You may have had life insurance for as long as you can remember. You wanted to make sure that your family would be taken care of and be able to pay their bills if anything happened to you.
But now that you’re older and your children are grown – and hopefully your mortgage is paid off – you may not feel you still need life insurance. This could be a valid assumption; however, there are some circumstances under which it may still make sense for you to have life insurance. They are:
You still have substantial debt.
You have dependent children or grandchildren.
You want to leave a financial legacy.
You still have substantial debt
No one likes the thought of leaving their loved ones to pay their debts if they die. If, however, someone has co-signed a loan with you – for example, for a mortgage or a car – and you die, then they will be on the hook for the entire amount.
If you have life insurance and name your co-signer as the beneficiary, this will help relieve any financial burden your death could cause them.
You have dependent children or grandchildren
If you have children who are still dependent on you because they have a mental or physical disability, life insurance can be an excellent way to ensure they will still have access to funds after you die. Lifelong care can be expensive, and a life insurance benefit will go a long way to helping fund it.
You may have grandchildren you are caring for or that you are not responsible for but want to leave money they can use towards higher education. A life insurance payout can be a great way to help a grandchild get a good start in life without having to go into debt.
You want to leave a financial legacy
You may not have dependent children or grandchildren but still want to leave them something when you die. Life insurance can be a great way to do this without cutting back on your spending during your lifetime.
Life insurance can also help make sure that you have something to leave everyone in your will. If you have a family cottage, it can be complicated to leave it to more than one person or family. Life insurance gives you the option to leave one person or family the cottage and another person or family the cash equivalent.
We can help you!
If you’re unsure whether or not it still makes sense to have life insurance after the age of 60, we’d be happy to sit down with you and talk through your options. Give us a call or email us today!
As a business owner, one of your challenges is learning how to balance between reinvesting into the business and setting money aside for personal savings. Since there are no longer employer-sponsored pension plans and the knowledge that retirement will come eventually, it’s important to have a retirement plan in place.
We’ve put together an infographic checklist that can help you get started on this. We know this can be a difficult conversation so we’re here to help and provide guidance to help you achieve your retirement dreams.
Determine how much income you will need in retirement.
Make sure you account for inflation in your calculations.
You should try to pay off your debts as soon as you can; preferably before you retire.
As you age, your insurance needs change. Review your insurance needs, in particular your medical and dental insurance because a lot of plans do not provide health plans to retirees.
Review your life insurance coverage because you may not necessarily need as much life insurance as when you had dependents and a mortgage, but you may still need to review your estate and final expense needs.
Prepare for the unexpected such as a critical illness or a need for long-term care.
Check what benefits are available for you upon retirement.
Canada Pension Plan- decide when would be the ideal time to apply and receive CPP payments. Business owners are in a unique position to control how much can be contributed to CPP by deciding to pay salary or dividends. (Dividends don’t trigger CPP contributions.)
Old Age Security- check pension amounts and see if there’s a possibility of clawback.
Guaranteed Income Supplement- if your income is low enough, you could apply for GIS.
Are you a candidate for an individual pension plan (IPP)? IPPs can provide higher contributions than typically permitted to an RRSP and the ability to create a lifelong pension.
Check if your business is a candidate for a group RRSP or company pension plan. This is a great way for you to build retirement savings and provide benefits for your employees and business too.
Make sure you are saving on a regular basis towards retirement- in an RRSP, TFSA, or non-registered. Since you can control how you get paid, salary or dividends, dividends are not considered eligible income to create RRSP room, therefore you should make sure you have the optimal mix of both to achieve your financial goals.
Ensure your investment mix makes sense for your situation.
Don’t forget to check if there are any other income sources. (ex. rental income, side hustle income, etc.)
The sale of your business can be part of your retirement nest egg. Therefore, you should make sure you know the valuation of your business and your plan to sell the business to your family, employees, partners or a third party. You should also know when you decide to sell your business too.
Are you planning to use the sale of your home or other assets to fund your retirement?
Will you be receiving an inheritance?
One other consideration that’s not included in the checklist is divorce. This can be an uncomfortable question, however divorce amongst adults ages 50 and over is on the rise and this can be financially devastating for both parties.
