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Straight Talk – Transcription of Episode 1 – Canada’s New Tax Changes for 2018

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I’m Rob Tetrault, welcome to Straight Talk.

What we’re talking about today is the proposed taxes changes from Trudeau and Morneau. Now they announced this earlier this year, and in kind of a big brouhaha and kerfuffle and they used words such as closing loopholes, making sure the rich pay their taxes and bringing fairness to all taxpayers. In reality, the only people they targeted here were business owners and business owners are the lifeblood of our country. They create jobs, they make the market move, they create wealth through their own businesses and through the jobs that they create.

So let’s actually figure out what they have done here.

Income sprinkling

So income sprinkling means if I want to pay dividends to my kids, my wife, my grandkids, and they are shareholders of the corporation, they can receive dividends. And they are paying dividends at a favourable tax rate. Now income sprinkling is on the way out according to the government. So they are no longer going to let you pay dividends to those people.

So if I’m a shareholder at Tim Horton’s or at Canadian Tire, I don’t need to actually go serve coffee in order to collect my quarterly dividend from owning that stock. I don’t need to sell hockey sticks to get a dividend from Canadian Tire. Now in privately held corporations, like business owners across this wonderful country, they can no longer do that unless the wife or the kids or the husband is actively involved in the corporation, which is ridiculous in my mind, and in fact it is the only place in the world where they are going to have a reasonableness test for dividends.

Holding passive investments in a corporation

Now this is the second thing that they wanted to attack. So if I hold a corporation, I have a holdco, I can take the excess capital and I can grow my net worth and I pay a smaller tax rate there. Because remember, we don’t have pensions. Business owners don’t have pensions—They have to fund their own pensions. Well this is one way to even out the playing field. Well, they attacked that. The good news is that they did decide that they were not going to follow through on that. The only ones that they will attack are corporations that have passive income of $50,000 or higher. That is good news.

Three. They took a look at the capital gains strip.

The capital gains strip is an effective strategy to move an income to a capital gain thus reducing tax payable. A lot of people are doing it at a high net wealth level. They decided that they are not ready for it, they brought some measures forward, it’s not happening at this point.

So here is the Straight Talk.

With respect to dividends, if you are currently paying your children or your spouse dividends and being taxed at a low rate, continue to do that aggressively. Why not. The tax changes aren’t coming yet and when they do come, then we are going to want to consider potentially other strategies, such as an IPP, which is an individual pension plan, or other high-level tax planning strategies.

Two. With respect to passive income in a holdco or in an investment company, you want to get that passive income as high as you can before the tax changes come into effect, because they are likely going to grandfather any previous income.

Three. You’ve got to be aware of any and all potential future tax changes that are going to come. And for that, make sure that you are on top of things when Morneau or Trudeau announce anything, likely in 2018 or potentially in 2019.

Thanks for your time.

President of National Bank Financial Martin Lavigne has high praise for Rob, #2 in Wealth Professional’s Top 50 List

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I am pleased to announce that Rob Tetrault, has been named one of Wealth Professional Canada’s Top 50 Advisors for 2018 (ranked #2, up from #9 in 2017). This list recognizes and celebrates talented professionals whose drive, dedication, qualities and accomplishments have brought distinction to Canada’s investment and financial industry.

Every year, since 2014, Wealth Professional Canada reaches out to the industry to gauge which advisors are driving their business forward and selects the best of the best from across the country. Rob distinguished himself by impressively increasing assets under management, generating greater returns, providing comprehensive wealth management advice and having a “client first” mentality.

On behalf of myself and the National Bank Financial – Wealth Management executive team, we congratulate Rob, and thank him for his exemplary work and exceptional willingness to make a difference in the daily lives of our loyal clients.

As always, we thank you for your continued business and confidence.

Martin Lavigne
President
National Bank Financial – Wealth Management

Read more: https://robtetrault.com/rob-awarded-2-position-wealth-professionals-list-top-50-wealth-advisors/

6th Annual Le Classique

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The Canadian CMV Foundation is proud to announce that its 6th annual Western Canada’s Largest Winter Outdoor 3 on 3 Ball Hockey Festival, Le Classique will be held on February 9th & 10th, 2018 at Whittier Park (Grounds of Festival du Voyageur).  The tournament is widely recognized as being the most important sporting event on the winter calendar in Manitoba. The tournament is the Canadian CMV Foundation‘s largest annual fundraiser and has allowed them to continue funding CMV vaccine research.

