August 18, 2024,

Dear Valued Clients & Friends,

As we reach the height of summer, we hope you’re enjoying the season and finding time to relax and recharge. The first half of 2024 has been eventful, and we’re excited to share updates, tips, and insights that will help you stay on top of your financial game as we move into the latter half of the year.

Thank you for your continued trust in AR Jaffer Professional Corporation. We’re here to support you every step of the way as you continue to build your net worth!

In this edition of the newsletter, I will review the most recent tax season, preparing for the remainder of 2024, the federal budget and a financial health check.  We will also be profiling our payroll management services.  Here are some topics that I will be discussing:

1. 2024 Personal Income Taxes Update & Planning
2. Income Tax Reviews & Audits
3. Economic Update & Personal Financial Health Check
4. Mid Season Financial Tips
5. Advisory, Tax Planning and Cash Flow Planning
6. Spotlight on Our Payroll Management Services
7. Stay Connected!

If you have missed any editions of the newsletter, please click on the following link:  AR Jaffer PC Newsletter Archives

We have been working very hard in providing personal tips & accounting, tax, and business content on social media.    Please connect and follow the links to my social media at your convenience (Facebook, Twitter, LinkedIn, Instagram) to stay fully updated on CRA Updates and tax planning tips for individuals & businesses.

   

As a reminder, if you get an opportunity, please also provide a google review available at the following link:

AR Jaffer Professional Corporation Chartered Professional Account Google Review

Sincerely,

Ali Raza Jaffer

1. 2024 Personal Income Taxes Update & Planning

As the 2023 personal tax and sole proprietorship tax deadlines have recently passed, you should have received your notice of assessments.  If you have not filed your returns yet, you can still send us the documents as it is always better to file even if the tax returns are filed late to avoid your account being flagged or subject to an audit (to be discussed further in the next section).  If you have any questions, please contact us.

2023 Tax Review

Here are some notable items to review from 2023

1. Please send us a copy of your 2023 notice of assessment for our review or if you have any questions.
2. If you had a tax payable, please ensure you have made the payment to avoid interest charges.
3. If you do not have a CRA My Account, please register on the CRA website.  Here is the link:  https://www.canada.ca/en/revenue-agency/services/e-services/e-services-individuals/account-individuals.html
4. Please ensure your address and direct deposit information is up to date with CRA.  You can update it directly through your CRA My Account.

2024 tax preparation

Please also remember to review the following to avoid interest and optimize your tax position for the remainder for 2024:

1. Installments:  If your tax payable in 2023 was greater than $3,000, you are required to make tax installments in 2024.  CRA will send you a letter on your CRA My Account with details.
2. RRSPs:  Please continue making 2024 RRSP contributions.  It is suggested to make monthly RRSP contributions rather than a lump sum on the Mar 1, 2025, deadline for optimal cash flow planning.
3. Prepare a digital folder for your 2024 tax slips (common items include medical receipts, donation receipts, RRSP contributions and all your T3, T4 and T5 slips).  These can then be uploaded on our portal early in 2025. 

2024 Federal Budget Proposals

This year has brought several changes in tax laws that may impact you or your business. Here are some of the key budget proposals that were made::

1. Capital Gains Inclusion Rate Change

Budget 2024 announced an increase in the capital gains inclusion rate from one half (50%) to two thirds (66.67%) for corporations and trusts, and from one half (50%) to two thirds (66.67%) on the portion of capital gains realized in the year that exceed $250,000 for individuals, for capital gains realized on or after June 25, 2024.

There are several tax minimization strategies that we can assist with.  Some of these include:

1. 1. Forming a holding corporation for any gains greater than an annual amount of $250,000.  This will allow taxpayers to take advantage of other deductions and the capital dividend account tax free drawings.  This is ideal when the capital for investing in the corporation came from after-tax business income.  The reason for this is that the tax deferral on incorporated business income provides significantly more capital in the corporation than the shareholder would have if the after-tax business income was distributed as dividends. Having more capital to invest in a corporation may mean that more capital gains can be earned, and this may ultimately result in more after-tax income to the shareholder.
   2. Triggering losses and/or taking advantage of loss carryforward balance to take advantage of the reduced inclusion rate
   3. Investments and properties should be jointly owned to optimize tax savings.  If property is owned jointly with a spouse, partner, or family member, where each person contributed equally to the purchase of that property, then each spouse, partner or family member should have access to $250,000 of gains annually at the lower 50% inclusion rate. Upon sale, the 50% inclusion rate may apply for up to $500,000 ($250,000 for each spouse or more if more than 2 joint owners) of capital gains.
   4. Transferring securities to charities to avoid capital gains.
   5. Tax deferred rollover of shares into a holding corporation.  This is most favourable when accrued gains are greater than $250,000.
   6. Tax-Efficient Investment Planning by reviewing and adjusting your investment portfolio to maximize tax efficiency. Consider holding investments for longer periods to delay triggering capital gains.
2. Lifetime Capital Gains Exemption

The income tax system provides an individual with a lifetime tax exemption for capital gains realized on the disposition of qualified small business corporation shares and qualified farm or fishing property. The amount of the Lifetime Capital Gains Exemption (LCGE) is $1,016,836 in 2024 and is indexed to inflation.