Contact Us about helping you get your retirement planning in order so your retirement dreams can be achieved.
In 2015, CIBC conducted a poll to see how many Canadian business owners had a business transition plan. Almost half of them didn’t have one.
No business owner likes to think about handing over their business they’ve built from the ground up. But the fact of the matter is, you will have to do it eventually. Even more concerning, what if you were to become ill or incapacitated? Making a decision of this magnitude during trying times would not be ideal.
Your two main choices for passing on your business are:
Transferring ownership to a successor of your choice (this can either be a family member or a non-family member such as a key employee)
When you die, all your capital property is deemed to have been sold immediately before your death. This includes your business. This means that capital gains taxes will be charged on whatever the fair market value (FMV) of your business is considered to be at the time of your death.
The higher the FMV of your business, the higher the capital gains taxes that will be charged. Your successors may not have the funds to pay these taxes which may force them to sell the business in order to fund the tax liability; thus, not to reaping the benefits of all your hard work as intended.
The good news is that there’s a way to protect your business; an estate freeze.
What is an estate freeze?
For the business owner, an estate freeze can be an integral part of your estate planning strategy. The purpose of an estate freeze is to lock-in (freeze) the value of the business, freeing the successor from the tax liability that may arise should the business’ value increase.
This is how an estate freeze works:
As a business owner, you can lock in or “freeze” the value of an asset as it stands today. Your successors will still have to pay taxes on your business when they inherit it – but not as much as if you hadn’t “frozen” your business and your company had increased in FMV.
You continue to maintain control of your business. As well, you can receive income from your business while it is frozen.
Your successor now benefits from the business’ future growth, but they won’t have to pay for any tax increases that occur before they inherit the business.
Freezing the value of your business can help you plan your tax spending properly. Selecting to “freeze” your business can help give you peace of mind that your successors won’t have to spend a considerable part of their inheritance on excessive taxes.
What happens when you freeze your estate?
When you execute an estate freeze, the first thing you need to do is exchange your common shares for preferred shares. Your new preferred shares will have a fixed (a.k.a. “frozen”) value equal to the company’s present fair market value. Make sure you have everything in place to properly determine the fair market value before you exchanging your shares.
Your company will then issue common shares, which your successors subscribe to for a nominal price (for example, 1 dollar). Note that your successors don’t own the stock yet – subscribing to the stocks means they will take ownership of the stocks at a future date.
As part of your estate freeze, you must have a shareholders’ agreement ready to bring in new shareholders. This agreement should list any terms and conditions related to the purchase, redemption, or transfer of your company’s common shares.
1. You can choose to receive some retirement income from your preferred shares by cashing in a fixed amount gradually. This action will reduce your preferred shares’ total value, reducing income tax liability upon death. For example:
Your shares are worth $10,000,000, and you need $100,000 annually. You can then redeem $100,000 worth of shares.
If you live for 30 more after you freeze your estate, you will have withdrawn $3,000,000 of your shares. This reduces the value of your shares to $7,000,000.
At your death, your tax liability is lower than it would have been had your shares remained at the original value of $10,000,000.
2. You can opt to maintain voting control in your company. This can be complicated (so you should consult a licensed professional), but you can set up your estate freeze so that you still have voting control in your business with your preferred stock.
How you can benefit from an estate freeze
You get peace of mind. The most important benefit to a tax freeze is that you know, whoever your successors are, they will receive what they are entitled to and not have to deal with any unpredictable tax burdens. Since an estate freeze fixes the maximum amount of taxes to be paid, you can properly plan how much money to set aside for this tax liability. One option is to have a life insurance policy equal to the amount of the tax liability, with your successor as the beneficiary, so you know they will have enough money to pay for these taxes.
You encourage participation in growing your business. Your chosen successors will be motivated to help the company grow, as they know they will benefit in the future.
Further tax reductions. If your shares qualify for lifetime capital gains exemption, then an estate freeze also helps further reduce your successor’s tax liability.
Is an estate freeze the right strategy for you?
There are a few things you need to consider when deciding if an estate freeze is right for you or not.
Retirement funding. What kind of retirement savings, if any, do you have? If you have money put aside in RRSPs, TFSAs, or even have a pension from a previous job, then an estate freeze may be the right choice for you. If you were planning to sell your company and live off the proceeds in retirement, then it likely is not the right choice for you.
