IFRS / ASPE and Banking Covenants

Posted on July 19, 2011 by Sanjeev Kamra

Do you have banking covenants, if so, are you aware of the impact the new accounting standards for private enterprise will have on those banking covenants? If not, now is the time to start thinking about it and have discussions with your bank and your assurance provider.
On January 1, 2011, all for profit enterprises, that are not public, were required to adopt either International Financial Reporting Standards (“IFRS”) or Accounting Standards for Private Enterprise (“ASPE”). The majority of organizations have likely chosen to adopt ASPE because it allows some of the same accounting policy choices they may have used under differential reporting.

However, when you were making this choice did you review your banking agreement? If not, now is a good time to review how the agreement defines “Generally Accepted Accounting Principles”. If it is unclear, I would recommend a call to the bank to clarify that ASPE meets their requirements.

It is important to understand that the adoption of ASPE will mean some changes to your accounting policies and the presentation of your financial statements which in turn, could impact the calculation of typical covenant ratios such as your “Current Ratio” or “Debt to Tangible Net Worth”.

Also consider that upon transition, ASPE allows a company a one-time opportunity to make certain accounting policy choices. For example, you can choose to account for income taxes by using either the future income tax method or the taxes payable method. Since the choices you make will impact the calculation of your covenants, I recommend that once you have made your accounting policy choices, you have an upfront discussion with the bank regarding the impact on your financial statements.

If you are required to report your covenants to the bank on a quarterly basis, the impact of these choices/changes need to be discussed now. If you report your covenants annually, the summer presents an excellent time to work with your assurance provider to understand ASPE and make progress on your transition plan.
For more info on your Toronto area Accountant or other business / financial services needs, call 905-216-2445, click info@vnaccountingsolutions.com or visit www.vnaccountingsolutions.com.

Definitions and useful information for charities in Canada

Posted on June 28, 2011 by Sanjeev Kamra

Disbursement quota:
The Income Tax Act requires that registered charities expend a prescribed amount annually on charitable activities or gifts to “qualified donees”. This amount is referred to as an annual disbursement quota and is based on the charity’s receipted donations and investment assets.

Gifts in Kind:
Any non-cash gift such as a gift of shares or real property.

Requirements for Official Tax Receipts:
Subsection 230(2) of the Income Tax Act requires a registered charity must keep a duplicate copy (which should clearly be marked as a copy) of each Receipt it issues. Tax Receipts must contain the following information:

A statement that it is an Official Receipt for Income Tax Purposes.
The Charity’s name and address in Canada as recorded with Charities Directorate.
The Charity’s business number assigned by Charities Directorate
The place or locale where the Receipt was issued.
The name and address of the donor.
The amount received and the eligible amount of the gift – This could differ if, for example, you receive $100 which includes the purchase of a ticket to a fundraising dinner for which the value of the dinner is $30. The amount received would be $100 and the eligible amount would be $70.
The signature of “a responsible individual” who has been authorized by the organization to acknowledge donations
The Receipt must show both the date on which the Receipt was issued and the date on which the donation was received. However, if a donor makes If the a series of cash donations during the year, it is acceptable to simply show the year in which the cash donations were received and only issue one Official Receipt after all of the donations have been received for the year.
Where the donation is a gift of property other than cash, the Receipt must show the actual day on which the property was received (not simply the year in which it was received) and must contain a brief description of the property. The Receipt must show the amount that is the fair market value of the property at the time that the gift was made. If the donated property has been appraised, the Receipt must also show the name and address of the appraiser.
the receipt must also show Canada Revenue Agency’s website address.
Qualified Donees:
Canadian charities that wish to make outright grants to other organizations may only make such grants to organizations that are “qualified donees”. A term defined under the Income Tax Act as:
Registered charities
Registered Canadian amateur athletic associations (RCAAA)
Registered national arts service organizations
Housing corporations resident in Canada constituted exclusively to provide low-cost housing for the aged
The United Nations and its agencies
Universities outside Canada listed in Schedule VIII of the Income Tax Regulations
Charitable organizations outside Canada to which Her Majesty in right of Canada (the federal government or its agents) has made a gift during the charity’s fiscal period or in the 12 months immediately preceding the period
Municipalities in Canada
Her Majesty in right of Canada or in right of a province (that is, the federal government, a provincial government, or their agents).

Registered Charities in Canada:
A registered charity will be designated by Canada Revenue Agency either as a charitable organization, a public foundation or a private foundation, dependent upon its structure, its source of funding and its activities.

