Please Note Our Christmas Shutdown
The offices of Ward & Uptigrove will be closed from 3:00 pm on Friday, December 24th and reopening in the New Year on Monday, January 3rd.
On December 14, 2021, the 2021 federal fall economic statement was presented. No changes were announced to personal or corporate income tax rates, but the economic statement did announce the following measures:
To encourage small businesses to invest in better ventilation and air filtration to improve indoor air quality, the Government proposes to introduce a temporary SMAQITC. The tax credit would be available to eligible entities in respect of qualifying expenditures attributable to air quality improvements in qualifying locations incurred between September 1, 2021 and December 31, 2022.
The tax credit would be refundable and have a credit rate of 25% that would apply to an eligible entity’s qualification expenditures. An eligible entity would be limited to a maximum of $10,000 in qualifying expenditures per qualifying location and a maximum of $50,000 across all qualifying locations. The limits on qualifying expenditures would need to be shared among affiliated businesses.
Qualifying expenditures would include expenses directly attributable to the purchase, installation, upgrade, or conversion of mechanical heating, ventilation and air conditioning (HVAC) systems, as well as the purchase of devices designed to filter air using high efficiency particulate air (HEPA) filters, the primary purpose of which is to increase outdoor air intake or to improve air cleaning or air filtration.
Qualifying locations would include properties used by an eligible entity primarily in the course of its ordinary commercial activities in Canada (including rental activities), excluding self-contained domestic establishments (i.e., a place of residence in which a person generally sleeps or eats).
To continue to support Canadians working from home due to the pandemic, the government will extend the simplified rules for deducting home office expenses and increase the temporary flat rate to $500 annually. These rules will apply to the 2021 and 2022 tax years. For details on the simplified rules introduced in 2020, see our previous article which will be updated as the legislation becomes available.
The government proposes to expand and enrich the Eligible Educator School Supply Tax Credit to allow teachers and early childhood educators to claim a refundable tax credit worth 25 per cent (up from 15 per cent) of up to $1,000, and to ensure that purchased supplies may be eligible no matter where they are used.
The government also proposes to expand the list of eligible teaching supplies to include electronic devices such as graphing calculators, digital timers, and tools for remote learning. These enhancements would take effect starting with the 2021 tax year.
As noted in our July 23, 2021 tax alert, the 2021 federal budget announced immediate expensing of many capital asset purchases with an effective date of April 19, 2021. There is still no draft legislation for this measure and no update was provided in the economic statement.
Given the government’s delay with introducing draft legislation for this measure, our recommendation is to assume this measure won’t be enacted in making capital asset purchase decisions until such time that we see draft legislation being introduced. If draft legislation is introduced and the effective date is retroactive, we will amend the prior tax returns to file a claim for immediate expensing at such time.
As noted in our July 29, 2021 tax alert, amendments to Bill C-208 are expected to be released soon. Any amendments to Bill C-208 will apply as of the later of November 1, 2021 and the date of publication of the final draft legislation. As we have yet to receive draft legislation, Bill C-208 and its more flexible conditions is still law. No draft legislation or update was provided with the economic statement.
We will continue to monitor these and provide relevant updates to clients via email and social media.
Those that manage a business and engage an accountant to prepare financial statements under what you may have previously referred to as a “Notice to Reader” engagement will have increased consultations, acknowledgement of your responsibilities and a new report attached. These strengthened requirements are due to the new Canadian Standard on Related Services (CSRS) 4200 Compilation Engagements, which is beginning for year ends ending on or after December 14, 2021.
The changes you can expect in a compilation engagement under this new standard can be outlined as follows:
A new report will be attached to your compiled financial information that more clearly describes your responsibilities as management, the responsibilities of the Accountant and an explanation of the limitations of a compilation engagement.
As a result of the increased consultation and documentation, it is likely that the time required and fees will increase.
A Compilation Engagement under the new standard does not provide any form of assurance on the compiled financial information. To understand the scope, it is useful to illustrate the nature of various engagements as outlined in the following diagram:
When determining the type of engagement required for your organization or company, your Accountant can discuss differences between each type of engagement.
The Ontario government has announced that the Not-for-Profit Corporations Act (ONCA), which provides a modern legislative framework for Ontario’s not-for-profit corporations (which includes registered charities that are incorporated), came into force as of October 19, 2021.
The ONCA generally applies to all Ontario corporations incorporated under an Act of the Ontario legislature that do not issue ownership shares, with limited exceptions.
The ONCA is intended to:
Existing not-for-profit corporations will have a three-year transition period to make any necessary changes to their incorporating and other legal documents to bring them into conformity with ONCA. Any other requirements under the ONCA come into effect on October 18, 2021.
For full details on all governance and reporting requirements, see Ontario’s Guide to the Not-for-Profit Corporations Act, 2010.
The ONCA specifies thresholds for a compilation, review, or audit engagement to be performed on a corporation’s financial statements as follows:
* Approval to waive an audit or to waive both an audit and review engagement requires an extraordinary resolution, which is approval from at least 80% of the votes cast at a special members' meeting where there are enough members to take a vote or if all voting members consent in writing.