Succession plans. Do you have someone in mind who would be a suitable successor? Just because you think your child, spouse, or best employee may want to take over your business doesn’t mean they do. Talk to anyone you are considering making a successor and see if they are both interested in and able to keep your business going.
Family relationships. Trying to figure out how to select a successor if you have several children may be challenging. It can cause a lot of strain amongst your children if they are all named successors if only some of them are actively interested in running the business. You may want to consider only making one child a successor and providing for your other children in different ways, such as making them a life insurance beneficiary.
If you decide to pursue an estate freeze for your business, you are helping plan for your heirs’ future and cutting down on the amount of taxes that will eventually have to be paid. That being said – an estate freeze can be complicated, and all the steps must be performed correctly. Be sure to consult an experienced professional be taking any steps to freeze your estate.
For incorporated professionals, making sure your practice is financially protected can be overwhelming. Incorporated professionals face a unique set of challenges when it comes to managing risk. Insurance can play an important role when it comes to reducing the financial impact on your practice in the case of uncontrollable events such as disability, or critical illness. This infographic and article address the importance of corporate insurance.
The 4 areas of insurance a incorporated professional should take care of are:
Health: We are fortunate in Canada, where the healthcare system pays for basic healthcare services for Canadian citizens and permanent residents. However, not everything healthcare related is covered, in reality, 30% of our health costs* are paid for out of pocket or through private insurance such as prescription medication, dental, prescription glasses, physiotherapy, etc.
For incorporated professionals, offering employee health benefits make smart business sense because health benefits can form part of a compensation package and can help retain key employees and attract new talent.
For incorporated professionals that are looking to provide alternative health plans in a cost effective manner, you may want to consider a health spending account.
Consider the financial impact this would have on your practice if you or a key employee were to suffer from an injury or illness. Disability insurance can provide a monthly income to help keep your practice running.
Business overhead expense insurance can provide monthly reimbursement of expenses during total disability such as rent for commercial space, utilities, employee salaries and benefits, equipment leasing costs, accounting fees, insurance premiums for property and liability, etc.
Key person disability insurance can be used to provide monthly funds for you or key employee while they’re disabled and protect the business from lost revenue while your business finds and trains an appropriate replacement.
Key person critical illness insurance can be used to provide funds to the practice so it can supplement income during time away, cover debt repayment, salary for key employees or fixed overhead expenses.
Buy sell critical illness insurance can provide you with a lump sum payment if your business partner or shareholder were to suffer from a critical illness. These funds can be used to purchase the shares of the partner, fund a buy sell agreement and reassure creditors and suppliers.
Life: For an incorporated professional, not only do your employees depend on you for financial support but your loved ones do too. Life insurance is important because it can protect your practice and also be another form of investment for excess funds.
Key person life insurance can be used to provide a lump sum payment to the practice on death of the insured so it can keep the business going until you an appropriate replacement is found. It can also be used to retain loyal employees by supplying a retirement fund inside the insurance policy.
Loan coverage life insurance can help cover off any outstanding business loans and debts.
Reduce taxes & diversify your portfolio, often life insurance is viewed only as protection, however with permanent life insurance, there is an option to deposit excess funds not needed for operations to provide for tax-free growth (within government limits) to diversify your portfolio and reduce taxes on passive investments.
Talk to us to make sure you and your practice are protected.
Starting a new business venture can be both exciting and nerve-racking at the same time. The hopes and dreams of success, financial freedom and being your own boss are accompanied by many uncertainties and risks. To add to some of the anxiety, comes the facts: about half of all new businesses will not be around within the next 5, and only about one third will survive 10+ years. The situation often becomes more complex when there are multiple owners and the future success of a business is at risk if proper planning is not done. The unexpected ‘exit’ of a partner due to death, disability, illness, retirement or just simply that ‘it’s not working out’ can create a very difficult situation for the remaining business owner(s) and the business itself. Many businesses operate under a ‘handshake’ sort of agreement, but those rarely are upheld when the situation starts to get challenging. In order to protect against all of these pitfalls, it is always advised to have the right structure in place to address any potential challenges that may arise. This is done through incorporating a Buy-Sell Agreement between the owners.
