CIBC Private Wealth Management is urging small business owners to take advantage of the favourable business tax treatment such as dividend sprinkling before the Ottawa government patches the current loopholes.
In an interview with BNN, CIBC managing director of tax and estate planning Jamie Golombek said it would be best for those business owners to capitalize on those dividends before the end of the year.
“Our planning advice for business owners is that if you have a spouse or children that are shareholders, either directly or indirectly of your private corporation, now’s the time you may want to max out those dividends before the end of the year, if they’re in lower tax brackets than you,” he said.
Golombek said this is something Finance Minister Bill Morneau is focussing on, adding that this would be the final year for these business owners to pay dividends as these would be taxable at the highest rate starting next year.
In terms of passive investments, he claimed it would be best to withdraw funds from the private corporation to max out RRSP and TFSA contributions for the year.
“RRSPs and TFSAs may offer benefits beyond those available with corporate investments,” he said.
For instance, he explained that receiving a salary of at least $145,723 by the end of the year will make way for a maximum RRSP contribution of $26,230 next year.
Golombek also noted the changes to the settlement period that gives investors ample time to unload some of the losers in their portfolio.
“We have until December 27. It used to be December 24 to settle before the three-day settlement date, now we have a two-day date. So, we basically have an extra few days to do be able to do that selling in that last week of the year,” he explained.
He furthered, “So if you have actually realized gains, maybe it’s time to look at the portfolio and say well, there’s a loser of two, maybe I’ll sell that, and offset to reduce my tax bill next April,” he said.
In conclusion, he stressed how financial planning should be a year-round task, pointing out that as the end of the year approaches, it pays to review personal finances to capitalize on any tax planning opportunities.