Ways And Means Motion: Lots of Tax Changes, Budget Shortfall

The Federal Government introduced a Ways and Means Motion on December 7 that will implement the promised middle income tax cut to 20.5%. In addition, there are a host of new tax increases for high net worth clients: Canadian retirees and business owners that tax and financial advisors will want to reach with planning advice soon.

In fact, advisors will be challenged to update not just on the tax changes to the 2015 T1 return but also to re-think personal, retirement, investment, corporate and trust planning strategies in light of these dramatic increases in taxes on high net worth families, all of which are scheduled to begin on January 1, 2016. Changes include:

  • A reduction in the 22% personal tax rate to 20.5% starting January 1, 2016.
  • A new 33%t personal income tax rate on taxable individual income over $200,000, starting January 1, 2016.
  • Subsequent changes to charitable donation calculations, trust and estate taxes, taxes on split income with family members
  • Increases in taxes on investment income earned in corporations
  • Tax-Free Savings Account (TFSA) annual contribution limits reduced back to $5,500 from the current $10,000, together with a reinstatement of indexation for 2016 and subsequent taxation years.

Proposals for the removal of the Family Tax Cut for 2016 and cancellation of the UCCB in favor of a new Canada Child Benefit, to begin in July 2016, based on 2015 family net income, are yet to be introduced.

“To that end, we are pleased to cover not just the detailed line-by-line nuances on the new 2015 T1 return, but also the effects of these significant changes for families, corporate owner-managers and trusts, at the January Sessions of the Distinguished Advisor Workshops; in particular the effects of the middle income tax cut, the removal of the Universal Child Care Benefit in favor of the Canada Child Benefit, and the new 33% federal upper tax bracket,” says Workshop keynote speaker Evelyn Jacks, President of Knowledge Bureau. “The TFSA contribution room changes back to a maximum $5500, although now indexed again, will reduce capital preservation strategies for seniors and their heirs over the current rules. These taxpayers have few tax shelters when RRSP deposits and RRIF income becomes taxable. Income averaging strategies are key to preserving capital in these cases.”

Early registration is accepted before December 31 for sessions being held in Winnipeg, Calgary, Vancouver or Toronto.

Also to be discussed: changes to child care expenses and refundable/non-refundable tax credits, the value of donations for high net worth clients, the new T1135 Foreign Income Verification Form, strategies for filing final tax returns, transferring assets from senior to junior family members and from proprietorships to corporations. A thorough review of pension income splitting, investment planning and capital gains planning will be featured.

“Tax and financial advisors now have an important opportunity to speak to their senior clients about maximizing TFSA contribution room; in addition for younger, high earning clients, TFSA and RRSP planning is very important,” said Jacks. “Astute tax and financial advisor working with corporate owner-managers will want to carefully consider the level of corporate salaries and dividend withdrawals now to the end of the year and in 2016, to take into account both federal and provincial tax hikes in 2016. Depending on income source and province of residence, many taxpayers may now pay more than 50% on high taxable incomes.”

Featuring some of Canada’s most experienced tax experts and special guests who are experts in security, technology and software, tax, bookkeeping and financial advisors have an opportunity to update their tax knowledge, and think strategically about running a more successful, digital tax preparation, bookkeeping and financial planning practice given these recent new developments, at the Distinguished Advisor Workshops.

These workshops feature expert instruction, PowerPoint presentations and what many attendees call the advisor’s “Tax Bible”; a 300-plus-page Knowledge Journal that describes tax changes line-by-line. Special Reduced Tuition Fee Rates apply before December 31 for Alumni, Designates and Groups.

Ideal for training new and returning staff, professionals may earn 10 CE/CPD credits with in-class participation and the pre-reading topics in EverGreen Explanatory Notes. This is also an important peer-to-peer learning and networking event geared to help advisors build their practices. For more information, call 1-866-953-4769 or register online at http://www.knowledgebureau.com/index.php/distinguished-advisor-workshops/daw-registration/

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