Since its first year, the tournament has continuously grown at an impressive pace by adding teams, divisions and activities to the weekend, and this year is no different. This year will feature 5 divisions (novice, competitive, corporate, women’s and Co-Ed), will host a huge social on the Friday night and children’s activities on Saturday afternoon. The weekend is a fun filled affair with activities for all ages.

As Chair of the Foundation, I couldn’t be more excited to be hosting the sixth year of this great fundraiser. Le Classique is really what started it all for our wonderful foundation. When Marc Foidart and I started this event 6 plus years ago, we knew we wanted to host a community event, we knew we wanted to throw a party, but at the same time, we knew we wanted to raise money. The Canadian CMV Foundation is the result of all that hard work. This year, we’ve set the target at $75,000.

In its relatively short period of existence, the Canadian CMV Foundation has had some remarkable successes. In 2016, the Charity doubled its endowment fund, grew its Medical Advisory Committee Nationally, joined forces with the Global Network of CMV Foundations, gained significant traction in its effort to enact legislative change and started planning for the first ever National CMV Summit.


ABOUT CONGENITAL CMV

Congenital Cytomegalovirus (CMV for short), is a debilitating congenital birth defect that can cause serious disease in babies who were infected with CMV before birth. It is the #1 cause of infant disability in North America, with about 1 in 150 children born with the condition. For more information on congenital CMV, you can visit www.cmvcanada.com .

Transcription: Buying and Investing in Bitcoin

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Paul: What are people saying in Winnipeg about Bitcoin? And what are they saying about you?

And what are they asking you?

Rob: Well they’re certainly asking me, And I certainly get a lot of inquiries , And it’s something that I didn’t think I will feel as many phone calls or texts on my phone or  emails about but it’s wrapping up lately obviously which brings us back to the old what do I tell the clients.

Well I tell them one that’s extremely speculative, obviously everyone who comes on the show says that.

Anyone who’s got any kind of background in economics, I think, would say that.

I tell them, I strongly encourage them not to participate, to stay away.

And then I also monitor on my own side, I monitor a couple tests , just to keep track of how bubbly I think we are and how close we are to the end.

Paul: What if they are insistent, what would you say to somebody who is insistent they want some bitcoin in their portfolio, how much of a … what kind of weighting would you reluctantly advise them to take on at these 17 thousand dollar bitcoin.

Rob: I would actually refuse to do it, I would refuse to participate in any way and I would go on record  saying “I’m not going to advise you to do that”, and if they’re going to do it elsewhere or on their own or whatever, I would strongly advise them that it has got to be speculative, it’s got to be less than 5% of your portfolio at the absolute most, it’s got to be money you know you can lose because this is like going to the roulette table and there’s no number that wins, you’re taking your 15 thousand dollars/17 thousand dollars you’re putting it on a number that isn’t on the wheel in my view, so I feel that strongly about it.

And one thing I monitor Paul, I monitor a couple of tests that I kind of created over time.

One is the client inquiry test – so how many inquiries am I getting per day on my phone, on email of people reaching out to me saying “Hey, I want to buy Bitcoin” and what I’ve seen is it’s very similar to the curve of the price of Bitcoin, so now I’m getting multiple asks per day and I track them and I keep tabs of how many people are texting me per day, how many random people in the streets, you know everyone has heard about the taxi driver asking you about a stock tip, you should stay away from that stock – you should sell it.

Well the same thing with Bitcoin, now how many people are asking me and I still think though, for what it’s worth, that there’s a little bit of room here In the Bitcoin yet.

Paul: People want in because they’re seeing it as a high growth potential asset, if you’re steering them away from Bitcoin, if they want growth in their portfolios, what type of assets would you direct them to?

Rob: I preach quality, I’ve preached quality since day one to all my clients, I like to understand the cash flow, I like to understand how the company’s going to be profitable, I look at dividend growth.

My dad always says “I’ll buy Bitcoin when it pays a dividend”.

But realistically, it’s something that I would much rather own, if you’re going to go growth there are a whole bunch of sectors that exist that you can get growth in that are gambling but like tech or healthcare, there’s a whole bunch of growth sectors that exist in the US more than in Canada.

But if we get back to Bitcoin just for a second say “Ok, so how many people are in right now, we want to measure how close we are to the end of this bubble”

The bubble us going to burst, the bubble WILL BURST, mark my word folks, and when it does burst how much time do we have left so I think there’s still a little bit of time left because not everyone is in yet, Paul.

