May 2025 Poll

Does the Liberal promise expected soon to cut the lowest personal income tax rate by 1% to 14%,  go far enough to help Canadians impacted by high costs?

The recent passage of Bill C-25 or the Pooled Registered Pension Plans Act brings PRPPs one step closer to becoming another option for retirement savings. But there are still significant hurdles to clear, says Douglas Nelson, Winnipeg financial planner and author of Master your Retirement, and numerous variables to consider before their value as a planning tool can be assessed. "It is difficult to know exactly how PRPPs fit into the range of retirement options,î adds Nelson, "until we see an actual product with real pricing.î Envisioned as a low-cost retirement savings option for Canadians who do not have access to workplace pension plans, PRPPs will pool employee and employer contributions under the administration of a qualified third party. These licensed administrators will be subject to a fiduciary standard of care, explains the federal government, ensuring that funds are invested in the best interests of plan members. "Since these plans will involve large pooled funds, plan members will also benefit from lower investment-management costs,î said Minister of State (Finance) Ted Menzies in a press release. The Act now proceeds to the Senate for approval. Then, it will be up to provincial governments to enact enabling legislation based on the federal framework. After that, licensed administrators ó probably financial institutions and investment counselors ó will launch PRPPs. As Nelson points out, there are numerous unknown variables that will become clear as the process develops. There are a number of things for which Nelson, who is a Real Wealth Managementô specialist in retirement and business succession planning, will be watching: ï Costs. Many pension options for mid-sized to large companies charge annual fees around 1%, vs. 2.5% for a mutual fund. Will fees for PRPPs be closer to 2.5% ó or 1%? ï Employer contributions. PRPPs will be available to employees with or without a participating employer. If employer contributions to PRPPs are optional, are small business owners likely to opt out? If so, what impact does this have on an employee whose employer does make contributions? Also, with many large pension plans today, employers have underfunded their contributions; what happens if employer contributions to PRPPs are underfunded? ï Taxation. PRPPs will allow for greater income splitting at an earlier age, but what happens if the pension payout amount is less than a retiree would have received from a group RRSP? The pensioner would probably transfer his or her money to another income option, so as to have more control. Then the pensioner would be back where he or she started ó with income from a life income fund (LIF) that can't be split prior to age 65. ï Survivor benefits. Will PRPPs have better-than-average survivor benefits for the surviving spouse and heirs? "It will be interesting to see what happens to other product offerings,î says Nelson. "Will the pricing for group RRSPs decline so they are more competitive, allowing a small-business owner to offer a lower-cost group RRSP, in which employees choose where to invest their money?î Still, PRPPs could be a great enhancement to the Canadian retirement savings system but it comes down to implementation. And for that, we will no doubt have to wait some months to see how things evolve.   Additional Educational Resources: Master Your Retirement 2012 Edition and Elements of Real Wealth Management Course.  

There is nothing in this story that Canadians donít already know. Itís just that Statistics Canada now has the numerical proof. According to its Income of Canadians 2010, after-tax income for families of two or more people in 2010 was virtually unchanged from 2009, making it the third consecutive year that family incomes have stayed flat. Indeed, 2010 median after-tax income was $65,500 vs. $65,400 in 2009, expressed in constant 2010 dollars. (The median is the level of income at which half of the population had higher income and half had lower.) The report, based on 2010 annual income information provided by participants in the Survey of Labour and Income Dynamics, tells us two-parent families with children fared slightly better, with median after-tax income of $78,800 in 2010 vs $77,200 in 2009. It heads downward from there and that, too, is no surprise. The median for female lone-parent families was $38,700, while families headed by a senior had a median after-tax income of $46,800. Unattached seniors received $23,400 in 2010 while unattached non-seniors had a median income of $27,500. According to StatsCan, 3 million Canadians, or 9.0% of the population, lived in low income in 2010, virtually the same number as in 2009. In 2000, this proportion was 12.5%. StatsCan also measures absolute mobility, which indicates how many people had an increase in income and how many experienced a decline. Between 2009 and 2010, after-tax income rose for 52.8% of individuals, while 47.2% experienced a decline. Between 2006 and 2007, before the economic downturn, income rose for 62.4% and declined for 37.6%.   Additional Educational Resources: Tax Strategies for Financial Advisors and Introduction to Personal Preparation Services courses.  

Although Canada's economy has weathered recent global mayhem relatively well, Canadians aren't home free. If we are to sustain our standard of living, says the Organization for Economic Cooperation and Development (OECD) in its latest Economic Survey of Canada, Canada has to increase productivity. The report calls productivity growth Canada's "main long-term challenge.î Over the past few decades, the OECD notes, the amount of labour, capital and natural resources needed to produce a unit of GDP has remained constant. Indeed, since 2002, Canada's overall productivity has fallen, while U.S productivity has grown by about 30%. The OECD makes two recommendations: first, more support for business investment in research and development (R&D) and, second, improve quality and access to tertiary education to maintain the supply of highly skilled workers. The report notes Canada's business sector devotes only about 1% of GDP to R&D, compared with 2% in the U.S. and more than 2.5% in Japan, Korea and some of the Nordic countries. Says Peter Jarrett, one of the authors of the study: "Canada is blessed with abundant natural resources. But it needs to do more to develop other sectors of the economy if it is to maintain a high level of employment and an equitable distribution of the fruits of growth.î The OECD also takes note of Canada's rising real estate prices and high household indebtedness. There is certainly no escaping Canadians growing debt burden. In its June issue of Financial System Review,  the Bank of Canada rated overextended Canadians as the country's greatest domestic risk. "The risks associated with high levels of household debt and a potential corrections in the housing market are elevated and have not diminished since December,î the Review notes. Bank of Montreal economist Sal Guatieri brought that home yet again in BMO's June 25 Focus: ï household credit market debt rose to a new high of 152% of disposable income in the first quarter of 2012. Household borrowing slowed slightly, but so did income growth, nudging the ratio higher; ï the proportion of "vulnerableî households ó those with debt service ratios of 40% or more of income ó is slightly more than 6%, pushing it over the norm for the past decade; ï the proportion of debt held by "vulnerableî households is slightly more than 11%, also mildly higher than normal. Clearly, Canadians shouldnít be too complacent and ignore the caution signs along the road to global recovery. The time to invest in our future is now.   Additional Educational Resources: Financial Recovery in a Fragile World and EverGreen Explanatory Notes.  

Do I have enough money to retire? For many baby boomers, that is the burning question.  Projecting after-tax cash flows over an average 15-year retirement period can be a daunting task.  To ease the strain, the Knowledge Bureau has two retirement-planning calculators in its Toolkit ó Tax-Efficient Retirement Income Calculator and the CPP Income Calculator Most retirees have several sources of income: public pensions ó Old Age Security (OAS) and Canada Pension Plan (CPP) ó as well as private pension income from registered pension plans (RPPs), RRSPs/RRIFs, or possibly Deferred Profit-Sharing Plans (DPSP). They may also have foreign-source pensions, not to mention investment income. Income from some sources will increase over time through indexation while income from other sources will decrease as the capital is diminished. And there's the income tax component to take into account. The Knowledge Bureauís calculators are designed to deal with these issues. The Tax-Efficient Retirement Income Calculator, for example, allows you to look at the various income streams over the entire retirement period. By projecting how each source of income will vary over time and by adjusting for the cumulative effects of inflation and taxation, the calculator paints a picture of the retiree's income stream during retirement. Then, by adding the projected monthly expenses, you can identify excesses and shortfalls and adjust your plan accordingly. Another burning question for those approaching age 60 is when to begin receiving CPP benefits.  The days of having to stop work in order to get CPP are behind us.  However, if you take your CPP and continue to earn pensionable income, you will have to continue contributing ó at least until age 65. The factors to consider when deciding when to start taking CPP include: to how much CPP benefits are you entitled? are you receiving a CPP survivor pension? will you keep earning income and, if so, how much? how long will you live? The CPP Income Calculator will take all of these factors into account and project your CPP benefit for each option available, from age 60 to age 70. The Tax-Efficient Retirement Income Calculator and the CPP Income Calculator are just two of the calculators available in the Knowledge Bureau Toolkit.  If you're not already using them, register now for a free trial.