Charitable organization:
A charitable organization primarily carries on its own charitable activities. Fewer than 50% of the charity’s directors can be related persons. As well, at least 50% of the funds the charity receives must come from unrelated donors.

Private foundation:
The primary purpose of a private foundation is to make gifts to organizations that are “qualified donees”. A registered charity is designated as a private foundation if 50% or more of its directors are related persons, and/or if more than 50% of its funding comes from related persons.

Public foundation:
The primary purpose of a public foundation is usually to make grants to other organizations that are qualified donees although some public foundations may also undertake some of their own activities provided that they have received permission to do so from Canada Revenue Agency. Fewer than 50% of the charity’s directors may be related, and less than 50% of its funding may come from donors who are related.

Note: Charities located in Ontario are further restricted by provincial laws to making grants to only charitable organizations.

Non-profit:
I am including this definition to clear up a common misconception. It is wrong to refer to a registered charity in Canada as a non-profit. A non-profit is defined in Section 149 (l) of the Income Tax Act as:

“a club, society or association that, in the opinion of the Minister, was not a charity within the meaning assigned by subsection 149.1(1) and that was organized and operated exclusively for social welfare, civic improvement, pleasure or recreation or for any other purpose except profit…”

Non-profits are exempt from paying income tax under most circumstances but they do not have the right to issue official tax receipts. Regardless of their tax exempt status, Canadian non-profits must file a Corporate T2 Return annually and in certain cases, a T1044 Non-Profit Information Return.

Retention of Records:
Canada Revenue Agency requires that a charity must retain certain records as follows:

Duplicate donation receipts, with the exception of receipts issued for donations subject to a ten year direction, must be held for a period of two years from the end of the calendar year in which the donations were made. Donation receipts for gifts made subject to a ten year direction (a direction that the gift be held for a minimum of ten years) must be held for as long as the charity remains registered and for two years after its registration is revoked.

All other books, records and their related accounts and source documents must be kept for a minimum of six years from the end of the last fiscal year to which they relate. Where a charity loses its registration, books and records must be retained for two years after the date the registration is revoked.

Why should you buy Critical Illness Insurance

Posted on June 1, 2011 by Sanjeev Kamra

Thanks to advances in medical science and a growing trend toward fitness and health awareness, more and more people are surviving illnesses which would have proved fatal in the past. In 2000, the life expectancy for a 65-year-old male in Canada was another 16 years. By 2025, a man the same age is expected to live another 18 years. Similarly, a 65-year old female can expect to live another 20 years and, by 2025, 21 years.

This means a great many people are going to be retired longer than they actually worked and that many of them are going to get pretty sick during that period – all of which points to the growing need for products like critical illness coverage.

Unlike life insurance that supports your family after you’re gone, or disability insurance that replaces some or all of your income if you’re unable to work, CI insurance is designed to protect against the costs of expensive medical or custodial care resulting from a significant illness.

Canadians are at risk:

Studies conducted by Statistics Canada, the Canadian Cancer Society and the Heart and Stroke Foundation suggest that one in three Canadians will develop cancer during their lifetime and that one in four is likely to have a heart condition, a blood vessel disease or a stroke-related illness.

If this concerns you, the key to determining what you’ll likely need is to calculate the potential costs of future care, factoring in the length of time that it’s likely to be used, the amount of government support available – which varies sharply from province to province – and the money you’ll have on hand. Keep in mind that the more comprehensive the coverage, the more expensive it tends to be.

Coverage limits:

Like most insurance, premiums are determined by your gender, age, whether or not you smoke, and your personal health history. A family tendency toward a hereditary disease like cancer, for instance, could limit your coverage – which can’t be purchased for a pre-existing illness.

Once you qualify, you get a cheque (it’s paid out as a tax-free lump sum, generally 30 days after diagnosis) to pay for private or alternative medical treatment, reduce debts, renovate your home to accommodate a lifestyle change, cover the costs of child care while you’re on the mend, or to keep your business running.

Depending on the coverage you choose, critical illness insurance can cover cancer, heart attack, stroke, paralysis, diabetes, multiple sclerosis, Alzheimer’s, and many other ailments. Not all plans cover cancer, heart disease and stroke equally, so read the fine print carefully.

Although often seen as a personal coverage issue, critical illness policies can also, to varying degrees, be used in business settings. If you’re self-employed, or are an important cog in the wheel at work, CI coverage may make sense here too.