What is a Buy‐Sell Agreement?
A buy-sell agreement is a legally binding contract designed to establish a set of rules or actions for the remaining business owner(s) to carry on the business, in the event one of them is no longer involved in the business – this can be due to death, illness, injury, retirement or a simple desire to ‘get out’. In other words, this document dictates how the remaining owner(s) will interact with each other and how the business will operate when certain situations occur. This agreement creates certainty and a ‘game plan’ in case one or more of the partners are no longer able or willing to commit to the business.
Types of Buy‐Sell Agreements
Buy-sell agreements are generally structured as a cross purchase agreement, promissory note agreement, or a share redemption agreement.With a cross-purchase agreement, each shareholder within the agreement agrees to purchase a specified percentage of the shares owned by the departing shareholder, and if it’s due to death, the deceased shareholder’s estate is obligated to sell the shares to the remaining shareholder(s). A shareholder will generally purchase insurance on the life of the other shareholder(s) and on death, will use the proceeds from the insurance to buy out the remaining shares from the deceased shareholder’s estate.With a promissory note agreement, corporate owned life insurance is placed on the life of each shareholder, with the corporation named as the payor and beneficiary. In the event that a shareholder dies, the surviving shareholder(s) purchases the deceased’s shares from their estate using a promissory note. Once the remaining shareholder(s) owns the deceased shareholder’s shares, the company collects the death benefit on the insurance policy with the excess amount above the adjusted cost basis of the policy in the capital dividend account. The company then provides the surviving shareholder(s) a capital dividend which provides the remaining shareholder(s) the necessary funds to pay off the promissory note.Under the share redemption arrangement corporate owned life insurance is placed on the life of each shareholder with the corporation named as the payor and beneficiary. In the event that a shareholder dies, the company collects the insurance proceeds and places the excess amount above the adjusted cost basis of the policy in the capital dividend account. The company uses the proceeds in the capital dividend account to redeem the shares held by the deceased shareholder’s estate. Once that is done, the remaining shareholder(s) takes over the ownership of those purchased shares.Each structure has their advantages and disadvantages and should be reviewed with a legal professional, tax professional as well as a knowledgeable Financial Advisor.
Why the business needs a buy‐sell agreement
A buy-sell agreement is a crucial component of a business that should be incorporated to protect the shareholders as well as the business itself. It is designed to ensure important things are taken care of if someone leaves the business for whatever reason, so that the business can continue to grow and run successfully. A buy-sell agreement offers several key benefits to your business:
It maintains the continuity of your business by ensuring members get to decide what happens to the business before any problems arise.
It protects company ownership by laying out a succession plan for departing members. This keeps remaining shareholders from being burdened by untested and unproven successors (like the widow or children of the departing co-owner).
It minimizes dispute between remaining co-owners and the family of the departing owner by having a strategy in place ahead of time to govern business operations.
It alleviates co-owner stress and uncertainty by specifically identifying which events would trigger a buyout.
It protects business assets and liquidity by providing a financial (and tax) plan for each of the different triggers addressed in the agreement.
It protects the interest of, not just the business entity itself, but also that of the business owners to ensure members (and their families, in the event of death or disability) are handled with respect, courtesy and the utmost fairness.
What to include in the buy‐sell agreement
Since a buy-sell agreement is a legally binding document, it generally should be drafted with a knowledgeable and experienced Legal Professional. Most agreements are started through a generic template, but then are customized for the needs of each business/partner and can be a fairly thorough and comprehensive document. There are several different components of a buy-sell agreement and several different aspects need to be addressed, such as the valuation of the company, ownership interests, buy-out clauses, and terms of payment. The agreement should generally be drafted at the very start of the business, so as to avoid any issues or misunderstandings later on. The agreement will also address certain ‘triggering events’, which are listed below.
Conflict between owners of a business in regards to the direction or management of the business can sometimes occur, and can even push the most successful business off-course. In a situation where no agreement or mediation can be reached, it may make sense to allow for one or more of the partners to be bought out. This would allow the business to continue moving forward and is often referred to as a ‘shot-gun clause’. Sometimes a situation where one owner offers to buy-out the other would also offer to be bought-out for the same value, thus ensuring fair treatment and value of the shares.
