Monthly Archives: September 2017

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CRA to Tax Registered Investment Fees Paid From Open Accounts


Originally posted on By Melissa Shin

If your clients pay their registered-account investment fees from open accounts, revisit that practice with them now.

At the November 2016 Canadian Tax Foundation Conference, CRA told attendees that paying registered plan fees from non-registered, or open, accounts, will incur a tax penalty equivalent to the fee.

CRA views the practice as creating an unfair advantage because it’s an indirect increase in the value of the registered plan — so the agency has changed its administrative position.

Now, “a controlling individual who pays investment management fees with respect to his or her RRSP, RRIF or TFSA outside of the plan could be subject to a tax equal to the amount of fees paid,” says a PwC release on the issue.

CRA will begin taxing people who pay fees in this manner as of January 1, 2018, and the tax will be punitive: based on CRA’s wording, if a person pays $100 in registered fees from an open account, she would trigger $100 in tax.

Michelle Connolly, vice-president, Tax, Retirement and Estate Planning at CI Investments, says people typically pay fees from outside their registered accounts to preserve registered capital and reduce taxable capital and potential income instead. But this tactic is predominantly a deferral, she points out, since the preserved registered capital will eventually be taxed as regular income upon withdrawal.

Some advisors argue preserving registered capital allows for greater compounding, she adds, but “I never viewed [fee redirection] as a top-three planning idea,” she says.

Read: Investment fees — what’s deductible?

Connolly says there are three main situations where people redirect fees:

  1. An individual taxpayer pays for her own registered account’s fees out of her open account.
  2. An individual taxpayer pays for someone else’s registered account fees out of his open account. One example, says Connolly, is a grandfather paying his grandchildren’s TFSA fees out of his open account.
  3. A joint account pays for one or both of the individual’s registered account fees.

Overcontribution risk

With this administrative change, CRA is focusing on the advantage created by paying the fee from an open account. But there’s another risk to fee redirection: overcontributing to a registered plan.

Let’s say a person contributes the maximum $5,500 to her TFSA, owes $100 in investment fees, and pays those fees from outside the TFSA. Under CRA’s new position, “she will have been viewed to have contributed $5,600,” says Connolly. And, not only will she have to pay $100 in tax due to her fee redirection, she may be penalized $1 per month (1% of the excess) for overcontributing to her TFSA. “Will CRA go that far?” asks Connolly. “Potentially.”

Read: The risks of overcontributing to an RRSP

What advisors should do

“An advisor should look at any clients that are redirecting fees on registered accounts and discuss these changes with clients,” says Connolly. “As of January 1, 2018, CRA will now view [fee redirection] much more aggressively.”

If the grandfather in our example wishes to help his grandchildren pay for investment fees for non-tax reasons, he can gift them an equivalent amount in cash after the grandchildren pay the fees out of their registered accounts.

The PwC release says CRA may announce administrative concessions when it releases its tax folio in early 2017. But Connolly says it’s unlikely that there will be any concessions.

Read: How to fix TFSA overcontributions

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Federal Liberals eye tax on private health


Originally posted on National Post December 2, 2016 by John Ivison

Federal Liberals eye tax on private health and dental plans, a move that would take in about $2.9B

The Liberal government is considering taxing private health and dental plans, in a measure that would raise about $2.9 billion, sources say.

As many as 13.5 million Canadians have lower tax bills because health and dental benefits are not treated as taxable outside Quebec.

Dan Lauzon, a spokesman for Finance Minister Bill Morneau, said no decisions have been taken and that any moves would not be made in isolation. The employee-sponsored health care tax exemption is being scrutinized as part of a sweeping review of 150 tax credits worth about $100 billion a year in foregone federal revenue.

Lauzon said the review is not being seen as a revenue-generating exercise.

The Department of Finance has asked seven external experts to look at the tax system to ensure that it is as fair, efficient and simple as possible.

It is understood the academics reviewed health and dental benefits, but it is not clear what they recommended.

The argument for killing the health and dental benefit exemption is that it does not treat all remuneration equally.