Paul: That is Rob Tétrault on Bitcoins, up next today is top business headlines including Hunter Harrison forced to take medical leave from his job as CEO of CSX, you’re watching The Street here on BNN.

Transcription: Linamar to buy Macdon for 1.2 Billion

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Paul: We’re back with Rob Tetrault, he’s a portfolio manager at National Bank Financial. He’s based in Winnipeg. He comes to Toronto every now and again and when he does, we ask him if he can sit in with us. It’s a great day to have you here because Linamar, one of the biggest auto parts companies in this country and indeed on the planet, has made an acquisition outside of its core business, which of course is auto parts, into the agricultural sector. It’s purchasing a company called Macdon, which I had not heard of prior to today because it’s not a publicly traded company but you’ve heard of it because it’s a Winnipeg company.

Rob: It is. I love coming on here and talking about Winnipeg stories or Manitoba stories. I’m a proud Manitoban. This is a great story. This is a family-owned business. They’ve been in Winnipeg for 70 years or so. Very successful. A lot of people work there. It’s one of the big players in Winnipeg. I actually know some of the executives there and they sold for a billion dollars. Obviously, for them, we don’t know what the multiple is. We will never know that. It’s a private company but obviously, if they decide to sell a family-owned tightly held company, it must have been a good price. I also like it for Linamar as well.

Paul: Why do you like it from Linamar’s point of view?  It’s clearly a diversification play by Linamar out of the core market segment. Linamar does have an agricultural segment already. It’s based in Hungary I believe. These operations are going to be combined in a corporate way with the Hungarian operations. Why do you like it from Linamar’s point of view?

Rob: Two reasons. One, obviously it’s a creative and it’s immediately adding to cash flow. They will be able to obviously…and I hate that some probably Winnipeggers might lose their jobs long term, but they will be able to add to the bottom line simply by economies of scale. Two, the big one. Anytime I see a deal, Paul, I always look at the metrics, “Did they issue debt or did they raise capital?” They did not raise capital for this, they issued debt, which means they’re paying 4% or whatever their rate is, probably in the four and a half range. They’re getting something a creative at the 10 to 12 percent range so that’s going to be a multiplier. I think that’s a great deal for them.

Paul: You like the fact that the shares are not being issued and the share base is not being diluted down.

Rob: Correct. We don’t want dilution.  If I’m an owner of Linamar I don’t want dilution, I don’t want to dilute 10% just to get 10%. I want to be able to pay with debt. Provided the leverage ratios make sense, and I think they do for them, I think no dilution. Likely a very good play.

Federal government provides details on income sprinkling for business owners

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On July 18, 2017, the federal government announced its intention to eliminate a number of tax planning strategies commonly used by small business owners. The proposed changes were widely contested and subsequently revised on October 16, 2017. The revisions included promises to simplify the proposal on income sprinkling and to provide draft legislation by the Fall of 2017.

Details were released on December 13, 2017 along with confirmation they will take effect in 2018. The “kiddie tax” will be expanded to include dividends paid to spouses and adult children that do not fall within any of the exclusions and do not meet a reasonability test.

Exclusions:

  • Dividends paid to a spouse will be excluded from the new rules provided the business owner meaningfully contributed to the business and is aged 65 or over,
  • Dividends paid to adults aged 18 or over will be excluded from the new rules provided the individual made a substantial labor contribution (generally, an average of 20 hours per week) to the business during the year or in any of the 5 previous years (the 5 previous years do not need to be consecutive). If the business is seasonal, the labour contribution requirement will only be applied for the part of the year in which the business operates. Records such as timesheets, schedules, log books or information contained in the payroll records will be used to establish the number of hours the individual worked in any given year,
  • Dividends paid to adults aged 25 or over will be excluded from the new rules provided the adult owns at least 10% or more (measured in votes and value) of a corporation that earns less than 90% of its income from the provision of services and is not a professional corporation,
  • Generally, the measures will not limit access to the lifetime capital gains exemption,

Reasonability test

For individuals between the ages of 18 and 24, dividends received must represent a reasonable return on property contributed to the business. The reasonableness criteria include:

  • “Safe Harbour Capital Return”: the return on property contributed to the business will be reasonable provided it does not exceed a prescribed returned determined by a formula, and
  • “Arm’s Length Capital”: the property contributed cannot be property derived from property income of a related business, borrowed under a loan or transferred from a related person.