An owner who is in the midst of a divorce may be bought-out by other partners, to protect the company ownership. A divorce settlement will generally depend on the partner’s share of the business. It’s not uncommon for a family law judge to order a business owner to split his or her interest in a company with the former spouse. To protect the business from this event, a clause should require the shares held by the former spouse of a partner to be acquired by the company or one of the other owners.
The value of the business comprises a significant component for the retirement of many business owners. Allowing the remaining partners to reclaim the interest in the business keeps the business intact and provides the retiring partner with a market to liquidate their ownership, thus providing the retiring partner with a cash infusion to enjoy their retirement. There may also be some distinction in the agreement between early retirement and regular retirement and how the shares of the departing owner are to be valued.
Borrowing money to expand or grow the company, or to purchase equipment or goods, is common for many companies. However, lending institutions often require personal guarantees from the owners/shareholders of the business. Having one or more owners that are not able to provide this guarantee can lead to higher fees and impact the overall financial well-being and growth of the business. Therefore, a provision should be considered to allow the other shareholders the opportunity to acquire shares of the defaulting shareholder(s).
An owner who has become disabled and unable to perform their duties can impact the overall well-being of the business. The agreement should address several situations and questions, such as whether the partner will continue to receive a salary, and for how long, or whether they will continue in the day-to-day management of the company.The buy-sell agreement also needs to clearly define what is considered a disability and should include a timeline for which the disabled partner would be given the opportunity to return. Often the business will purchase disability buy-sell insurance and link the definitions to the plan. This has the added benefit of providing an independent third party to determine when the criteria for the buy-out are satisfied.
The death of a partner is an unfortunate and difficult situation for both the family and business partners alike. To deal with the stress of continuing the business, establishing the rules of business continuity upon death provides peace of mind to both the surviving partners and the family of the deceased. The surviving partners benefit from the assurance of not having to deal with an unwanted partner and the family is assured that they will be treated fairly.Generally, all partners/co-owners will be covered by a ‘key person’ life insurance policy, which can be paid by either the company or the other partners, where the death benefit would be used to buy out the deceased owner’s shares (as mentioned above).
Funding the buy‐sell agreement
Without sufficient resources to fund a potential buy-out, the agreement itself can fall apart. The partners need to decide where the money will come from to complete the buy-out – whether it will be the responsibility of individual owners or from the company itself. While not all events can be protected, two can: the death and disability of a shareholder. By using an insurance policy, funds can be made available at the time they are needed, thus minimizing potential liquidity issues, protecting the business and the impacted shareholders, as well as the family of the deceased shareholder. Using insurance provides the protection needed at a fraction of the cost to the alternatives and can provide immediate capital and significant tax benefits.
Working as a partnership between 2 or more individuals is never an easy task, and the situation only gets more complicated when one or more of them exits the business. Protecting not only the business, but your personal interests, as well as your family’s future are very important objectives for any business owner, and should not be overlooked. Although no business can be certain of success, there are strategies and structures that can help protect the business from failure in the future. Working with a knowledgeable and experienced Financial Advisor, Legal Professional and Tax Professional, you can be assured that you can have the proper Buy-Sell Agreement in place so that all parties involved benefit.
On April 20, 2021, the B.C. Minister of Finance announced the 2021 budget. We have highlighted the most important things you need to know.
Requirement to repay B.C Emergency Benefit for Workers has been waived
If you are self-employed and received the B.C. Emergency Benefit for Workers, you will no longer be required to repay this benefit if you would have qualified for it based on your gross income (instead of your net income). This mirrors a federal change to the Canada Emergency Response Benefit.
Home Owner Grant threshold change
The budget confirmed a previously announced increase to the Home Owner Grant to $1.625 million (from $1.525 million) for the 2021 tax year. This grant helps reduce the amount of property taxes you pay.
PST exemption for electric bicycles
As of April 21, 2021, electric bicycles and tricycles will be exempt from provincial sales tax (PST). Also, electrical conversion kits and parts and services for bicycles and tricycles will be exempt from PST.
