ICCC-CPA workshop on Pension Plans in Evolving Tax Framework

21 Mar 2018 6:00 PM | Mayank Bhatt
ICCC-CPA workshop on Pension Plans  
In Evolving Tax Framework


 Participants at the ICCC-CPA workshop on pension and taxation

The Indo-Canada Chamber of Commerce (ICCC) in association with the Chartered Professionals Accountants (CPA) of Ontario organised a workshop on ‘Individual Pension Plans: A Response to an Evolving Tax Framework for Business Owners’ on March 21, 2018 at the ICCC’s office in Toronto.

Professional financial advisors and business owners eager to understand the tax implications of the new federal tax proposals and planning of pension in the wake of these proposed changes attended the program. Robert Rubino and Suzanne Schultz, both CPAs from the RBC Royal Bank, made the presentations.

Carmen Jacques, Manager, Student Recruitment, CPA Ontario, introduced the speakers and Kanwar Dhanjal, President, ICCC, welcomed the participants to the workshop. Ajay Tandon, VP, Program and Events, was the master of ceremonies for the evening. ICCC directors Naresh Chawda, Pramod Goyal, Abu Becker, Pradyuman Jhala were present at the workshop along with former ICCC Presidents Sanjay Makkar and Dharma Jain.

Rubino is with RBC Dominion Securities as an Investment Advisor. His planning and advice is structured to complement Public Accountants in their pursuit to plan efficiently for Corporate Clients. Suzanne Schultz is the Vice President and Estate Planning Specialist at the RBC Wealth Management Financial Services Ltd.

In her presentation on wealth management strategies in the light of the federal budget, Suzanne Schultz discussed the proposed changes in the tax measures for small businesses. Her presentation touched upon how the Federal Budget proposals may affect passive saving in a corporation, the possible solutions to help business owners save for retirement.

 ICCC President Kanwar Dhanjal  Presenters with the ICCC team
 Dharam Jain, Ajay Tandon, Pramod Goyal, Sanjay Makkar  Sanjay Makkar, Kanwar Dhanjal, Carmen Jacques, Ajay Tandon

She listed the progression of the history of the new proposals which began in the 2015 election platform to target unfair tax advantages afforded business owners and following which the federal government sought consultations with the public in July 2017, which was followed by the December 2017 legislation on income sprinkling. Feb 2018 Passive investment proposal announced (much less onerous than July paper)

She claimed that income in a corporation subject to the small business deduction is taxed at preferential tax rates. If the net income is then used to invest passively, the business owner would have much more to invest than an individual would have.

Starting in 2019, if a corporation earns more than $50,000 in passive income in a year, the small business deduction will begin to be clawed back.  Reduction of $5 for every $1 of passive income above $50,000.  Full claw back once income reaches $150,000.Passive investment income for this purpose will include rents, royalties, interest, portfolio dividends (foreign and Canadian), taxable capital gains.

Income sprinkling rules – the big picture. The December proposals will limit income splitting using private corporation shares in certain cases. Kiddie tax (high tax rates) has applied to dividends paid to minor children for many years now. New Tax on Split income (like kiddie tax) will apply to a related shareholder over age 17 with some exceptions.

In his presentation on Individual Pension Plans, Rubino delineated the different options that both individuals and corporates have of planning pension and managing all aspects of wealth.  He said that planning of pensions should be part of managing all aspects of wealth for both an individual and corporate entities. Individual pension plans could be company sponsored – multiple companies may sponsor a single IPP or a registered plan which complies with pension and fiscal laws and regulations.

Rubino listed the eligibility of the applicants, which included incorporated business owners 37 + years of age, incorporated Professionals who are receiving T4 income, senior executives who are looking to plan for the future. He explained that the reasons to establish the plan could be subject to the new passive income rules, diversify the retirement strategy, significantly increase retirement savings, attain a planned capital accumulation for retirement, corporate tax deduction – retain small business tax rate. Rubino also listed the many advantages of a pension plan, which include the plan being creditor proof, assisting in succession planning, assist in sale of business, retain lifetime capital gains exemption, diversifying the retirement strategy.

 Participants at the workshop

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