For individuals aged 25 or over, payments that are reasonable based on the following criteria:

  • Work performed in support of the business
  • Property contributed directly or indirectly to the business
  • Risk assumed in respect of the business
  • Amounts paid or payable by any person or partnership to or for the benefit of the individual in respect of the business; and
  • Other factors that may be relevant

Where an individual acquired property as a consequence of the death of another individual, special rules will apply for determining whether a dividend is excluded or reasonable or is a taxable capital gain from the disposition of excluded shares. 

Next Steps

Dividends paid to family members in 2018 and subsequent years that do not meet the “excluded” or “reasonableness” test will be taxed at the highest marginal tax rate.  We recommend that you speak to your professional tax advisor regarding paying dividends to family members prior to the end of the year.

The government has also confirmed its intention to limit tax deferral opportunities by retaining passive investments inside of a corporate. However, details will only be released in the 2018 Federal Budget.

We will continue to keep you informed of changes as they occur.

Cedric Paquin, CPA, CA, CFP
Wealth Planning Consultant

National Bank Financial is an indirect wholly-owned subsidiary of National Bank of Canada. The National Bank of Canada is a public company listed on the Toronto Stock Exchange (NA: TSX). The particulars contained herein were obtained from sources we believe to be reliable, but are not guaranteed by us and may be incomplete. The opinions expressed herein do not necessarily reflect those of National Bank Financial.

Wealth Preservation

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The concept of wealth preservation and the discussions that surround that concept usually happen with my clients either at or approaching retirement. Generally it’s a discussion that also happens concurrently with a risk tolerance analysis, but that doesn’t need to be the case. For example an advisor who’s hearing a young couple saying they want to preserve capital might confuse that with a conservative risk tolerance. Although that may be the case, it’s also quite possible that the client has a significant risk tolerance in the purest form of the discussion equity/fixed income ratio, but still wants to preserve wealth using defensive equity strategies. That client may have a need for higher returns, and a desire to preserve capital, and it may not be necessary, depending on risk tolerance, to move to a fixed income portfolio.  In other words, preservation of wealth and risk tolerance are not the same thing, and most advisors will often interchange the two. Assuming the discussion is actually one of preserving wealth, and not one of reducing risk tolerance, the below factors apply.

The preservation of wealth discussion usually happens at the late stages of saving or in the retirement years for most clients because that’s when they start drawing on their income or are starting to think about it. The easiest way to move to a preservation of wealth strategy is to change the asset allocation in a portfolio and to increase the fixed income component. The problem with that solution is that forces the client to be willing to accept reduced returns, and most people can’t afford that. In reality, in my view, there are better ways to do it without sacrificing returns.

Staying away from speculative stocks and sectors. This is a fairly simple and obvious one, but if investors want to preserve capital, they should stay away from speculative sectors, stocks that aren’t profitable, stocks that are trading a crazy multiples, and stocks that haven’t yet clarified or explained what their revenue model will eventually look like. Many of the pure growth plays in the markets would have these characteristics. If you can’t explain how your company is going to make money, if you aren’t currently making money, or if you don’t have a plan on how to monetize your idea, it’s probably best to stay away if preservation of capital is important. In this case, I would suggest sticking to sectors that have proven long term track records of generating profits and sustained growth, along with a slowly increasing dividend.

Replacing higher Beta equities with lower beta equities. Generally, this would be equivalent to replacing growth equities with dividend paying equities. For example, there’s an index that exists called the TSX Low Volatility index, and it targets the 50 stocks in Canada that have the lowest volatility. Not only has it historically done as good or better than the larger TSX index, but it has done it with less volatility. In theory, the way it protects wealth is that if ever there’s a market correction, the stocks should drop less than the broader index.

Adding Real assets to the portfolio. Specifically, REITs and Infrastructure are two sectors that I’ve liked for a long time. Real assets typically don’t correct as much in downturns, and provide consistent tax efficient income. If you actually take a step back and think about what you actually own when investing in these types of companies, you own actual buildings or infrastructure projects with proven long term cash flows. I always ask myself, in 20 years, what will my asset look like, and generally when considering these types of investments, they look good and have a strong likelihood of having kept its value.

Using alternatives such as Equity Linked GICs. This would be for a client who wants to have equity exposure while having the comfort of the guarantee associated with GICs. Clients can participate in the upside of the markets while having 100% of their principle protected. An easy way to preserve capital is to have the entire amount protected, and this allows for that.