Elimination of provincial sales tax refunds on specific vehicle transactions
The provincial sales tax refund for motor vehicles purchased and resold within seven days has been eliminated. This elimination will apply on a date still to be set by regulation.
Carbon tax increase
The budget confirms a previously delayed increase to the carbon tax rate. As of April 1, 2021, carbon tax rates were set at $45 per tonne. They will increase to $50 per tonne on April 1, 2022.
Tobacco tax increase
The budget increases the tax rate on tobacco products as of July 1, 2021:
On cigarettes and heated tobacco products (vaping), taxes will increase from 29.5 cents to 32.5 cents per cigarette or heated tobacco product.
On loose tobacco, taxes increase from 39.5 cents per gram to 65 cents per gram.
Changes to the speculation and vacancy tax
Corporations owned by government agents are now exempt from the speculation and vacancy tax.
Also, the following changes have been made and are retroactive to November 27, 2018:
Properties owned by a trustee for a trust that benefits a registered charity can claim an exemption from the speculation and vacancy tax.
If someone has a beneficial interest in a property contingent on the death of another individual, they will no longer be included in the definition of “beneficial owners” for this tax.
We can help you assess the impact of tax changes in this year’s budget on your finances or business. Give us a call today!
On April 19, 2021, the Federal Government released their 2021 budget. We have broken down the highlights of the financial measures in this budget into three different sections:
Personal Tax Changes
Extending Covid -19 Emergency Business Supports
All of the following COVID-19 Emergency Business Supports will be extended from June 5, 2021, to September 25, 2021, with the subsidy rates gradually decreasing:
Canada Emergency Wage Subsidy (CEWS) – The maximum wage subsidy is currently 75%. It will decrease down to 60% for July, 40% for August, and 20% for September.
Canada Emergency Rent Subsidy (CERS) – The maximum rent subsidy is currently 65%. It will decrease down to 60% for July, 40% for August, and 20% for September.
Lockdown Support Program – The Lockdown Support Program rate of 25% will be extended from June 4, 2021, to September 25, 2021.
Only organizations with a decline in revenues of more than 10% will be eligible for these programs as of July 4, 2021. The budget also includes legislation to give the federal government authority to extend these programs to November 20, 2021, should either the economy or the public health situation make it necessary.
Canada Recovery Hiring Program
The federal budget introduced a new program called the Canada Recovery Hiring Program. The goal of this program is to help qualifying employers offset costs taken on as they reopen. An eligible employer can claim either the CEWS or the new subsidy, but not both.
The proposed subsidy will be available from June 6, 2021, to November 20, 2021, with a subsidy of 50% available from June to August. The Canada Recovery Hiring Program subsidy will decrease down to 40% for September, 30% for October, and 20% for November.
Interest Deductibility Limits
The federal budget for 2021 introduces new interest deductibility limits. This rule limits the amount of net interest expense that a corporation can deduct when determining its taxable income. The amount will be limited to a fixed ratio of its earnings before interest, taxes, depreciation, and amortization (sometimes referred to as EBITDA).
The fixed ratio will apply to both existing and new borrowings and will be phased in at 40% as of January 1, 2023, and 30% for January 1, 2024.
Support for small and medium-size business innovation
The federal budget also includes 4 billion dollars to help small and medium-sized businesses innovate by digitizing and taking advantage of e-commerce opportunities. Also, the budget provides additional funding for venture capital start-ups via the Venture Capital Catalyst Program and research that will support up to 2,500 innovative small and medium-sized firms.
Personal Tax Changes
Tax treatment and Repayment of Covid-19 Benefit Amounts
The federal budget includes information on both the tax treatment and repayment of the following COVID-19 benefits:
Canada Emergency Response Benefits or Employment Insurance Emergency Response Benefits
Individuals who must repay a COVID-19 benefit amount can claim a deduction for that repayment in the year they received the benefit (by requesting an adjustment to their tax return), not the year they repaid it. Anyone considered a non-resident for income tax purposes will have their COVID-19 benefits included in their taxable income.
Disability Tax Credit
Eligibility changes have been made to the Disability Tax Credit. The criteria have been modified to increase the list of mental functions considered necessary for everyday life, expand the list of what can be considered when calculating time spent on therapy, and reduce the requirement that therapy is administered at least three times each week to two times a week (with the 14 hours per week requirement remaining the same).