Key shareholder coverage:

Key person life insurance is frequently put in place because the death of a key employee or shareholder would result in a variety of financial difficulties for the business. But similar problems can arise if a key employee becomes critically ill, particularly if the illness prevents the employee from returning to work for an extended period, or perhaps permanently. Banks may require the collateral assignment of insurance on the life of a key shareholder to secure business loans. Losing a key employee could also impact the firm’s ability to manage business loans, restricting the purchasing shareholder’s earning power, thereby limiting his or her ability to repay the amounts owed.

Shareholder agreements typically provide for the purchase and sale of shares on a shareholder’s death or disability and this could also include critical illness. There’s some question whether critical illness is always an appropriate ‘triggering event’ in a shareholder agreement, so be sure to review this aspect.

For example, a shareholder might have a mild heart attack, or incur a treatable form of cancer, and still have a full recovery. In this instance, critical illness benefits might be paid without triggering a sale of shares since the individual may be able to continue working. On the other hand, there’ll be circumstances where the onset of a critical illness might trigger a desire to sell out and the coverage could provide significant financial help. For more info call 905-216-2445, click info@vnaccountingsolutions.com or visit www.vnaccountingsolutions.com

Where to Invest; RRSP or TFSA?

Posted on May 23, 2011 by Sanjeev Kamra

You have limited funds and you’re wondering whether it’s better to put them in your Registered Retirement Savings Plan (RRSP) or in Tax-free Savings Plan (TFSA) eligible investments.

That depends on two factors:

1. How frequently the funds will be removed from and re-contributed to either investments within an RRSP or TFSA in the years leading up to your retirement.

If you are going to need the funds prior to retirement and intend to re-contribute them at a later date, a TFSA may be the better option because you can make withdrawals at any time and the contribution room is restored; but when you make RRSP withdrawals, you lose that contribution room.

2. What your marginal tax rate is today and what your marginal tax rate will be when you finally remove the funds:

Generally, if your marginal tax rate is lower at the time the funds are removed from your registered plan at retirement, the RRSP option will usually produce a better result – but that is only true if your marginal tax rate actually is lower.

Your marginal tax rate can be influenced by income-tested benefits including the Age Credit, Old Age Security (OAS), the Guaranteed Income Supplement (GIS) and the GST Credit. Because they are income-tested benefits, they are reduced or clawed-back as your income increases, ultimately disappearing entirely at an upper threshold that is different for each of the benefits. If the funds you remove from your RRSP after age 65 increase your taxable income and result in the loss of some or all of your income-tested benefits, you will have effectively – and perhaps substantially – reduced your income and increased the tax you pay. And you would have cancelled out some or all of the value of your RRSP withdrawal.

There is no doubt that RRSPs and TFSAs play key roles in financial and retirement planning and there are strategies – like income-splitting – that you can use to reduce your taxable income and avoid claw backs. A professional advisor can help you decide what’s best for your situation. For more info call 905-216-2445 click info@vnaccountingsolutions.com or visit www.vnaccountingsolutions.com

How to protect yourself from identity theft

Posted on May 9, 2011 by Sanjeev Kamra

“Phishing” is a term used for unsolicited email messages from allegedly legitimate companies that trick innocent victims into divulging personal information. This scam is known as “phishing” .

Legitimate financial institutions would never ask you to respond via email to any requests for confidential, private, or personal information such as your password, your customer card number, or your login information. In truth, you should never, ever send personal identification numbers or confidential information of any kind by email, since it is not a secure method of contact.

So, how do you spot a scam? These phishing emails often urge you to click on a link or attachment for any of the following reasons:

To change or update your personal information
To invite you to enter a contest
To warn of possible suspension of your client card or account
To invite you to apply for products

After clicking on an attachment or link from an unsolicited email, the user is usually taken to a phony site that requests confidential information, which could include any of the following:

Bankcard numbers or user IDs
Account numbers
Personal identification numbers (PINs)
Credit card numbers
Social insurance numbers (SINs)
Any other personal or private information
Passwords

These scams are designed most often to impersonate the look and feel of an authentic site. They contain a web address with the “@” symbol or a numeric address (e.g., 123.456.7.8). The address may also include the word, phrase, or text of a company name (e.g., “XYZ”) to make it appear genuine.