Using a consistent rebalancing strategy. This is another oldie but goodie, and a simple way to protect capital. Every time the market rallies and your asset allocation get out of whack, by rebalancing, you take some profits off the table, reduce your exposure to markets, and protect yourself in the event of a market correction.


National Bank Financial is an indirect wholly-owned subsidiary of National Bank of Canada. The National Bank of Canada is a public company listed on the Toronto Stock Exchange (NA: TSX). The particulars contained herein were obtained from sources we believe to be reliable, but are not guaranteed by us and may be incomplete. The opinions expressed herein do not necessarily reflect those of National Bank Financial.

Transcription: Rob gives his insight on the marijuana market

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Paul Bagnell with guest host Rob Tétrault

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Paul:  We are back with my guest host Rob Tétrault. He’s a Portfolio Manager at National Bank Financial. He’s based in Winnipeg, but we’re lucky enough to have him right here in Toronto today. You told me during break that you get all kinds of phone calls from clients who want in to the marijuana stocks. I guess they’re asking you which ones are the winners. What do you tell them?

Rob: It’s kind of a phenomenon right now. We’re getting a whole bunch of phone calls. In Winnipeg where I am a proud Manitoban and proud to be from, Delta 9 this week, a CEO John Arbuthnot…actually John, great guy, he used to work for me and got into the business as a cold caller, now he is a CEO of an IPO listed company, $60 million company on the TSX Venture. That fueled some news in Manitoba. So, people are picking up their phone, they’re saying, “Wow, I want to be part of this. I want to be part of this.” People think you know, “If I had got on to Tech early how much money would I have made?”

Paul: Yeah.

Rob: So, a lot of people that don’t necessarily understand what he sector looks like and how it works, but I’m getting a ton of phone calls and you’re right, they’re asking me which ones to buy.

Paul: What is your response? You see risk here.

Rob: I do see risk. I think it’ll happen. I think there’s going to be retail recreational marijuana. It’s going to be sold. I do think that the provinces are going to control distribution. I think it’s the only way it can work. I think in Manitoba, my view is, we’re going to see Manitoba liquor and lotteries. You know, in Ontario it’s going to be the liquor distribution.

Paul: It is.

Rob: And I think the other provinces will follow suit. Maybe Alberta and Quebec won’t, maybe they’ll do private. But regardless, now at the end of the day you’re simply a farmer. You’re simply growing these plants to bring them to someone to sell. So, we know how big that market is. Much like the liquor market in Canada, you know, the gentlemen at the Seaport Motor Hotel in Churchill, Manitoba can only drink so many beers and the individual who’s, you know, smoking his marijuana is only going to smoke the same amount of marijuana he smoked last year. So, if you’re making that assumption, the Market Cap, if we’re spending $200 a year on marijuana, the Market Cap, the total Market Cap in Canada for recreational marijuana, should be a six to ten billion dollar valuation somewhere in there. If we look at the top, call it five stocks on the TSX, Canopy is at 3 billion, Aphria is at 1…I want to 4 or 5, and Aurora is at another 1.3. Just those three companies are already at that Market Cap.

Paul: So the sector you’re saying is overvalued?

Rob: I am saying the sector is overvalued as a whole. Now something needs to work itself out. Maybe Canopy will be the best player in there, maybe it will be Aurora. The thing is we don’t know the rules of the game yet. We don’t even know what the rules are going to be and yet people are already assuming that they are going to have all those profits. They are not even producing this marijuana yet. So, that’s a concern of mine.

Paul: There is a marijuana ETF. It’s called, The Horizons Marijuana Life Sciences IDX ETF ticket symbol HMMJ on Toronto. Is that a better way to play it if people insist on getting into this? Would you guide them towards an ETF rather than trying to pick individual stocks?

Rob: Yeah, because we don’t know the management right now. Whenever you’re looking at a company, it’s always important to look at the management, the track record, what the leverage is, how they’re doing, and what their vision is for the company. We have very little indication as to how they’re going to play it, the large players. These were very, very small companies that became large very quick. Canopy is a three billion dollar company. So, the ETF, you get everything. You get the small ones, you get the big ones, if you want to play the sector that’s what it’s going to be, but in my view, in five years when this whole thing is setup the whole sector will be worth 10 billion. That’s my view. So, if you’re buying Canopy or one of those, you’re either of the view that they will outperform their competitors, or maybe you’re of the view that Canadians will start smoking more marijuana, I don’t know, that’s possible, or you’re of the view that these companies will get a higher valuation than for example, the liquor equivalent. So, one of those things could happen, but if you’re doing that, that’s what you’re expecting.

