Canadian Tax Test Results :CRA SOTW
Alan Baggett
Failing grade on the Canadian Tax Test
Average taxpayer scored only three out of 10 when asked about common
personal taxation rules, but the company that conducted the survey
says that is because of the complex changes made to the system
recently
SARAH DOUGHERTY, Freelance
When it comes to knowing about tax rules that could save them money,
Canadians aren't making the grade.
That's the conclusion of the Great Canadian Tax Test, a recent survey
commissioned by mutual fund company Mackenzie Financial. The average
Canadian got only three of 10 answers right on the survey of common
personal taxation rules.
But the failing grade doesn't mean Canadians aren't knowledgeable,
said Mackenzie spokesperson Sandy Cardy. Rather, the results signal
just how difficult it is to keep up with a changing and complicated
tax code.
"Even a genius can't keep up with the number of changes," says
Mackenzie Financial's Sandy Cardy.
“I think Canadians are becoming increasingly sophisticated and tax
savvy, but they can't keep up with the changes," said Cardy, senior
vice-president of tax and estate planning for Mackenzie. "The results
show even a genius can't keep up with the number of changes and the
complexity."
This was the second tax test conducted by Mackenzie, whose core
business is mutual fund management. The company also offers wealth
management services.
Mackenzie runs the tax test as part of the education it provides for
both independent financial advisers and those that sell its products,
according to Cardy.
On the last test two years ago, the average Canadian turned in a
better performance, correctly answering six out of 10 true-or-false
questions.
Cardy chalked up the score slippage in the test done this fall to the
introduction of a number of tax changes in 2007. These include the
right to contribute to an RRSP up to age 71 instead of 69 and the
abolition of an annual contribution limit for RESPs.
Other questions on the test dealt with income splitting, the carry
back of net capital losses, gifts of publicly listed stock, tax
credits for children involved in qualified physical activities and
capital gains on non-registered investments.
Cardy declined to speculate why there were regional variations in the
scores - Quebecers scored the lowest, Manitobans and Saskatchewan
residents the highest - other than pointing out one of the questions
dealt with a rule not applicable in Quebec. (The other rules in the
test apply across the country.)
Cardy thinks it's more difficult than ever for individuals to do their
own tax planning. "A few decades ago, it was easier to go it alone and
maximize your credits and deductions," she said.
In recent years, governments have responded to lobby groups by
adopting a slew of new rules, according to Cardy. Seniors, for
example, are benefiting from new income splitting provisions. Income
splitting allows one partner in a couple to allocate income to the
other partner to reduce taxes.
Canadians are pretty knowledgeable about RRSPs, said Cardy, but tend
to miss out on credits and deductions, income splitting possibilities
and education planning strategies.
Plain old procrastination accounts for part of Canadians' failure to
be more proactive about tax planning, Cardy said. Information overload
is also part of the problem; between the Internet, self-help books and
business news on television, taxpayers are swamped with advice.
Personal finance Average taxpayer scored only three out of 10 when
asked about common personal taxation rules, but the company that
conducted the survey says that is because of the complex changes made
to the system recently
Cardy's bit of advice is to hire a financial adviser, who can act as a
quarterback, bringing in other experts (for example, insurance
specialists and estate lawyers) as needed.
Patricia Lovett-Reid agrees complexity is one reason Canadians neglect
tax planning. She also thinks lack of time is a big factor. Lovett-
Reid is a senior vice-president with financial services firm TD
Waterhouse Canada Inc., a business television host and certified
financial planner.
"Tax planning is about doing a lot of little things right," Lovett-
Reid said in a phone interview from her Toronto office.
“When people are looking to put more money in their pocket, they think
about spending less," she said. "Tax planning falls to the bottom of
the list."
When Lovett-Reid hits the road to talk about tax planning and
investment strategies, she sums up the priorities with a series of
tips. Here is her list:
- Split income with family members.
- Maximize contributions to your RRSP and any RESPs for a child's
education.
- Borrow to invest.
- Where possible, buy and hold investments to defer taxes.
- Invest in a home instead of making someone else rich by renting.
- Use dividend-paying investments, which are tax advantaged.
- Maximize tax deductions and employee benefits. The latter might
include preferential mortgage rates and reimbursement for travel and
meals.
- If you can earn self-employment income, it opens up doors to lots of
deductions.
Aside from working with a financial planner, Lovett-Reid recommends a
book published annually by the tax and advisory firm KPMG called Tax
Planning for You and Your Family, which is available in book stores.
Canadians might not see the immediate, tangible benefits of hiring a
professional to help with tax planning, but the investment pays off in
spades, Cardy said. "If they were to take advantage of all (the
rules), it would have a dramatic influence on their future net worth."
© The Gazette (Montreal) 2007
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Alan Baggett – Tax Collector’s Bible
Peeassha
"Alan Baggett" <AlanB...@volcanomail.com> wrote in message
news:18b6bc34-ae6a-4714...@g39g2000pri.googlegroups.com...
SARAH DOUGHERTY, Freelance
© The Gazette (Montreal) 2007
You can't split income with family members unless they're 18 or older or the
attribution rule will apply.
Canuck57
"Peeassha" <peaa...@hotmail.com> wrote in message
news:gjvp5v$r2c$1...@reader.motzarella.org...
>
> You can't split income with family members unless they're 18 or older or
> the attribution rule will apply.
I thought you had to be retired?
Be interested to hear how a wage earner can split earned income with his
wife. As far as I know, can't be done.
Alan Baggett
> "Peeassha" <peaash...@hotmail.com> wrote in message
>
> news:gjvp5v$r2c$1...@reader.motzarella.org...
>
>
>
>
>
>
>
> > "Alan Baggett" <AlanBagg...@volcanomail.com> wrote in message
> > Miss a Tax Tale Miss a lot!
> > Pop the link below into your browser to view the entire CRA SOTW
> > Library!
> >http://canada.revenue.agency.angelfire.com
> > Alan Baggett - Tax Collector's Bible
>
> > You can't split income with family members unless they're 18 or older or
> > the attribution rule will apply.
>
> I thought you had to be retired?
>
> Be interested to hear how a wage earner can split earned income with his
>
> - Show quoted text -
Where the article states:
' - Split income with family members.'
It was assumed that they were speaking of non-employment income.
i.e. if a husband and wife have a joint savings account that earns
interest income, they could attribute that income in a manner that
benefits the pair best.