Advanced Tax Planning

January 19, 2015 Uncategorised

icon-returnOne of the best asset accumulation strategies is to safely reduce taxes.

Wealthy families make up 1% of tax payers, yet pay 25% of total income tax paid. This is only going to get worse as government tax revenues decrease and expenditures increase.

They pay more than their fair share of taxes because of a lack of knowledge of advanced tax planning strategies. They are not tax experts.

The source of the largest loss of net worth is the lost opportunity associated with paying too much income tax. Typically, this is a non-recoverable expense – or is it?

ICON is associated with a network of leading edge tax experts who are current with the various changes and amendments constantly taking place to the Tax Act. These experts are the technical resources who design tax efficient transactions that decrease the dependency on achieving high rates of return.

We are proud of the fact that none of our clients have ever had one of our tax strategies declined.

Every tax dollar saved is a 100% return to the investor.

ICON has safe and proven tax strategies that are considered to be at the leading edge which can help you reduce your taxes right now.

The Canada Revenue Agency (CRA) is taking a harder stand with regard to tax payers’ rights as it relates to the deductibility of certain expenses and structures used to reduce personal taxes. Even structures that have been approved in the past are now being more closely scrutinized by CRA and in some cases, deductions which had been deemed acceptable in the past, are now being disallowed or severely modified.

Even though the environment has tightened, there are still tax deferral transactions that are permitted, lessening the lost opportunity cost of paying income tax.

Corporate Tax Planning

The small business tax rate for 2015 is 15.5% on the first $500,000 of corporate income. Once the tax is paid on this income, the remaining after tax asset is now classified as a “retained earning”. Retained earnings are typically rolled back into the business to fund growth or in the cases where the assets are not required to fund growth; the assets are invested in various portfolios. Income from these portfolios is taxed as if the income was generated personally at the individual’s highest tax bracket.

When a small business earns income greater than $500,000, the owner needs to obtain advice as to the most tax efficient way to record the income, i.e. should the income be left in the company, paid as a dividend or salary, or accessed through a family trust.

Retained earnings can be removed to fund tax-free retirement income through a tax conduit. In situations where the retained earnings are not required to fund retirement, a transaction can be implemented whereby corporate assets flow tax-free to a personal estate – or, you can both arrange for retirement income and have corporate assets flow tax-free to a personal estate.

Personal Tax Planning

Despite the CRA’s efforts to restrict opportunities for individuals to reduce personal taxes, there are sophisticated ways to legally minimize your income taxes. However, these tax structures require a knowledgeable advisory team that can identify these unique opportunities that minimize the individual’s personal taxes.

These opportunities need to be effected prior to them becoming mainstream because the CRA often introduces policy changes to dilute the efficiency of such transactions.

Typically, these policy changes have not affected the tax deductibility of pre-existing structures that are in place prior to the CRA’s policy changes take effect (grandfathering).