quadrantadmin, Author at Quadrant

Does Canada really need an inheritance tax?

A new report published by the Canadian Centre for Policy Alternatives (CCPA) discovered that the 87 richest Canadian families have more collective wealth than everyone in New Brunswick, Prince Edward Island, and Newfoundland combined. This wealth is typically concentrated in the same families, and is passed down among many generations leaving very little room for change. In response, David Macdonald, an economist, has proposed a 45% tax on estates larger than $5 million, similar to other countries, to help reduce the gap. However, in Canada, the addition of this type of tax could result in certain assets being taxed two if not three times.

“Canada is the only country in the Group of 7 advanced economies (G7) without an inheritance, gift or estate tax.”

The surprising secret to funding a successful startup

When beginning a startup business, many entrepreneurs tend to ignore the significance of where their debt financing comes. This can be a costly mistake. Recent research has shown that using a personal loan, in contrast to a business loan, can make you less successful in future endeavors. The study didn’t examine why, but there are a number of possible reasons the type of funding makes a difference and can contribute to better and faster business growth.

Key Takeaways:

Even if they don’t need a loan to survive, startups might benefit from some debt from business loans.
Business loans can benefit startups by building credit ratings to enable them to apply for future loans and negotiatie better loan terms.
On the equity side, previous research indicates business loans help firms raise venture capital and receive higher IPO valuations of their shares when underwritten by their banks.

“These financing details are noteworthy because recent research shows a connection between debt use and venture success. Compared to equity-only firms, startups initially using business loans have higher average revenues and survival rates three years later.”

How to build an education plan for your child

If you want to save and invest in your child or grandchild’s future, you may want to make sure that your money will lead to the best outcome for them. One way is to create an education plan to answer important questions, like what opportunities are there for your child in their chosen area of study? A plan should include the goals of education, which schools are best for reaching these goals, determining what the costs will be and where the funding will come from. This will help ensure your money is well spent.

“Investing in a postsecondary education should involve more than just figuring out how to pay for it – as important as that might be. There are other questions to be answered.”

Calgary becomes first Canadian city to allow businesses to start online

As of July 31st, small businesses in Calgary can get started online, thereby forgoing any brick and mortar transactions. New online applications will allow businesses to get licensing and permits entirely in the virtual world. Director of Calgary Business Services explained that greater efficiency and speed was what Calgary start-ups were after. Calgary is the first Canadian city to make this a reality for its small-business owners, with the possibility of more to follow. In the fall, Calgary also has plans to allow businesses to renew or modify their commercial entities online.

“Business owners can now apply for licences and permits in a single online application, the city said in a news release.”

Here’s what taxes can do to your savings if you’re not careful

Over 65 percent of Canadians are aware of and contribute to a Registered Retirement Savings Plan (RRSP) or a Tax-Free Savings Account (TFSA). Both of these options are ways Canadians can protect their savings from being taxed. But, if you are looking to save some money outside a TFSA or RRSP account, then you need to know your options to minimize taxation on those savings. Investment of income outside of these two accounts typically fall into three taxation categories: capital gains, interest income and eligible dividends income. Each is taxed differently if you choose to invest and save, you should choose which works best for you.

Key Takeaways:

Interest income earned from deposits in savings accounts, guaranteed investment certificates (GICs), or bonds is treated like your regular income from a tax perspective.
Capital gains are incurred when you transfer or sell an investment like a stock, and is taxed at your marginal rate, but only half of the capital gain would be subjected to tax.
Eligible dividends income is paid to shareholders, and the tax rate applied is often lower than that for interest income and higher than that for capital gains.

“If you have any savings sitting outside an RRSP and TFSA, you should be aware of the tax bite. Different types of investments are taxed differently, and this can make a significant difference to your actual investment returns.”

Alberta accounted for 97% of federal income tax decline during recession’s height

It’s going to take quite a while to determine exactly why the Federal income tax revenue fell by about $5 billion in 2016. According to the Globe & Mail high-income earners paid $4.6 billion less in taxes in 2016 despite a higher tax rate. One thing that stood out was that Albertans accounted for 93 percent of the decline among those in the top income brackets. It was a similar in lower tax brackets as well.

Why you need to understand risk and uncertainty when planning for retirement

When retirement planning, you need to consider that it is not a one size fits all plan, and you often have to make adjustments due to risks. Typically, financial planning will take into consideration investment returns, inflation and retiree spending and assumes a lifespan of 90. However, risks are not limited to this list, and can also include jobs, divorce, disability or death. For better retirement planning, it is advisable not to take a set it and forget it attitude and instead review your plan more often and make adjustments along the way.

“The ‘Risk’ of Ignoring Risks in Retirement Financial Planning” may be of interest to retirees, those approaching retirement, and the advisors who advise them both.”

When the CRA’s bullying came back to bite it: Offshore tax audit results in $5 million in damages

The Canada Revenue Agency (CRA) was accused of being overly aggressive in it’s audit and assessment methods of SLT, but the agency itself had to pay up after an off shore audit went wrong and the taxpayers involved sued for damages. Shareholders of a company called SLT were relentlessly assessed over a period of several years only to have the CRA back off when the agency realized the assessments would not lead anywhere. The taxpayers sued and were awarded close to five million for lost interest and legal fees.

“The CRA’s conduct in this matter is troubling. More troubling are the facts that ordinary Canadians without deep pockets are often at the mercy of the CRA and that, had the case been governed by the laws of any other province or territory instead of Quebec civil law, the taxpayers might not have prevailed.”

This retirement advice should be retired

We’ve all been told how much to save for retirement. However, setting such a high goal, especially for those in their 20s or 30s, can leave many people so frustrated by what they’re told to save that they completely give up on savings and investing altogether. Although some guidelines should be followed, it should be reasonable as even saving a little will help. Around your mid-40s to early 50s is the time people should pay attention to saving guidelines to ensure you can retire with the lifestyle you want.

“Savings guidelines can help you see if you’re in good shape or need to save more. Ultimately, though, we need people to save consistently for retirement. “

If you sell real estate, expect the taxman to take a close look in continued CRA crackdown

The CRA has recently announced that the agency plans to be more proactive when it comes to real estate sales. Despite the need to report real estate sales (even on your principal residence which is except from tax), not every Canadian is reporting these sales on their tax returns. Over the last three years, over 30,000 files have been reviewed by CRA auditors who discovered nearly $600 million in additional taxes and resulted in over $43 million in penalties. In particular, pre-construction assignment sales are especially on the agency’s radar. If you plan on selling property, it’s best to report any sales and pay what you owe upfront as you can accumulate massive penalties from non-payment. The agency has and will examine more of these transactions every year.