from the corporation should be the same as if the individual earned the funds directly as a salary. The government is concerned with the ineffectiveness of integration in situations where corporate surpluses are paid out in the form of tax-exempt or lower taxed income. The legislation has been amended to eliminate this conversion and a new anti-avoidance rule will be added.
Multiplication of the Lifetime Capital Gains Exemption (LCGE):
Currently, corporations can use family trusts to have multiple LCGE limits for multiple family members. There are 3 proposed measures in this category:
As the legislation is finalized, I will provide a further update. In the meantime, if you have any questions, please contact myself or the staff.
As you prepare your 2016 tax documents, We wanted to identify some of the tax changes for the 2016 tax filing period. Please email email@example.com or call 905-629-7720 with any questions.
Individuals and families
Canada child benefit (CCB) – As of July 2016, the CCB has replaced the Canada child tax benefit (CCTB), the national child benefit supplement (NCBS), and the universal child care benefit (UCCB).
Children’s arts amount – The maximum eligible fees per child (excluding the supplement for children with disabilities) has been reduced to $250. Both will be eliminated for 2017 and later years
Home accessibility expenses (if 65+ or claiming disability tax credit) – You can claim a maximum of $10,000 for eligible expenses you incurred for work done or goods acquired for an eligible dwelling.
Family tax cut – The family tax cut has been eliminated for 2016 and later years.
Children’s fitness tax credit – The maximum eligible fees per child (excluding the supplement for children with disabilities) has been reduced to $500. Both will be eliminated for 2017 and later tax years.
Eligible educator school supply tax credit – If you were an eligible educator, you can claim up to $1,000 for eligible teaching supplies expenses.
Interest and investments
Tax-free savings account (TFSA) – The amount that you can contribute to your TFSA every year has been reduced to $5,500.
Dividend tax credit (DTC) – The rate that applies to “other than eligible dividends” has changed for 2016 and later tax years.
Investment tax credit – Eligibility for the mineral exploration tax credit has been extended for flow-through share agreements entered into before April 2017.
Labour-sponsored funds tax credit – The tax credit for the purchase of shares of provincially or territorially registered labour-sponsored venture capital corporations has been restored to 15% for 2016 and later tax years. The tax credit for the purchase of shares of federally registered labour-sponsored venture capital corporations has decreased to 5% and will be eliminated for 2017 and later tax years.
Sale of principal residence – The sale of a principal residence must now be reported, along with any principal residence designation, on Schedule 3. Under proposed changes, the CRA will be able to accept a late designation in certain circumstances, but a penalty may apply.
Reassessment period – Under proposed legislation, for tax years that end after October 2, 2016, the CRA may at any time reassess your income tax return if you fail to report a sale or other disposition of real estate.
Check out the following tax, accounting, and cash flow strategies for Health Care Professionals.
Click Here to view.
As the year-end approaches, many Canadians are gearing up for holiday spending and finding the means to pay for the many expenses they will be incurring. On a day-to-day basis, Canadians are struggling to meet the daily needs for their family and are looking for various options to achieve their financial
A recent survey conducted by the Canadian Payroll Association concluded that nearly half of all Canadians are living paycheque to paycheque. This means if there was a change in interest rates, job loss, severe illness or other life-changing event, many of those Canadians would be in severe financial difficulty.
Furthermore, at the beginning of 2016, Statistics Canada reported that the average Canadian had more than $21,000 in debt. An ineffective financial strategy will result in the accumulation of lines of credit debt, credit card debt and the buildup of personal loans. This will be even more significant in the event that a paycheque is delayed or large one-time expenses are incurred. This snowballing effect could result in the inability to even afford minimum payments on debt.
To view the complete article, click here.
How to face the biggest financial burdens—family costs and a mortgage—at the same time
Julie and Noel Bond seemed well on their way to realizing the Canadian dream when they moved east of Vancouver to the small community of Mission in 2014 so they could afford a three-bedroom house for their growing family. They now have two pre-school children and are expecting a baby in March.
While Julie plans to stay home to look after the kids for a year after the baby’s birth, the couple face a tricky financial dilemma over what to do after that. For Julie to return to her part-time $30,000-a-year teaching job would be pointless because her entire paycheque would be eaten up by child-care costs. But the $80,000 a year Noel earns as a railway worker isn’t enough by itself to cover the mortgage and other expenses if Julie stays home to look after the kids. Whether Julie, who is 36, returns to her old job or stays home, they expect ongoing expenses to exceed take-home pay by about $1,000 a month. That leaves Julie looking for solutions and wondering, “What will my family do?”
To read more, click here.
Coping with the death of a loved one is difficult. There is a lot to keep in mind when managing the final tax affairs of a deceased person. The final tax return is generally filed in the same manner as when they were alive. All income up until the death of the individual must be reported and all credits are deductions that the person was entitled to may be claimed.
A final tax return must be filed after a death. All of the deceased’s income from January 1 of the year of death up to the date of death must be reported by the legal representation of the deceased. They must also report any income earned after the date of death.
Information for legal representatives
You are a legal representative of a deceased person if you are named executor in the will or you are appointed as the administrator of the estate by a court.
As a legal representative, it is highly recommended to get a clearance certificate from the CRA which certifies that all the amounts the deceased owed to the CRA have been paid.