Bryan Sommer , CPA , CA , CFP , CIM Portfolio Manager
CIBC WOOD GUNDY
Contrary to statements made by the government and the Department of Finance during the consultation process in July and September 2017 , there are no rules in place to grandfather the earnings of passive investments held by a private company before the proposed change in tax law takes effect . Aside from the exemption of the first $ 50,000 of AAII , which by the government ’ s own admission equates to earnings on $ 1 million of passive investments , there is no recognition of or accommodation for the fact that private company owners need to accumulate investments in their companies as a safety net for economic slowdowns and as pension for when they retire . 18 The government said it expects that 3 % of companies currently claiming the SDB would be affected by the proposed tax rules . 19 If that is indeed the case , it seems like the government is using a sledgehammer to swat a fly .
18
Although the owner of a company can participate in a Registered Pension Plan ( RPP ) as defined in Regulation 8515 of the ITA — otherwise known as an Individual Pension Plan — the retirement benefits available under such an RPP are less than the benefits available to an employee , and are far less than the amount available to an employee of the federal government .
19
Department of Finance Canada , Tax Measures : Supplementary Information , February 27 , 2018 . ( budget . gc . ca / 2018 / docs / tm-mf / si-rs-en . html # Toc507170859 )
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Bryan Sommer , CPA , CA , CFP , CIM Portfolio Manager
604 535-3722 bryan . sommer @ cibc . ca www . bryansommer . com
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