How do you protect yourself:

You can help protect yourself quite easily from email fraud and sites that request your personal or banking information if you remember these simple rules:

If you encounter a suspicious-looking unsolicited email that appears to be from a bank or other financial institution, do not reply or click on the link. Instead, contact the institution immediately and report the attempted fraud.
Review all your financial statements on a regular basis to check for any unauthorized or suspicious transactions. Never send personal or financial information to anyone by email.
Do not immediately assume that an email has come from a legitimate source, just because the “from” line logo, or image appears to be legitimate. They can easily be forged with the kind of graphics technology available today.
You should always be suspicious of email attachments from unknown sources. If you do not know or recognize the sender of an email, do not open any attachments, regardless of the circumstances.
Never click on links in email messages from unknown sources. A link in a phishing email will take you to a bogus website that has been designed to look real. If you want to log in to your bank’s online services, type the URL into the address/location window on your web browser; or save a link in your favourites list and go from there.
Don’t ever trust offers of money or threats of legal action. Also, do not be fooled by warnings about “security compromises” or “security threats.” Swindlers and charlatans will often make such claims in an attempt to frighten people into disclosing personal information to resolve the alleged threat.
When you receive emails, you should run your anti-virus software to ensure they don’t contain any viruses.
If you think you may have received a counterfeit email or disclosed any confidential information, or if you have any other security concerns, call your bank or financial institution for advice on what steps you should take.

By taking all the precautions given above, you should be able to safely avoid falling into the hands of the multitude of phishing email scam artists who are constantly on the prowl. For more info call 905-216-2445, click info@vnaccountingsolutions.com or visit www.vnaccountingsolutions.com

Lifelong Learning Plan

Posted on May 7, 2011 by Sanjeev Kamra

The Lifelong Learning Plan (LLP) allows you to withdraw amounts from RRSPs to finance training or education for you or your spouse or common-law partner. You cannot use the RRSP funds to finance your children’s training or education, or the training or education of your spouse or common-law partner’s children.

Who can participate in the Lifelong Learning Plan?

To participate in the LLP, all of the following conditions must apply:

The student (RRSP owner) must be either the LLP participant or be the spouse or common-law partner of the RRSP owner.

You must own an RRSP
The student must be a full-time student (or a part-time student if he or she meets the disability conditions).
You (the RRSP owner) have to be a resident of Canada.
The student has to enroll in a qualifying educational program at a designated educational institution.
The participation in the Lifelong Learning Plan (LLP) has to be done before the end of the year the student reaches the age of 71 years old.

You are responsible for making sure that all LLP conditions are met. If a condition is not met while you are participating in the plan, your RRSP withdrawal will not be considered eligible. You will have to include the RRSP withdrawal as income on your income tax return for the year you received the funds.

If you meet the conditions for participating in the LLP when you make a withdrawal from your RRSP, you can do the following:

Participate in the plan as many times as you wish over your lifetime. Starting the year after you bring your LLP balance to zero, you can participate in the plan.
Participate in the LLP at the same time as your spouse or common-law partner. You can use the LLP for either or both of you.
Participate in the LLP even if you have withdrawn amounts from your RRSP under the Home Buyers’ Plan (HBP) that have not been fully repaid.

For more info call 905-216-2445, click info@vnaccountingsolutions.com or visit www.vnaccountingsolutions.com

Investments and Taxes

Posted on April 5, 2011 by Sanjeev Kamra

There are different kinds of investment income—and different tax rules for each. While designing an investment strategy outside a registered plan, you should take into consideration the kind of income you’ll earn.

Investment income breaks down into four basic categories:

Dividends:

Dividends are basically a payout of a company’s profits to its shareholders. Dividends paid by Canadian companies are eligible for the Dividend Tax Credit and receive preferential tax treatment.

With mutual funds, Canadian dividends earned by the fund are distributed to the fund’s unit holders and they enjoy the same tax advantages as dividends paid directly to the company’s shareholders.

Capital Gains:

Anytime you sell a capital asset whose price has increased from its average adjusted cost basis per unit, you generate a capital gain. Capital assets include things such as stocks, real estate and mutual funds.

If you own equity mutual funds, you may find that they generate capital gains every year, even if you don’t sell your units. Activity within the fund may require that a capital gains distribution be made.

Regardless of how you earn it, a capital gain receives tax-favoured treatment, as only fifty per cent of the net annual gain are added to your income and taxed.

Interest:

Interest income is simply added to your income and taxed at your marginal tax rate. Within your mutual fund portfolio, your fixed-income funds are most likely to pay interest.

Because there are no tax breaks on interest income, you may want to minimize the interest-earning investments you have outside your tax-sheltered registered plan.

