Canada Pension Changes: CPP, OAS, GIS Summary

It has been some time since we have had significant news from the Government of Canada, but as you may have heard, they are currently proposing to make changes to eligibility for OAS and GIS. In addition to this we have recently seen the implementation of changes to the Canada Pension Plan which I wrote about earlier.  I felt that this was important enough to write about again, so I have created a Newsletter with as much relevant detail as possible for both the CPP and OAS/GIS changes.  The February 2013 Newsletter is posted  on our website and you can use the links below to read the full article.

CPP Summary:

1. If you are under age 65 and already collecting CPP, but continuing to work you and your employer must now continue to pay CPP until age 65. 
2. If you are between ages 65 and 70 and continuing to work but elect to stop contributing to the CPP you must complete a form CPT30 for your employer AND SEND A COPY TO REVENUE CANADA.    If you do not elect to stop, you and your employer must continue to pay CPP until age 70.  (A copy of the CPT30 form is attached to the end of the Newsletter for your information)

OAS/GIS Summary:

The Old Age Security (OAS) Pension is a monthly benefit available to Canadian applicants 65 years of age who meet the Canadian legal status and residence requirements.  However, the Government of Canada is proposing to change the eligibility rules for the Old Age Security and Guaranteed Income Supplement payments.  If you were born before 1957 this will not affect you, but for the rest of us it may mean changing the way we plan our retirement years.    

As usual, we have posted this under the red banner on our website homepage. You can read this and other relevant articles using the link to the website homepage or our "Library" page for more details:

http://liwanpo.com/
http://liwanpo.com/resources_newsletter.php

As you know, I am always happy to hear from you so if you would like to discuss this or other issues, please feel free to call me.

Government of Canada is changing OAS eligibility

Currently the Old Age Security (OAS) Pension is a monthly benefit available to Canadian applicants 65 years of age who meet the Canadian legal status and residence requirements.  However, the Government of Canada is proposing to change the eligibility rules for the Old Age Security and Guaranteed Income Supplement payments.  If you were born before 1957 this will not affect you, but for the rest of us it may mean changing the way we plan our retirement years.

The Government of Canada has introduced measures to gradually increase the age of eligibility for the Old Age Security (OAS) pension and the Guaranteed Income Supplement (GIS) between the years 2023 and 2029, from 65 to 67. However, those currently receiving OAS benefits will not be affected by the changes.  These and other changes will affect those born after 1957.  To find out more about these proposed changes use this link to read the entire article posted on the "Library" page of our website in the Newsletters section.

Government of Canada Proposed OAS and GIS Changes

2012 Ontario Healthy Homes Renovation Tax Credit

At last, seniors are getting a tax break on home renovations required to assist living at home.  And the good news is, this is not one of those one year only deals, this tax break is here to stay for now.  Here is the best part though, the 2012 Ontario Healthy Homes Renovation Tax Credit is not just for seniors with disabilities.  Any person over the age of 65 either as a tenant or a homeowner can make eligible renovations to their residences and qualify for this tax credit.   In addition, there is no income test to qualify and 100% of eligible expenses qualify.  Finally, this is good news for all seniors who want to live in their own homes longer, improve accessibility or be more functional or mobile at home.

IMPORTANT NOTE: For the 2012 tax year only, eligible expenses cover fifteen months from October of 2011 through December of 2012.  If you want to take advantage of the first year of this tax credit, you will need to do so before the end of 2012 if you have not already done so.

I have prepared a more detailed newsletter on this subject, and you can read the full article in detail using this link.  Look for the red banner on the lower left hand side of the home page and click on the article "2012 Ontario Healthy Homes Renovation Tax Credit".

http://www.liwanpo.com/

Be Mortgage Free Faster!

Yes, it really is possible to pay off your mortgage faster using these tried and true smart-money strategies provided by the money lenders themselves.  Reduce your Amortization period.  Make more frequent payments. Use your prepayment options.  To get more details on how this works in your favour, use the following link to read the full article, "Be Mortgage Free Faster 2012":
http://www.liwanpo.com/fin_personal_personal.php

This site also contains many other articles of interest on personal and business finance tips, tax tips and more.  Well worth your time to investigate what's available free to read. Jacques

2012 Taxes: Income Splitting and Attribution

Admittedly, not an easy tax subject to get your head around, but in the end can be well worth taking the time to understand and apply if the conditions are right for you.

In short, the Income Tax Act contains rules designed to eliminate the ability for a taxpayer in a high tax bracket to shift income to a lower-bracket taxpayer.  Knowing the rules and working within the restrictions can be beneficial but in general it requires the assistance of a tax professional to work out the details.  If you think you might benefit from income sharing, we can help you to work through any options that might apply.  For more details on this and other relevant tax subjects, please visit our website, Taxes pages. http://www.liwanpo.com/taxes_personal.php   

2010-2012 RRSP Contribution Limits

Once again at this time of the year, if not already underway, we need to consider RRSP contributions for the 2011 year.  This link provides a brief article on the limits for contributions set by Canada Revenue as well as deadline information.  As always, if you need assistance with RRSP planning, or to consider all of your options we will be happy to hear from you at (905) 881-6257.  To see this article in full please use this link to our website http://www.liwanpo.com/taxes_personal.php 
and look for the first article 10-12 RRSP Contribution Limits listed in red font

Should you incorporate?

Deciding to incorporate?

We are often asked for advice relating to the incorporation of a small business.

Incorporation is a business structure available to you to conduct your business activities. A corporation is a legal entity and is considered to be a separate person for tax purposes – it has to prepare its financial statements and file its own corporate tax returns with CRA.

Benefits of incorporation

1.  You are able to creditor proof your personal assets. You can limit your personal liability through incorporation by keeping your personal and corporate assets separate. Personal assets of the shareholders are not available to the creditors of the corporation. One exception would be where shareholders are required to give personal guarantees to banks, for instance.

2.      Deferral of taxes. Most small Canadian corporations are taxed at a  low rate of 15.5 % on the first $ 500,000 of active business income whereas individual tax rates can be as high as 46%. The low rate of tax provides the business with the opportunity to defer taxes until the funds are withdrawn from the corporation. The corporation has the incentive to retain surplus funds, for growing its business.

A corporation can also deduct accrued salaries or bonuses in its fiscal year even though paid out after the year end provided that payment is made no later that 179 days after the year end– corporate taxes are thus deferred to the following year.

3.      A $750,000 capital gains exemption is available on the sale of the qualified small business corporation shares.

4.   Different share classes may allow you to split income with family members, thereby reducing your tax burden. 

Drawbacks

1.       The costs of setting up a corporation and of preparing financial statements and tax returns

2.      Losses are trapped in the corporation and can only set used to offset future income from the corporation. They are not available for setoff against your personal income.

The general rule is not to incorporate until the business is profitable. You should always seek professional advice before you incorporate.