Business TheReview Wednesday, December 30,1992 — Ag Make sure tax plan also saves time Whether you look at tax plan- ning in general or something spe- cific like a tax shelter, make sure the end justifies the means. “Taxpayers are regularly led into tax plans that don’t justify the time and expense of implementa- tion and administration,” said David Thompson, of Thorsteins- sons, tax lawyers. You must look at the expected benefits but realize that an analysis leading to precise figures usually proves impractical because so many assumptions have to be made. At a continuing legal education seminar, Thompson did look at the case of a lawyer who was consid- ering incorporation and other tax planning strategies. From his 31- page analysis, I’ve drawn just a few points which are of general interest to those with their own businesses, incorporated or other- wise. (Note that a business can include revenue property.) You can save tax through income splitting when other fam- ily members (spouse, children — and possibly other relatives whom you support) are in a lower tax bracket than you. At present, the difference between the lowest tax bracket (taxable income below about $30,000) and the highest tax bracket, which applies to income of more than about $59,000 (ignoring surtaxes), is about 20 percentage points. So if your taxable income is more than $59,000, you should be able to save at least $200 tax for every $1,000 shifted into hands of a family member with taxable income below $30,000. “You can pay a reasonable sal- ary to a spouse to work in your business,” said Thompson. The spouse must actually do the work and should receive about what you'd pay an outsider. “AS a practical matter, Revenue Canada is generally quite lenient as far as payment of relatively modest salaries to spouses,” Thompson said. “However, large salaries are often challenged and excessive Salaries are sometimes penalized. “If Revenue Canada ever suc- cessfully challenges the deductib- ility of a salary to a spouse because of all or part of it is unreasonable, then double taxation arises. “You lose the deduction but your spouse will still be taxed on the salary received.” Salaries can also be paid to children — scrutinized even more closely than spousal salaries by Revenue Canada — and other family members. (The benefit: instead of supporting family with your after-tax dollars, you pay them, claim a deduction and they pay their own expenses.) If you incorporate your business OF practice, a trust may sometimes be used to split income — but get expert advice here. _ “Once the children become independent, incorporation can then be used to shift the emphasis to deferring tax and building up additional funds for retirement,” Thompson said. An active business might pay about 23 per cent tax on its income. If it earns $100,000, it pays $23,000 tax and $77,000 remains in the company to be invested. If an individual pays 40-50 per cent tax on income of $100,000, only $50,000-$60,000 remains to be invested. Once you don’t need all your income for living expenses, con- sider leaving money in the com- pany even if that means putting less money into a registered retire- ment savings plan, Thompson said. ‘Instead of supporting family with your after- tax dollars, you pay them, claim a deduction and they pay their own expenses’ If you pay tax at 50 per cent and take another dollar out of your company to generate an 18-cent RRSP contribution, you pay 50 cents tax on that extra dollar of income — but save only nine cents tax by being able to contribute another 18 cents to your RRSP. Generous contributors to Christmas drive The following people or organiza- tions contributed to the Sidney Lions/Review Christmas Hamper Fund and Sidney and Peninsula Kiw- anis Christmas Toy Drive as of December 21. R. Impett Canora Joint Ventures Helen & Les Morby William & Helen Hunter Vera North W. Todd K. Glover A. Johnson D. Miller Mrs. L. Bradley Mr & Mrs. A. Pearce Mrs. D. Harper Helen Chambers Upper Room Victoria GT. Garnley J. Hewitt A. & P. Niven Mr. N. Armstrong L. Rodewaldt Bob Moss Saanichton School C.A. Johnston Smitty’s Restaurant BJ. Burns M. Longerhorst Liquor Store employees Holy Trinity Church Paulette Vanau Bergh Georgina Sutherland PD. Finrite 2nd N. Saanich Girl Guides 3rd N. Saanich Brownies 6th Tsartlip Beavers 6th Tsartlip Cubs Glen Meadows Ladies Auxiliary Central