Budget 2024 proposes to increase the LCGE to apply to up to $1.25 million of eligible capital gains. This measure would apply to dispositions that occur on or after June 25, 2024.

Under the Canadian Entrepreneur’s incentive, the LCGE would increase by $200K increments to reach $2 million by January 1, 2034.

1. Mineral Exploration Credit

As announced on March 28, the government proposes to extend eligibility for the Mineral Exploration Tax Credit (15%) for one year, to flow-through share agreements entered into on or before March 31, 2025.  This is in additional to the deduction available for flow through shares when calculating taxable income.

1. Home Buyer’s Plan (HBP)

Budget 2024 proposes to increase the HBP withdrawal limit from $35,000 to $60,000.  In addition, the 15-year repayment period is proposed to increase by an additional three years for participants making a first withdrawal between January 1, 2022, and December 31, 2025. Accordingly, the 15-year repayment period would start the fifth year following the year in which a first withdrawal was made.

1. Carbon Rebate for Small Businesses

Although the calculation has yet to be determined, for the fiscal years 2019-20 to 2023-24 fuel charge years, the tax credit would be available to a Canadian-controlled private corporation that files a tax return for its 2023 taxation year by July 15, 2024. Additionally, to be eligible for a credit in respect of an applicable fuel charge year, the corporation would need to have had no more than 499 employees throughout Canada in the calendar year in which the fuel charge year begins.

For instance, eligibility for receiving a payment in respect of the 2022-23 fuel charge year would be based on the number of persons employed by the eligible corporation for the 2022 calendar year.

As there are many changes that were announced, our team is here to assist should you have any questions.  Further details of these changes are available at https://www.canada.ca/en/revenue-agency.html

If you have any questions about your 2023 assessments and how the recent 2024 changes may affect you, our team is here to help.

1. Income Tax Reviews & Audits

As The CRA generally does not require much supporting documentation in the initial tax e-filing, they often send a letter for a ‘review’ to validate the information that has been submitted. Reviews are generally routine and should not cause any panic if you do receive a letter in the mail.  Reviews could require documentation from as far back as six years.  A review normally requires the taxpayer to respond within 30 days. Typical areas that are investigated are as follows:

1. Child care receipts
2. Support payments to an ex-spouse
3. Tuition receipts
4. Donation receipts – ensure that the donations are made through a registered Canadian charity
5. Sale of a principle residence or rental property
6. Allowable business investment loss (ABIL)

On the other hand, an ‘audit’ can occur from time to time if amounts filed do not match CRA’s records or if a taxpayer in continuously late in filing.  Common reasons for an audit are as follows:

1. If you file a ‘nil’ or ‘zero’ tax return.
2. Audits are also chosen based on the taxpayer’s risk assessment or past filing history.
3. Not filing tax returns consistently.   We recommend filing tax returns on time to avoid penalties or potentially being audited.
4. Net worth or lifestyle audit.  CRA reviews a taxpayer’s lifestyle and income filed to determine if their account could potentially be flagged.

The recommendation is to keep all paperwork for 6 years, file on time and file accurately to avoid a CRA audit.  We are available to guide you if you receive any letters in the mail.

1. Economic Update & Personal Financial Health Check

With inflation currently on the decline, interest rates are also declining.  Interest rates have already decreased 0.5% so far this year and economists project a further 0.25% increase in the fall. While reviewing your current personal and rental property mortgages, please contact me if you require some assistance on the financial impact of these declining rates and weather to proceed with a fixed or variable mortgage.

We recommend a cash flow plan, budget, or tax plan to be prepared to ensure you are able to plan for your net worth and eventually for retirement.  At a minimum, this should be prepared once every 5 years and then updated annually as your personal and financial situation changes.  We refer to this as a Financial Health Check.  Please contact us if you require further details on how we can assist you with a Financial Health Check for your personal or business planning.