Paul: That’s Rob Tétrault on the marijuana stocks and the risk he sees there.       

Big tax changes on the horizon for small business owners

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Rob Tétrault, B.A., J.D., MBA, CIM
Vice-President, Portfolio Manager

Cédric Paquin, B.Comm, CPA, CA, CFP
Wealth Planning Consultant

On July 18, 2017 the department of finance released a consultation paper they publicized as a crackdown on perceived tax loopholes for wealthy business owners.

Personally, we had an uneasy feeling as we read through the proposal. The changes will have significant adverse implications on tax planning strategies widely used for several years by many business owners; not just the wealthy ones! As tax advisers, we always felt the strategies we implemented were available (and encouraged) to compensate our business owner clients for the risk they take, for the jobs they create and for the fact they do not have job security, employment benefits, employer sponsored pension plans, employment insurance, sick days or vacation days. The latest Key Small Business Statistics released by Statistics Canada in 2016 revealed that small businesses employ 70.5% of the labor force in Canada, were responsible for 87.7% of net employment change, accounted for 27% of R&D and contributed an average of 30% to the GDP of their respective province. They are the backbone of our economy! How will these figures be impacted over the long term?

Here is a brief review of the tax planning strategies targeted by the proposal.

Income splitting and multiplication of the capital gains exemption

Corporate structures are commonly set-up with all family members owning shares of the corporation, either directly or indirectly through a family trust. Income splitting can be achieved by paying dividends to lower income family members. The capital gain exemption can be multiplied on the future sale of the business by allocating the capital gain incurred to various family members based on share ownership or per the discretion of the trustee(s) of the family trust.

The “kiddie tax” was introduced in 1999 causing private company dividends paid to minor children to be taxed at the top personal tax rate. Currently, income splitting with minors can only be achieved by paying them a reasonable salary based on the work they perform for the business.

Starting in 2018, the Department of Finance proposes a number of measures to extend the “kiddie tax” to all related family members, whether minors or adults. Dividends received from related private corporations will be subject to the highest personal tax rate unless the amount is reasonable in the circumstances based on the recipient’s labor contribution and/or invested capital.

The capital gain exemption will no longer be available to minors, will not be available for any family member if the capital gain is subject to the extension of the “kiddie tax” rules above and will no longer be available for gains that accrued while the shares were owned by a family trust.

Tax deferrals when passive investments are held inside of a private corporation

Incorporated business owners can take advantage of tax deferrals by leaving passive investments inside of their corporation. For example, a corporation that earns income eligible for the small business deduction pays a combined federal and provincial tax rate of 10.5% in Manitoba. An individual subject to the top personal tax bracket would pay 50.4% in tax. Therefore, a 39.9% tax deferral can be achieved by leaving excess funds inside a corporation allowing for better compound growth and a larger nest egg in the future.

The consultation paper proposes to eliminate the advantage of retaining income in a private corporation. While the Department of Finance did not release any draft legislation they did set out a number of different approaches under consideration.

While it remains to be seen what form the rules will take, they will no doubt result in significantly higher taxes for the majority of business owners. Alternative planning strategies such as individual pension plans (IPPs) and retirement compensation arrangements (RCAs) will likely become more popular in the future.

Converting dividends into capital gains

Much less common than the previous two strategies was a practice we knew was under scrutiny so the proposed draft legislation came in as less of a surprise. The strategy involved embarking on a series of transactions with the effect of converting highly taxed dividends income into lower taxed capital gains.

The consultation paper proposed draft legislation to expand current anti-surplus stripping rules to capture these transactions. Amendments to these rules are effective as of July 18, 2017.

Conclusion

These proposals, if and when they become law, will have considerable impact on tax and estate planning strategies commonly implemented by incorporated business owners. We will closely monitor and advise you of any significant changes or revisions to these proposals as they occur and once they are eventually enacted. No doubt, they will require a careful review of existing corporate structures as well as an analysis of future tax planning opportunities.

Please do not hesitate to contact us if you would like to discuss your situation in more detail.

This information transmitted is intended to provide general guidance on matters of interest for the personal use of the reader who accepts full responsibility for its use, and is not to be considered a definitive analysis of the law and factual situation of any particular individual or entity. As such, it should not be used as a substitute for consultation with a professional accounting, tax, legal or other professional advisor.