Old Age Security
The budget enhances Old Age Security (OAS) benefits for recipients who will be 75 or older as of June 2022. A one-time, lump-sum payment of $500 will be sent out to qualifying pensioners in August 2021, with a 10% increase to ongoing OAS payments starting on July 1, 2022.
Waiving Canada Student Loan Interest
The budget also notes that the government plans to introduce legislation that will extend waiving of any interest accrued on either Canada Student Loans or Canada Apprentice Loans until March 31, 2023.
Support for Workforce Transition
Support to help Canadians transition to growing industries was also included in the budget. The support is as follows:
$250 million over three years to Innovation, Science and Economic Development Canada to help workers upskill and redeploy to growing industries.
$298 million over three years for the Skills for Success Program to provide training in skills for the knowledge economy.
$960 million over three years for the Sectoral Workforce Solutions Program to help design and deliver training relevant to the needs of small and medium businesses.
Federal Minimum Wage
The federal budget also introduces a proposed federal minimum wage of $15 per hour that would rise with inflation.
New Housing Rebate
The GST New Housing Rebate conditions will be changed. Previously, if two or more individuals were buying a house together, all of them must be acquiring the home as their primary residence (or that of a relation) to qualify for the GST New Housing Rebate. Now, the GST New Housing Rebate will be available as long as one of the purchasers (or a relation of theirs) acquires the home as their primary place of residence. This will apply to all agreements of purchase and sale entered into after April 19, 2021.
Unproductive use of Canadian Housing by Foreign Non-Resident Owners
A new tax was introduced in the budget on unproductive use of Canadian housing by non-resident foreign owners. This tax will be a 1% tax on the value of non-resident, non-Canadian owned residential real estate considered vacant or underused. This tax will be levied annually starting in 2022.
All residential property owners in Canada (other than Canadian citizens or permanent residents of Canada) must also file an annual declaration for the prior calendar year with the CRA for each Canadian residential property they own, starting in 2023. Filing the annual declaration may qualify owners to claim an exemption from the tax on their property if they can prove the property is leased to qualified tenants for a minimum period in a calendar year.
Excise Duty on Vaping and Tobacco
The budget also includes a new proposal on excise duties on vaping products and tobacco. The proposed framework would consist of:
A single flat rate duty on every 10 millilitres of vaping liquid as of 2022
An increase in tobacco excise duties by $4 per carton of 200 cigarettes and increases to the excise duty rates for other tobacco products such as tobacco sticks and cigars as of April 20, 2021.
Luxury Goods Tax
Finally, the federal budget proposed introducing a tax on certain luxury goods for personal use as of January 1, 2022.
For luxury cars and personal aircraft, the new tax is equal to the lesser of 10% of the vehicle’s total value or the aircraft, or 20% of the value above $100,000.
For boats over $250,000, the new tax is equal to the lesser of 10% of the full value of the boat or 20% of the value above $250,000.
If you have any questions or concerns about how the new federal budget may impact you, call us – we’d be happy to help you!
Tax season is upon us once again. But since 2020 was a year like no other, the 2021 tax-filing season will also be different. Both how we worked and where we worked changed for a lot of us in 2020.
Some Canadians got to work from home for the first time but saw no other disruption to their jobs. There was a much bigger disruption for other Canadians – they faced temporary or permanent job losses and had to supplement their incomes wide side gigs and emergency government programs.
The Canadian government has introduced some new tax credits and deductions in response to these changes. We’ve covered some of the highlights below.
Claiming home office expenses
With a sudden shutdown happening across the country in March 2020, many Canadians stopped commuting to the office and started working from home. As a response to this, the Canada Revenue Agency (CRA) has offered a new way to claim home office expenses. If you:
Worked from home due to COVID-19 – for a minimum of 50 percent of the time for at least four consecutive weeks AND
Your employer did not reimburse you for your home office expenses.
You can claim $2 for each day – to a maximum of $400 for the year.
If you have more complicated or higher home office expenses, then your employer must provide you with a T2200 form, with a list of deductions included.
New Canada Training Credit
Suppose you are between the ages of 25 and 65 and taking courses to upgrade your skills from a college, university, or other qualifying institution. In that case, you can claim this new, refundable tax credit.