Most employee benefits are taxed – for example, life insurance paid by employers are reported on employees’ T4 slips and included as taxable income. Similarly, a car paid for by an employer is taxed.

But health benefits are an exception. Proponents of eliminating the credit argue that those with lower incomes but without private health plans are subsidizing those with employee-sponsored coverage.

On the other hand, there is a strong economic case for encouraging employers to provide health coverage for employees.

Quebec included health and dental plans as a taxable benefit in the early 2000s and found that employers scaled back the coverage offered.

The Liberals have been clear that they intend to take action on eliminating some tax credits, particularly those that benefit higher-income Canadians.

Morneau told the Senate finance committee that changes are coming.

“We think we did make some simplifying efforts in budget 2016, but we know there’s more work to be done in this regard to look at things that no longer have the desired impact,” he said. “It’s an effort that we’re pursuing.”

The 2016 budget removed the children’s fitness tax credit and the children’s arts tax credit.

During the 2015 election campaign, the Liberals talked about reducing or eliminating the credits for individuals paid by stock options. but backed away, over concerns from Canada’s high-tech sector.

Any attempt to hit health and dental coverage would be controversial, particularly because of the many Canadians who receive it.

But the prospect of raising such as much as the $2.9 billion forecast in the current Report on Federal Tax Expenditures might prove too enticing for Morneau to ignore.

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Top tax credits and benefits for seniors


January 18, 2017

Use this list to help your senior clients ensure they claim the most common tax credits, deductions and benefits for which they’re eligible.

Read: Essential tax numbers

    • Pension income splitting — Those who receive a pension may be eligible to split up to 50% of eligible pension income with a spouse or common-law partner.
    • Guaranteed income supplement — If clients received the guaranteed income supplement or allowance benefits under the old age security program, they can renew the benefit by filing by the deadline.

Read: Navigate RRSP attribution rules

  • Goods and services tax/harmonized sales tax (GST/HST) credit — Clients may be eligible for the GST/HST credit, a tax-free quarterly payment that helps offset all or part of the GST or HST they pay. To receive this credit, clients must file an income tax and benefit return every year, even if they didn’t receive income. If they have a spouse or common-law partner, only one of them can receive the credit. The credit is paid to the person whose return is assessed first.

Read: CRA tweaks process for accessing online tax info of businesses

    • Medical expenses — Clients may be able to claim the total eligible medical expenses that they, their spouse or common-law partner paid, provided the expenses were made over any 12-month period ending in 2016 and were not previously claimed. This can include amounts claimed for attendant care or care in an establishment.
    • Age amount — For clients 65 years of age or older on December 31, 2016, if net income was less than $83,427, they may be able to claim up to $7,125.
    • Pension income amount — Clients may be able to claim up to $2,000 if they report eligible pension, superannuation or annuity payments on their tax return.
    • Disability amount — If clients, their spouses or common-law partners or dependents have severe and prolonged impairments in physical or mental functions and meet certain conditions, they may be eligible for the disability tax credit (DTC). To determine eligibility, they must complete Form T2201, Disability Tax Credit Certificate and have it certified by a medical practitioner. Canadians claiming the credit can file online whether they have submitted the form to the CRA for that tax year or not.
    • Family caregiver amount — Those caring for a dependant with an impairment in physical or mental functions may be able to claim up to $2,121 when calculating certain non-refundable tax credits.
  • Public transit amount — Clients may be able to claim the cost of monthly or annual public transit passes for travel within Canada on public transit in 2016.
Originally published on

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2016 Year End Tax Considerations


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New Rules for Principal Residence Exemption


In part one of a three-part series about year-end tax planning, Jamie Golombek, managing director of tax and estate planning with CIBC Wealth Strategies Group, explains how the changes to the principal residence exemption will affect every Canadian. Click here to register for Golombek’s 2016 Year-end Tax Planning webinar.

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Financial Information


General Financial Information and Financial Literacy Resources:

The website, “Get Smarter about Money”, is operated by the Investor Education Fund – a non-profit organization founded by the Ontario Securities Commission – that provides unbiased and independent financial tools to help consumers improve their financial literacy.  Click on the link below to access the information:

The British Columbia Securities Commission also offers consumers online resources and tools to research and assess potential investments and protect themselves from unsuitable or fraudulent investments.  See more at:  This website offers consumer information in English, Punjabi, and Chinese.