There may be additional filing and reporting requirements under other statutes such as the Corporations Information Act and the Corporations Tax Act.
The Ontario government is expected to release more information regarding the ONCA.
The Federal Government has proposed legislation that significantly expands trust reporting requirements. For taxation years ending on or after December 31, 2021, trusts that are required to file a T3 Trust Income Tax and Information Return will also be required to disclose the following information for each settlor, trustee, beneficiary and person who has the ability to exert influence over trustee decisions regarding appointment of income or capital of the trust:
This new information schedule must be filed with the trust’s T3 return. It cannot be filed on its own.
For all existing clients, we have reviewed your situation and have reached out to you to get this information before the filing deadline of March 31, 2022. The deadline to return this information to us is December 31, 2021. If you have any questions about these new filing requirements or about the T3 return, please contact Becca Newbigging.
Canadian-controlled private corporations are now eligible to receive a 10-20% refundable tax credit if they purchase, construct or renovate a building (included in Class 1 or 6) over $50,000 and up to $500,000. The max credit available for additions in the periods below are:
This credit is available for each fiscal year in the qualifying period.
The building investment must be made in a designated region to qualify for the tax credit. The credit is issued based on the building location not the location of the corporations head office. Please note that any investment in Wellington County WILL NOT qualify for this tax credit as it is not in the designated region. A full listing of the designated regions are located on Ontario's website.
If your company is a part of an associated group of companies, only ONE company in the group can claim the tax credit each year. The other companies in the associated group will need to elect in writing to waive their right to claim the ROITC.
Under Canada’s Income Tax Act (ITA), the sale of a residence can be exempted from income tax under the Principal Residence Exemption (PRE). In 2016 the CRA began requiring the sale of principal residence to be reported on the seller’s income tax in order to qualify for the PRE and to tighten up eligibility requirements.
With this in mind, there are several things Canadian property owners need to consider when filing for PRE, particularly if they own multiple properties.
The CRA does not specify an exact duration of time an individual or their family members must reside in a dwelling for it to qualify as a principal residence for a given year. The tax rules refer to the residence being “ordinarily inhabited” within the calendar year. A more significant issue is whether a property held for a short period will produce an income gain (not eligible for the PRE) or a capital gain (usually eligible for the PRE) when sold.
The CRA will analyze evidence, such as length of time in the dwelling, sources of income and real estate buying patterns, to establish if the dwelling is indeed a principal residence or perhaps part of a business venture, such as real estate flipping.
If the CRA challenges your claim of exemption, they’re going to look at all the facts in the scenario. This could include looking into your intention of moving in and if something happen that forced you to sell.
Most properties (home or cottage, for example) can be designated a principal residence – even those seasonal residences located outside of Canada, such as in the U.S. or Caribbean – as long as the owner or their family ordinarily inhabit it during each calendar year being claimed. Only one property per year, per family (spouse or common-law partner and children under 18), can be designated a principal residence.
Although it is becoming rare now, each spouse can designate a different property as a principal residence for years before 1982. Once sold, a property that isn’t deemed a principal residence will be subject to capital gains tax for the years it was not designated. A gain may also arise if the residence is designated for some, but not all, of the years of ownership.
There is also a restriction on land size that qualifies for the PRE. Property that exceeds one-half hectare (roughly 1.2 acres) will generally not qualify for the exemption. For example, if the property is a farm, only one-half of a hectare of land plus the home would qualify for the exemption, while the remaining acreage would be subject to capital gains tax based on value appreciation. If the excess land is required for the use and enjoyment of the property, then the land that qualifies can be larger. However, CRA is very restrictive when applying this rule.
When selling one of multiple properties owned, an owner can designate it as a principal residence for all or part of the years of ownership to take the best advantage of the exemption and minimize the amount of capital gains tax paid. Generally speaking, it makes sense to designate the property that has the highest average gain per year of ownership.
The mandatory income tax reporting of a principal residence sale was introduced by the CRA to increase monitoring over foreign property ownership, “quick flips” or short holdings (on properties that may not qualify for principal residence status), properties that were not “ordinarily inhabited” every year by the owner, as well as serial builders who build and occupy a property before selling it.
Property that is used primarily to generate income or that is considered inventory does not qualify for PRE. This includes property that is solely rented out on a long- or short-term basis or one where the owner occupies one unit and rents out the others.
If an owner fails to report the selling of a principal residence, they could be subject to a late-filing penalty of $100 per month, up to a maximum of $8,000, according to the CRA. In addition, if an owner doesn’t report the sale on their tax return, the exemption may be denied and therefore the owner would be taxed on the capital gains.
If you have sold a property in the tax filing year, you should speak to your Accountant to assess how best to calculate and minimize your tax.
On November 30, 2021 the Ontario legislature passed Bill 27. This bill amends various Ontario statutes. The two most significant changes are to the Employment Standards Act (ESA).
These changes are the right for employees to disconnect and limit on employers to include non-compete provisions in employment and other agreements.