As you approach retirement, there are other investment options that can help you generate a tax efficient cash flow.

Return of Capital:

A return of capital is not considered income since it is merely a return of your original investment. It is tax efficient because it allows you to receive a cash distribution without triggering a capital gain. While the return of capital portion reduces taxes payable on the distributions, it reduces your cost base which will result in increased capital gains on the eventual disposition of the units.

Your investment decisions should be based on your risk tolerance and financial goals, not income tax goals alone. But you can make sure you take the tax treatment of your investments into consideration and take advantage of that knowledge, for example, by holding interest-earning investments inside your registered plan.

For more info call 905-216-2445, or click info@vnaccountingsolutions.com or visit www.vnaccountingsolutions.com

Divorce and Separation: Tax Implications

Posted on March 25, 2011 by Sanjeev Kamra

Divorce and separation can be very expensive, and tax implications are probably last thing on your mind. However, there are tax savings opportunities that can save you money while going through this often painful process.

Splitting up assets:

You should consider the tax cost of family assets when splitting them up upon separation or divorce.

Assume that the husband has $350,000 of RRSPs and $150,000 of non-registered investments. The husband and the wife jointly own the family home which has a fair market value of $500,000.

· In this example, it would be wise for the wife to claim for the family home because the principal residence exemption would dictate that if the home were sold, the wife would receive the sale proceeds of $500,000 tax-free.

If the husband were to keep the RRSPs and the non-registered investments, he’s short-changed. This is because when the RRSPs are cashed in, the whole amount would be included in the husband’s income. Additionally, upon the sale of the non-registered investments, capital gains tax would arise.

Therefore, when you are splitting up family assets it is very important to look at the after-tax cost of those assets.

Do not cash in RRSPs when splitting family assets:

There is a special rule in the Income Tax Act that allows one spouse to transfer his/her RRSP to the other spouse upon separation or divorce. This is very helpful if you have to make an equalization payment to your spouse.

If you did not take advantage of this special tax rule, then you may end up having to cash in your RRSPs, which would be included in your income, in order to make an equalization payment to your spouse.

Update the Canada Revenue Agency on your status:

Make sure to update the CRA on your single status after you have been separated or divorced. The reason being is that the amount of Canada Child Tax Benefit that you receive for your children is based on family income, i.e. the combined income of you and your spouse.

If you are separated or divorced, your spouse’s income is taken out of the equation and only your income is factored in to the calculation for the Canada Child Tax Benefit that you are entitled to.

Therefore, it’s likely that you will receive an increased amount of Canada Child Tax Benefit by claiming yourself as single. You can claim single status only 11 months after the month of the divorce or separation.

Split the ownership of multiple properties:

If you and your spouse own two properties (e.g. house and cottage), then consider giving one property to each spouse. The reason being is that each spouse can separately claim the principal residence exemption.

Certain legal fees are tax deductible:

If you have to pay legal fees to your lawyer to collect support payments, then those legal fees are tax deductible on your personal tax return. Legal fees paid to your lawyer to prepare a separation agreement or for disputes going back and forth on the split-up on family assets are not tax deductible.

Claim the eligible dependent tax credit:

If you have more than one child and you and your spouse have joint custody of the children, then consider structuring the separation agreement such that you will be claiming the eligible dependent tax credit for one child and your spouse will be claiming the eligible dependent tax credit for the other child.

For both spouses to claim the eligible dependant tax credit, only one of the two children can receive child support payments.

For more info call 905-216-2445, or click info@vnaccountingsolutions.com or visit www.vnaccountingsolutions.com

Are you Self-employed? You are different when it comes to tax

Posted on March 14, 2011 by Sanjeev Kamra

As a self-employed person, there are key differences in when and how you should pay your taxes – and knowing those differences can bring some significant tax savings. Here is what you

need to know.

Tax deadlines

• Most Canadians must file their personal tax return by April 30 — yours is due on June 15.

Tax owing on the personal tax return must be paid by the April 30 deadline. If the return is not filed by June 15, interest and penalties will apply.

• Generally, if you qualify as ‘self-employed’ for tax purposes, you are required to pay taxes in instalments based on your reported income in the previous taxation year, CRA will send you a notice with the amounts you have to pay. Instalment payments for 2011 are due March 15, June 15, September 15, and December 15. If you don’t pay by the due dates, you may face instalment interest and penalties.