You can automatically accumulate $250 annually – and the new Canada Training Credit has a lifetime maximum of $5,000. You can claim this credit when you file your taxes.
Pandemic emergency funds
The emergency support programs helped a lot of Canadians avoid financial disaster. If you were one of the Canadians who received pandemic emergency funds, you must be aware of the tax implications.
If you received the Canada Emergency Response Benefit (CERB) or the Canada Emergency Student Benefit (CESB), no taxes were withheld at source, so you will be taxed on the full amount. If you received the Canada Recovery Benefit (CRB), Canada Recovery Sickness Benefit (CRSB), or Canada Recovery Caregiver Benefit (CRCB), the CRA withheld a 10% tax at source, so you may not owe additional taxes on this income.
New digital news subscription tax credit
This is a new, non-refundable tax credit that is calculated at 15 percent – and is eligible for up to a maximum of $500 in qualifying subscription expenses. To qualify for this credit, you must subscribe to one or more qualified Canadian journalism organizations – and you could save up to $75 a year thanks to this credit.
I’m here to help you understand where you owe taxes and how you can lower your tax bill. Give me a call today!
“I already have life insurance from work, so why do I need to get it personally?” or “Work has got me covered, I don’t need it.”
While it’s great to have group coverage from your employer or association, in most cases, people don’t understand that there are important differences when it comes to group life insurance vs. self owned life insurance.
Before counting on insurance from your group benefits plan, please take the time to understand the difference between group owned life insurance and personally owned life insurance. The key differences are ownership, premium, coverage, beneficiary and portability.
Self: You own and control the policy.
Group: The group owns and controls the policy.
Self: Your premiums are guaranteed at policy issue and discounts are available based on your health.
Group: Premiums are not guaranteed and there are no discounts available based on your health. The rates provided are blended depending on your group.
Self: You choose based on your needs.
Group: In a group plan, the coverage is typically a multiple of your salary. If your coverage is through an association, then it’s usually a flat basic amount.
Self: You choose who your beneficiary is and they can choose how they want to use the insurance benefit.
Group: You choose who your beneficiary is and they can choose how they want to use the insurance benefit.
Self: Your policy stays with you.
Group: Your policy is tied to your group and if you leave your employer or your association, you may need to reapply for insurance.
Talk to us, we can help you figure out what’s best for your situation.
On Friday, February 19, 2021, Prime Minister Justin Trudeau announced an extension to several of the COVD-19 federal emergency benefits. The goal of this extension is to support Canadians who are still being financially impacted by the COVID-19 pandemic.
The following benefits are impacted:
Canada Recovery Benefit
Canada Recovery Caregiving Benefit
Canada Recovery Sickness Benefit
Canada Recovery Benefit
The Canada Recovery Benefit (CRB) provides income support to anyone who is:
Employed or self-employed, but not entitled to Employment Insurance (EI) benefits.
Has had their income reduced by at least 50 percent due to COVID-19.
You can receive up to $1,000 ($900 after taxes withheld) a week every two weeks for the CRB. The recent changes now allow you to apply for this benefit for a total of 38 weeks – previously the maximum was 26 weeks.
Canada Recovery Caregiving Benefit
The Canada Recovery Caregiving Benefit (CRCB) helps support people who cannot work because they must supervise a child under 12 or other family members due to COVID-19. For example, a school is closed due to COVID-19 or your child must self-isolate because they have COVID-19.
You can receive $500 ($450 after taxes withheld) for each 1-week period you claim the CRCB. The recent extension made now allows you to apply for this benefit for a total of 38 weeks instead of the previous 26 weeks.
Canada Recovery Sickness Benefit
The $500 a week ($450 after taxes) Canada Recovery Sickness Benefit (CRSB) is also getting a boost. If you cannot work because you are sick or need to self-isolate due to COVID-19, you can now apply for this benefit for a total of four weeks. Previously, this benefit would only cover up to two missed weeks of work.
Finally, the government will also be increasing the amount of time you can claim Employment Insurance (EI) benefits. You will now be able to claim EI for a maximum of 50 weeks – this is an increase of 24 weeks from the previous eligibility maximum.