For more details on these two important changes to the ESA please contact HRresults@w-u.on.ca.
With remote interviews, many of the cues you would normally use to read a person are lacking. But there are still tactics you can use to help make the right choice.
Here are a few tactics that can help you make the right virtual hire:
Given that remote work is likely here to stay for many and that virtual hiring offers access to larger talent pools, we are likely to see more, rather than less, remote recruiting going forward.
Since the beginning of the pandemic, employers have been navigating the challenges of managing remote work. Virtual work, remote work, telework and work from home have now become the “norm” for many businesses. There are benefits and challenges to remote work for both employers and employees, as well as both Human Resources and Health and Safety considerations.
Challenges:
Benefits:
The legal considerations for remote work are typically the same as the employer and employee obligations for work performed at the employer’s premises.
When the pandemic started, employers rushed to arrange alternate arrangements for staff and may not have had time to consider all of the above factors or to prepare something in writing to clarify details of the remote working arrangements. Now that remote work has been ongoing and may have become permanent, having a written policy and agreement is an important step in managing remote employees. The policy should consider:
Employers should be clear in their expectations and employees are still required to meet those job expectations; however, flexibility and adaptability are key to successful remote work situations.
Every investor wants to know the answer to the question, “How much money will I need to retire?” Many factors contribute to this determination and it is unique for everyone. For example, someone who earns $70,000 per year will likely be able to live comfortably on $60,000 per year in retirement, but another person who makes $200,000 each year will likely not find that income level realistic. There is a simple way to discover the amount of retirement income you and your family will require, and it is called the Financial Independence Number.
You only need two pieces of information to determine your Financial Independence Number:
Your Basic Cost of Living is the total of your non-discretionary expenses annually. Things like housing, transportation, utilities, taxes, and healthcare to name a few. Your Draw Down Rate is the percentage of your assets you can utilize without reducing your capital. It is generally agreed upon that 4% is a reasonable and realistic Draw Down Rate for retirees.
John and Jane want to know the amount of wealth that they must accumulate in order to retire comfortably based on their annual expenses of $60,000. They are comfortable with the rule-of-thumb Draw Down Rate of 4%.
Their Financial Independence Number (FIN) is easily calculated as:
FIN = Annual Expenses ÷ Draw Down Rate
= $60,000 ÷ 0.04
= $1,500,000
John and Jane’s Financial Independence Number is $1.5 Million, which is the amount of invested capital that they will need to fund their retirement and maintain their capital. Understanding this number will allow their financial advisor to assemble a plan to achieve this number, not just “earn as much as possible”.
The sooner you determine your Financial Independence Number, the sooner a plan to reach that goal can be built.
A Financial Planner can work with you to determine a savings budget and investment strategy to attain your retirement goals.
Spousal Registered Retirement Savings Plans were designed to encourage retirement savings with tax breaks at time of contribution and at time of withdrawal, just like regular RRSPs.
Spousal RRSPs contain additional advantages for couples who have a partner earning a higher income than the other. The greater the income discrepancy between the two partners . . . the greater the potential benefit at the time of withdrawal.
The contributor to an RRSP or a Spousal RRSP, receives the initial tax benefit. The contributor’s taxable income is reduced by the amount of the contribution. A $5,200 contribution ($100/week) reduces taxable income by $5,200 for the contributor whether it goes into their RRSP or into a Spousal RRSP.
While on-deposit, the investments are treated equally, growing tax free in an RRSP or a Spousal RRSP until the funds are withdrawn. (This assumes that the money is held in the Spousal RRSP for 3 years, otherwise any withdrawals are taxed as income for the contributor, not the spouse.)
At retirement, the household will rely on their savings in their RRSPs to generate income to cover their living expenses now that employment has ended. Both spouses in the couple would begin to withdraw from their RRSPs (or RRIFs). If there is a large discrepancy in the amounts in their RRSPs, one spouse could have a significantly higher income than the other when withdrawals are made during retirement.
All other things being equal, a couple with a high-income spouse and a low-income spouse will pay more income tax than a couple with equal levels of income. There are ways to split income between spouses, but they have limitations and are often under threat of being repealed.
As an example of the effects of balancing income without the aid of income splitting, a couple with one spouse earning $75,000 and the other at $0, will pay $11,881 in income tax in 2020. A couple with each partner earning $37,500 for a total of $75,000 will pay $9,792. A savings of more than $2,000 each year!!
As couples review their taxes each year, if spouses are in different brackets, they should consider using this strategy to lessen future taxes by having the higher income spouse contribute to a Spousal RRSP for the lower income spouse.
Reminders
With a long term focus and over 20 years of experience, we have and continue to assist many of our clients in facilitating successful buy or sell. Our team of advisors surrounds you and can guide you through the transaction or even just provide a second opinion. We’ve established relationships with trusted business valuators, corporate commercial lawyers and lending relationship managers.
Our knowledge and reputation, along with our ability to assist in negotiating a fair deal, help the process go smoothly. Buying or selling a business should be a rewarding experience that is positive and memorable. