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 Canada Revenue Agency (CRA) is making it easier for businesses to do business with the tax man. It has launched a one-stop shop for managing your tax information at http://www.cra-arc.gc.ca/bsnssnln/menu-eng.html. This single Web page gives you options to file, for example, GST/HST returns, T2s, T4s, T1s; to request a web access code, direct deposit, transfer payments, and more; to make payments; to make calculations such as automobile expenses and payroll deductions. You can also review and register ó all in an easy-to-use format. Just select your task from the list and the CRA will direct you to the appropriate service.   Additional Educational Resources: Essential Tax Facts 2012 Edition and Introduction to Personal Taxation Services Free Trial  

The Bank of Canada calls it "home-equity extraction,î denoting the ability of homeowners to borrow against the steadily increasing value of their homes. These secured personal lines of credit (PLC) ó secured by the borrowers' homes ó have become a significant factor in the run-up of household debt since the late 1990s. "Secured PLCs, which are mostly secured by housing assets, have risen sharply both in absolute terms and as a share of total consumer credit,î say researchers Allan Crawford and Umar Faruqui, authors of "What Explains Trends in Household Debt in Canada?î in the Winter 2011-2012 edition of Bank of Canada Review.  "In 1995, secured PLCs represented about 11% of consumer credit; by the end of 2011, this share was close to 50%.î We are all aware that the ratio of household debt to disposable income has climbed in Canada, particularly over the past decade, with debt reaching 150% of income. This has distressed central bankers, politicians and market monitors, as they consider the impact of domestic household finances on Canada's economic and financial well-being. (See Knowledge Bureau Report, Jan. 25.) As a result, the latest Review turns its attention to issues and trends around household debt in a special issue entitled Household Finances and Financial Stability. As editor Graydon Paulin notes: "The articles in this special issue of the Review reflect two important facts. First, in recent decades, there has been a steady increase in Canadian household indebtedness. Second, real house prices in Canada have exhibited an upward trend since 2000. These facts are interrelated, since rising house prices can facilitate the accumulation of debt. Households could, therefore, experience a significant shock if house prices were to reverse.î Crawford and Faruqui argue both mortgage and consumer credit have contributed to this higher ratio. Gains in real income coupled with low interest rates have made home ownership more affordable, and the home ownership rate has risen accordingly. As well, since the late 1990s, house prices have risen at a faster pace than income. This all adds up to ratio of mortgage debt to disposable income that has climbed to 100% over the past 30 years from 50%. "Before the mid-1990s, the increase in the debt-to-income ratio was driven mostly by residential mortgage credit,î report Crawford and Faruqui. "But since then, consumer credit has also been a contributing factor. The rising importance of consumer credit has coincided with a strong increase in non-mortgage borrowing secured by housing assets.î Financial innovation, supported by an exuberant housing market, has given homeowners access to more non-consumer credit in the form of PLC and home-equity extraction. That takes the ratio of consumer debt to disposal income over the 50% mark. So, household debt has accumulated and all eyes are on the housing markets. A market crash could put paid to Canada's modest recovery. The end result: Canadians should tread cautiously. Keeping our economy onside requires a careful balancing act. As for Crawford and Faruqui, they recommend more research, this time on the relative importance of the various determinants of growth in household credit and the impact of new financial innovations on debt levels. "This work will improve our understanding of the forces affecting future growth in household debt,î they say.   Tessa Wilmott is a financial journalist and editor of Knowledge Bureau Report.   Additional Educational Resources:  Debt and Cash Flow Management, try the Free Trial!  

Raising children is a costly business and Canada Revenue Agency acknowledges this with deductions and tax credits available when you file your annual income tax return. Here are claims for your minor children that you and your tax preparer should be considering for 2011: ï Child-care expenses. Assuming you have child-care expenses, remember to claim the lucrative child-care expense deduction, which reduces your net income. (Click here to download the form). But this claim is often audited; so, be sure to keep your child-care receipts. Reducing your net income is important because it is the base on which many benefits and refundable tax credits and benefits are calculated. The lower your net income, the greater your ability to access those credits and benefits. The Canada Child Tax Benefit (CCTB) is one of those benefits that are based on net income, in this case, family net income. It is a tax-free monthly payment made to eligible families and includes the National Child Benefit Supplement and the Child Disability Benefit. ï Child Amount. When it comes to non-refundable tax credits, be sure to claim the Child Amount for each eligible child under the age of 18. The $2,131 claim is not income-tested and either parent can claim it; in fact, unused amounts can be transferred from one parent to the other. ï Children's fitness and arts activities. Check private activity receipts to see if you can claim the Children's Fitness Amount and/or the new Children's Arts Amount.   ï Disability Tax Credit. If you have a disabled child, you'll want to claim the $7,341 Disability Amount, which, in the case of minor child, is increased by a supplement of $4,282 for a total claim of $11,523. This supplementary amount, however, can be reduced by the amount you claim as a child-care deduction. You will need a Disability Tax Credit Certificate, form T2201 completed by a doctor. ï Public Transit Amount. Finally, be sure your young ones keep all public transit passes for a possible claim for the Public Transit Amount. Investing Tips for Minors. Establish an in-trust account for your minor child. But be sure to deposit into the account only funds from the child's part-time jobs, CCTB received for the child and the capital gains earned on principal transferred to the child. (The Attribution Rules, which generally prohibit the transfer of assets from higher-income earners to lower-income earners in the family, requires that interest or dividends earned on principal transferred is attributed back to and reported by the adult transferor.) By having his or her own in-trust account, eligible earnings ó interest and dividends earned on "untainted accountsî ó are taxable in the child's hands. Because of the tax-free zone, the basic personal amount of $10,822, this usually allows the earnings to accumulate tax-free. Over time, planning around these rules but within the framework of the law will build assets in the hands of multiple family members, resulting in future income-splitting benefits. It's Your Money. Your Life. File tax returns for all family members together, including minor children. If you think strategically about family income splitting, you will be able to accumulate capital in many family members' hands. The objective is to unleash the potential each taxpayer has to maximize the tax-free zone of $10,822 and save significant sums over time. Evelyn Jacks, president of Knowledge Bureau, is author of Essential Tax Facts 2012 and co-author of Financial Recovery in a Fragile World. To purchase your books, visit http://www.knowledgebureau.com/Books.asp  

Tomorrow ó March 29 ó is the federal budget and the federal government will balance its need to generate revenue to reduce the deficit with maintaining a fragile economic recovery. Knowledge Bureau Report's team of experts will examine the budget, access the changes and tell you what it all means to you. Watch for Budget 2012 Special Report.  

Can a bank be held liable by victims of fraud if the fraudster was a customer of the bank and carried out his fraud using various bank accounts, in the process arousing concerns by bank staff? We will soon find out as, on Aug. 15, the Ontario Superior Court of Justice approved a class-action lawsuit against the Bank of Montreal (BMO). The lawsuit, Pardhan v. Bank of Montreal, alleges that BMO is culpable because Salim Damji, who defrauded investors of more than $77 million from 1999-2002, deposited the stolen money into various personal accounts at various BMO branches, as well as into an account in the name of a numbered company operating as Cash Plus. Many investors' cheques were written "in trust,î yet Damji deposited them into non-trust accounts. The suit maintains that BMO knowingly assisted this breach of trust, knowingly received the fraudulent funds and/or was negligent in its receipt of these funds. Damji, a resident of Toronto, claimed that his company, STS Inc., had recently developed a new teeth-whitening product that was soon to be sold to industry giant Colgate-Palmolive. He offered investors the chance to buy into his company before the sale, putting the money "in trustî until the deal was inked. Damji must have been very persuasive, as he was able to extract more than $77 million from investors. But it was all a lie ó there was no teeth-whitening product, no sale to Colgate, not even a company and certainly no money in trust. On April 26, 2002, Damji was arrested and charged. He pleaded guilty and was sentenced to seven and a half years in jail. He left behind a web of thousands of transactions but little cash. Damji had an internet gambling habit and had transferred funds offshore This recent decision represents the culmination of many administrative battles within the court system itself. Ruling that the litigation plan was deficient, the court had declined to certify the proposed class action as recently as April 2012.After considering additional evidence, the court has decided to certify the proceeding. Those investors who gave money to Damji for the STS scheme in trust and whose money was deposited in the Cash Plus account, will be represented in the action.  

Statistics Canada's closely watched indicator, the Consumer Price Index (CPI) added 0.5% in January, taking inflation to 2.5% for the 12 months ended January. The Bank of Canada's core index, at 2.1% for the same period, was right on target, suggesting no policy changes are forthcoming. "The 2.1% reading on core inflation,î says Douglas Porter, deputy chief economist at Bank of Montreal, "brings us right back to where the Bank of Canada expected it to be for the first quarter in its January Monetary Policy Review. Headline inflation at 2.5% is still above its call of 2.2%, but it should drop notably by March.î The culprits driving inflation are higher gas and food prices. Gasoline prices increased 6.8% in January while food prices for food purchased from stores rose 4.9%. Year over year, food prices rose 4.2% while the cost of energy advanced 6.5%. The electricity index rose 7.3%. In fact, prices rose in seven of the eight major components in the 12 months, the exception being recreation, education and reading. StatsCan notes that, excluding food and energy, consumer prices increased 1.6% in the 12 months to January after rising 1.3% in December.   Additional Educational Resources:  Debt and Cash Flow Management and Elements of Real Wealth Management courses.