Saanich Lions Mrs. McGawa R. Garland E-E. Williams Just for Jimmy, Sidney Pre School Patricia Kelling A.D. Gillespie Mr. & Mrs. N. Rhodes Daphne Mitchell Ann Raymond Waddling Dog Inn Pottery Plus Eileen's Exercise Ladies Mrs. |. Wallace Mrs. A. Forder Ron Kubek W. Thomsett T. Reid G. Jensen Mrs. K. Weaver Victoria Flying Club Torque Masters Car Club NRS Properties (Saanichton) Don Stott Safeway Store (Sidney) Oakcrest (Saanichton) Mrs. J. Oldfield P. Brown H. Strumberger Shirley Courser Deep Cove Elementary Keating School Violet Richardson A. McCullock T&S On Parkland School Sidney Kiwanis Senior Citizen Bridge Club Mrs. M.M. Campbell Mrs. C. Deslisle & Family Panorama Leisure Centre Pat McConnell May Peckham A. Rhodes Maryland Group Home J. & B. Caldwell Stelly's School John Anderson Senior Housing L.D. Johnston Mrs. D. Stewart Green Glade School 676 Kitty Hawk Air Cadets St. Paul's United Church J. Bicknell R. Bradshaw NRS Block Bros. — Sidney Wayne Coward John & Susan Lapman Peter & Louis Gardner Brian Carmichal Glen Fraser Mrs. Booth Pacific Forest Products Mrs. Dutoit Saanich North and The Islands Constituency CLIVE TANNER M.L.A. Residents of the Constituency are invited to visit or call their new office at #11 - 9843 Second Sireet (Marina Court, behind the Landmark) Sidney, B.C., V8L 3C7 Telephone: 656-0488 Fax: 655-4906 Open Monday 11 a.m. - 4 p.m. Tuesday - Friday 9 a.m. - 4 p.m. Other times by Appointment Hospital Employees Union Patricia Millard Erica & Roger Harrison Meredith & Erin Latimer So you pay 41 cents tax on that dollar. If you leave the dollar in the company, the company pays only about 23 cents tax. “Income doesn’t accumulate tax-free in a company the way it does in an RRSP,” Thompson said. “But if the company can invest its money in growth- oriented investments which pro- duce little or no income, then the company can have the same tax- deferral advantage as the RRSP.” Mike Grenby is a Vancouver- based columnist and independent financial adviser who works with individuals; he will answer your questions as space allows — write to him clo The Review, 9726-First St, Sidney, B:C., V8L 3C7. Are your sound investments a little too quiet? If you don’t think you‘re making the most of your money, you probably aren't. I can show you how to improve your rate of return and boost your income. D.L. (DEBI RICH 388-4234 388-6275 Investors ; Group : Building futures since 1940. j= + VINYL FLOORING HARDWOOD CARPETS CERAMIC TILE ‘VINYL FLOORING — AREA RUGS CARPETS _CERAMIC(TILE CARPETS _ BLINDS We've got the best lines on blinds. | JIL DIWVYAD —_ SLAdUVD PEE Vertical or horizontal we can line you up with the best blinds in the business. The best quality. The best prices. The best value. Guaranteed. Visit our showroom or call us for a free in-home estimate. UNITED CARPET. 9752 4th ST SIDNEY 655-4858 i= 655-4858 = & OQNIMOOTI ALIVIOAdS ~GOOMGIVH SONYVINV ONIOOM TANIA ONIOOT TANIA SGNIId _ SliddVD D. & G. Latimer TL ote [ PRotel Hand Bannister %& R.J. McDonald coal W. & S. Clark Mrs. |. Starr R. R. Reed Mr. John Bell Mr. & Mrs. Berry N. & B. Arscott e R cava Best Wishes In H. Cadenhead J. McLeod Our apologies if by any chance we 1993 i have missed someone who made a contribution to the Sidney Lions/ ; PET SR GnanieeGnrietnasiMamper The staff and management would like to You have all made this project a large success for through your sup- extend our warmest thanks to all our ort we have put over 450 hampers e nich in turn will make a happier patrons for your support in 1992. Christ for about 3,000 persons. | ° A aan Ralieie the above penioned We wish you all the best in the organizations could openly operate = in a more caring area. coming year! Thank you from us to the people of our area from Elk Lake to Brentwood F Bay to the whole Peninsula. God é bless you all and may your Christ- | be better for what we all have ° ras Pe ished. Andy Andrew, presi. || 2937 Beacon Ave, Sidney — 656-1131 || dent, Sidney Lions/Review Food \— “y Bank. BARRISTERS, SOLICITORS & NOTARIES NICHOLAS W. LOTT CHRISTOPHER S. LOTT R.G. WITT LAPPER D. MAYLAND McKIMM TIMOTHY F. LOTT G. LIANNE MACDONALD GEORGE F. McKIMM — Retired SHEILA STELCK Personal Injury/ Real Estate/ Criminal Law Wills & Estates/ Family Law Commercial & Co. Law/ Municipal Law FIRST 1/ 2 HOUR CONSULTATION FREE 9830 FOURTH ST. GANGES CENTRE BLDG. . SIDNEY, B.C. GANGES, B.C.