The Financial Consumer Agency of Canada (FCAC) has an online financial literacy self-assessment quiz to help you determine how well you keep track of market trends, plan to make ends meet, set goals, and choose the right products and services. Find out how your money management skills measure up.

The FCAC also has a database of seminars, workshops, and interactive tools to help you strengthen your financial literacy. There are listings from all across Canada, so you canyou access information close to your community.

The Ontario Securities Commission (OSC) has an Investor Office page that provides consumers with information to help them understand the investment world and make intelligent investing decisions.

The Financial Services Commission of Ontario (FSCO) offers a series of videos focused on helping Ontarians understand retirement planning. The video series, “A Guide to Retirement Planning” outlines strategies for retirement planning in easy-to-understand terms.

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Little Black Book of Scams


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“In Denial, Regarding Bank Sold Insurance”


CBC Marketplace – In Denial – Mortgage Insurance Canada – Part 1

CBC Marketplace – In Denial – Mortgage Insurance Canada – Part 2

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Registered Education Savings Plans:


How RESPs work

A Registered Education Savings Plan (RESP) is a dedicated savings plan to help you save for a child’s education after high school.

Most RESPs are opened for children, but you can open an RESP for yourself or another adult. The person who opens the plan is called the subscriber.

When your child enrols in post-secondary education, they can start taking payments, called educational assistance payments (EAPs) from their RESP. EAPs are made up of the investment earnings and government grant money in the RESP. The person who is named to receive EAPs under the plan is called the beneficiary.

7 things to know about RESPs

  1. Your savings grow tax free. There is no tax on the investment earnings, as long as they stay in the plan.
  2. If you save for a child age 17 and under, the federal government also puts money into the RESP as a grant or bond. In some provinces, the provincial government may contribute too.
  3. You can usually put money in whenever you want, up to a lifetime maximum of $50,000 per child. But some plans require set monthly or annual contributions.
  4. The contributions are not tax deductible. But you can withdraw them tax free from the plan at any time for any reason.
  5. There is a wide range of investment options available for RESPs. Examples: stocks, bonds, mutual funds, GICs. Some plans let you decide how to invest your savings. Others invest your money for you.
  6. Your child can take money out of the RESP when they enrol in university or college or another qualifying education program or specified education program.
  7. An RESP can stay open for up to 36 years. Under specified plan rules, the plan can stay open for up to 40 years for beneficiaries eligible for the disability tax credit.

6 reasons to open an RESP

1. Government grants

The federal government adds to your RESP savings each year through the Canada Education Savings Grant. Lower-income families may also qualify for the Canada Learning Bond.

2. RESP savings grow tax free

You don’t pay tax on any investment earnings as long as they stay in the RESP. That means your savings can grow faster.

3. EAPs are taxable in the hands of the student

When your child enrols in post-secondary education, they can start taking payments, called educational assistance payments (EAPs), from their RESP. EAPs are made up of the investment earnings and government grant money in the RESP. Tax on EAPs is payable in the hands of your child — not you. Since students tend to have little or no income, they likely won’t have to pay much tax on the payments. Contributions can be withdrawn by you or by the student tax-free.

4. A variety of investment options

You can choose investments that best suit your investment objectives, risk tolerance, and time horizon. Different providers offer different investment options. Examples: stocks, bonds, mutual funds, GICs.

5. Friends and family can contribute

Anyone can set up an individual RESP for your child – not just you. Your child’s RESP can grow more quickly with contributions from friends and family. Consider encouraging monetary gifts on special occasions to contribute to your child’s RESP.

6. RESP accounts can stay open for 36 years

If your child chooses to defer their education plans after high school, they can still use the RESP money when they are ready to go back to school. But check the rules of your RESP to make sure there are no restrictions on waiting to continue their education. Under specified plan rules, RESP accounts for beneficiaries eligible for the disability tax credit can stay open for up to 40 years.