Here are my top 5 recommendations with the recent changes to the inflation and interest rates (note that these are general recommendations, and it is best to speak to a professional prior to making any decisions on changing your mortgage or investment situation) :

1. Pay down your highest interest rate loans first.
2. Consider refinancing to potentially lock in your rates.  An early renewal may be the key to secure a lower rate before the next interest rate increase.
3. Prepare an annual budget and cut down unnecessary costs.
4. Evaluate larger purchases and defer them into the future (eg. Car purchases, large renovation projects, high budget vacations).
5. Consider looking at new investments:
   1. Stock markets are volatile and are up and down lately so there may be some good bargains to be sought out
   2. Crypto markets are also very volatile (please tread carefully here as crypto is still considered a new type of investment strategy)
   3. Real estate markets are also down, but may still be expensive given the high interest rates

Navigating both inflation and interest rates can be complex. For this reason, it is extremely important to have a Financial Health Check in place and ensure that tax, investment, and cash flow strategies reflect your long-term goals.

We have some excellent planning tools on our website to help get you started with a Financial Health Check.  Click ARJCPA Financial Tools for more information.

1. Mid Season Financial Tips

As we recently passed the mid-year mark, it’s an ideal time to review your financial health. Here are five key tips to ensure you’re on track for end of year:

<![if !supportLists]>1.    <![endif]>Review Your Budget: Mid-year is perfect for revisiting your budget. Analyze your spending patterns and adjust your allocations as necessary.

<![if !supportLists]>2.    <![endif]>Tax Planning: Consider potential tax-saving opportunities, such as contributing to retirement accounts or making charitable donations. Staying ahead of tax planning now can save you from a year-end scramble.

<![if !supportLists]>3.    <![endif]>Investment Check-In: Review your investment portfolio to ensure it aligns with your long-term goals. Consult with your financial advisor if you’re considering adjustments.

<![if !supportLists]>4.    <![endif]>Prepare for Year-End: Start gathering necessary documents and information for year-end financial reporting. Early preparation can ease the stress as the fiscal year wraps up.

<![if !supportLists]>5.    <![endif]>Business Forecasting: If you’re a business owner, reassess your forecasts and goals. Adjusting your strategy now can set you up for a strong finish to the year.

We review these strategies in our advisory services that will be discussed next.

 

1. Advisory, Tax Planning and Cash Flow Planning

Whether you are an individual taxpayer, sole proprietor, or corporate business owner, many of us have experienced a challenging past couple of years.  As part of our commitment and service delivery, we have been working with our clients on the following:

<![if !supportLists]>1)    <![endif]>Business Financing which includes

<![if !supportLists]>a.    <![endif]>$100k BDC working capital loan application. This is the most popular and easiest application process.

<![if !supportLists]>b.    <![endif]>Bank loan proposals & applications

<![if !supportLists]>c.    <![endif]>Lines of credit applications

<![if !supportLists]>d.    <![endif]>Preparation of business plans and cash flow projections

<![if !supportLists]>2)    <![endif]>Life Insurance Planning Strategies

<![if !supportLists]>3)    <![endif]>Cash Flow Planning & Budgeting

<![if !supportLists]>4)    <![endif]>Tax Planning and Corporate Restructuring (Holding companies, Estate Freezes, Trusts)

<![if !supportLists]>5)    <![endif]>Net Worth Analysis and Planning

<![if !supportLists]>6)    <![endif]>Strategies to achieve your short term and long-term goals

Let me know if you have any questions on these strategies and we can set up a call or meeting.

Please see our website for further details at https://www.arjcpa.ca/business-advisory-services/

1. Spotlight on Our Payroll Management Services

Managing payroll can be time-consuming, especially during the busy summer months. Our Payroll Management Services ensure your employees are paid accurately and on time, allowing you to focus on what matters most—growing your business.  We partner with ADP to ensure a seamless payroll experience.   They have a special program for CPA firms that would also allow our clients from benefit from these services.  We also use Quickbooks online which also has an efficient payroll platform.

With AR Jaffer Professional Corporation, you receive:

• Accuracy: We handle all the details to ensure compliance with ever-changing regulations.
• Time-Saving: Free up your time by letting us manage payroll processing and reporting.
• Peace of Mind: Know that your payroll is in good hands, with support available when you need it.

Interested in learning more? Contact us today!

1. Stay Connected

We’re always here to assist you with any accounting or financial questions you may have. Stay connected with us through our social media channels and never miss an update:

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Thank you for being a valued part of the AR Jaffer family. We look forward to continuing to serve you in the months ahead.

Have a safe, healthy, and restful remainder of the summer!

Best regards,