You can pay by selecting one of three methods:

1. The schedule set out in the instalment payment notice you will receive from CRA.

2. Last year’s tax payable.

3. The estimated tax payable for the current year.

Tax tips

You may qualify for these deductions:

• Home office – if you use your home office as your principal place of business, you may be able to claim a portion of your housing costs including rent (if you are a tenant), mortgage interest, property taxes, utilities and home insurance.

• Capital assets – the furniture and equipment acquired for your business can be written off gradually by claiming the capital cost allowance (CCA) each year.

• Business expenses – claim reasonable expenses related to earning your income.

• Harmonized Sales Tax – if you charge these taxes to your clients/customers and remit them to the Canada Revenue Agency, you’re entitled to HST refund on business purchases.

• Health and/or Dental Insurance Premiums – these may be deductible for you and your family and deducting them as a business expense usually delivers a better tax benefit than claiming them as a medical expense. The reimbursement of medical and dental expenses would still be received tax-free!

For more info call 905-216-2445 or click info@vnaccountingsolutions.com or visit http://www.vnaccountingsolutions.com/

Maximize your RRSP today and reap the rewards

Posted on February 23, 2011 by Sanjeev Kamra

Year after year, many Canadians leave a key financial opportunity on the table by not contributing the maximum allowable amount into their Registered Retirement Savings Plan (RRSP). If your annual income tax assessment includes a notice from the Canada Revenue Agency that details how much unused contribution room you have left in your RRSP from previous years, the time to act is now.

For example, investing $10,000 into an RRSP that offers a 7% return, compounded annually could turn into $76,123 over the span of just 30 years. Plus, investing the full amount creates a larger income tax deduction that could result in a significant tax refund.¹

Although it may seem difficult to find the money to contribute into your RRSP every year, we can show you a number of strategies to consider that can help accelerate your plan using assets you have readily available and key tax planning benefits.

Know Your Limits

It’s important to know how much contribution room you have, prior to sitting down with us to discuss your RRSP investment strategy. Each year, the Canada Revenue Agency identifies your unused contribution room for the upcoming tax year on your Notice of Assessment. If however, you are unable to locate your Notice of Assessment, a quick call to the Canada Revenue Agency at 1-800-959-8281 or a visit to www.cra-arc.gc.ca can provide the information you need.

Invest Smart

It may be to your benefit to move money you currently have in savings accounts or other investments into your RRSP sooner, rather than later. Moving these dollars into your RRSP will not only result in a reduction of your annual tax bill – but it also allows you to maximize growth inside your RRSP, without generating immediate taxable income. It’s important to remember that if an investment with an unrealized gain is transferred into a RRSP, the capital gain must be reported in the year of the transfer, but only half of the gain will be included in taxable income. You will also have to report any interest or dividend income earned up to the time the investment is moved into your RRSP.

Invest Regularly

Consider working your RRSP contribution into your budget by using a monthly investment plan that automatically deducts a specified amount from your savings or chequing account on a regular basis and invests it into funds held inside your RRSP.

Monthly investment plans can be customized to work best for you. We will work with you to help determine the appropriate dollar amount and frequency. We generally recommend you begin by investing at least 10% of your earned income each month. However, it may make sense to invest more, if you have unused contribution room.

Consider the Benefits of Borrowing

In many cases, borrowing for a short period to take greater advantage of RRSP contribution room makes sense. Increasing your RRSP contribution now offers immediate tax savings this year and tax-deferred potential growth for many years to come.

Financial advisors can help you determine whether a loan fits into your financial plan by looking at the following factors²:

Your age – The impact of compound growth increases depending on the time that money is invested. While borrowing to invest may have more impact at a younger age, we can show you it’s never too late to save for your retirement.

Your ability to repay – We’ll ensure that you don’t borrow more than you should. Together, we will create just the right plan to make sure you can pay off the balance of your loan quickly and then start a regular investment plan to automatically take care of future RRSP contributions. In addition, contributing to an RRSP generates an income tax deduction that could result in a significant tax refund that could be used to help pay down a significant portion of the loan almost immediately.

Your ability to borrow – An RRSP Loan or Line of Credit, like any other use of credit, will increase your Debt Service Ratio (the percentage of your monthly income that goes to pay off debts) and lenders rely on this ratio to determine your loan eligibility. When preparing your plan, we’ll be sure to take your complete financial picture and other borrowing into account.

Financial Advisors can help you determine the best strategy for your personal RRSP investment plan. For more information call 905-216-2445 or click info@vnaccountingsolutions.com or visit www.vnaccountingsolutions.com

Category Archives: Tax