Midnight, June 15 is the deadline for individuals who own an unincorporated small business to file their income taxes. It is also the day that those who pay their income taxes on the quarterly instalment plan must make their second-quarter payment. Missing either of those deadlines could prove costly. Filing the personal return for proprietorships. The tax-filing deadline is midnight April 30 for most taxpayers. The exception is unincorporated small-business owners and their spouses; for them it is June 15. But, and this is the catch, if you owe taxes when you do file, the interest begins accruing as of May 1. This is not inexpensive: interest costs are calculated at the prescribed rate, which is determined quarterly (currently 1%) plus 4% ó for a total of 5% ó compounding daily. If you miss filing a return by June 15, the consequences are even harder on the pocketbook. When you fail to file, you set yourself up for late-filing penalties: 1. First failure to file a return on time: the penalty is 5% of unpaid taxes plus 1% a month up to a maximum of 12 months from the filing due date. 2. Subsequent failure to file on time within a three-year period warrants a penalty of 10% of unpaid taxes plus 2% a month to a maximum of 20 months from filing due date. Further, on assessment of your taxes, the Canada Revenue Agency (CRA) can apply a gross negligence penalty if there has been an omission of information, including failure to file a return. This amounts to 50% of taxes payable. So, filing an accurate return is important; take the time to disclose all sources of income and back up your income and your expenditures with orderly files in soft and/or hard copy. If the CRA suspects you are willfully evading taxes and the court agrees, the penalties are stiffer still. (Note the fate of the Desautels above.) Tax evasion is the act of making false or deceptive statements in order to reduce or eliminate taxes or falsely claim refundable credits. Also, you can be guilty of this crime if you participate in destroying, altering, mutilating or otherwise disposing of records or books of account. If convicted of tax evasion, besides paying the taxes, you are liable for a fine of not less than 50% and not more than double the amount of the taxes that were sought to be evaded, and/or imprisonment for a term not exceeding two years. Quarterly instalments. If you remit your income taxes quarterly, you must file your second instalment by midnight, June 15, to avoid interest penalties on the prepayment of your 2012 taxes due. The CRA usually sends a billing notice as a reminder. If your income picture will change in 2012 ó especially if it decreases ó you may not be required to pay the amount on your billing notice. Check with your tax advisor. You are required to remit taxes quarterly in 2012 if your net taxes owing are $3,000 or more in 2011 or in either 2010 or 2009 ó except in Quebec. The limit for Quebec residents is $1,800, not $3,000. Farmers and fishers pay instalments only once on net self-employment income based on two-thirds of net income as of Dec. 31. It's Your Money. Your Life. While interest and late-filing penalties may be avoided under the Taxpayer Relief Provisions in hardship cases ó such as illness, death of a family member or other factors beyond your control ó there is generally no leniency for tax delinquents or cheats. Do file on time to avoid expensive interest and penalties and reward yourself by investing the savings. Evelyn Jacks is president of Knowledge Bureau and founder of the Distinguished Advisor Conference, now in its ninth year. This annual event attracts hundreds of top advisors from across Canada to discuss recent trends in economics, tax, investment, retirement and estate planning.     Additional Educational Resources: Distinguished Advisors Conference and Debt and Cash Flow Management self-study course.  

Growth as a professional in Canada is increasingly dependent on collaborative planning with a culture unfamiliar to you, including new Canadians and established communities, many of whom often face unusual challenges. At this year's Distinguished Advisor Conference (DAC)  Nov. 11-14, award-winning Cree speaker Madeleine Dion Stout will speak on "Miskwē˝ihtamowin: Planning for excellence with indigenous communities.î Raised on the Kehewin First Nation and a nurse by training, Dion Stout has been recognized for her outstanding contribution to health reform, health education and the development of public policy toward an improved health-care system for all Canadians, with a particular focus on First Nations, Inuit and Métis. She has received the Assiniwikamik Award from the Aboriginal Nurses Association of Canada, a Distinguished Alumnus Award from the University of Lethbridge and Honorary Doctor of Laws from the University of British Columbia and the University of Ottawa. In March 2010 she received the National Aboriginal Achievement Award in the health category. "Wellnessî personally and culturally is the issue for Dion Stout. Dion Stout will address DAC attendees on Nov. 13, Day 2 of the annual conference, held this year in Naples, Florida. (To review the agenda, click here). The theme of this year's DAC is "Navigation: Charting a new courseî and Dion Stout joins a lineup of knowledgeable and respected speakers ó including Patricia Croft, Gordon Pape, Diana Juricevic and Richard Croft ó who tackle the topic of planning in today's uncertain environment. "This is particularly important in Canada as the indigenous community faces unique opportunities and challenges,î says Evelyn Jacks, DAC founder and president of Knowledge Bureau. "A better understanding of the contributions these communities can make in planning for health promotion and wealth creation adds value when working with this client group.î To take advantage of early bird prices, register before June 30 for DAC.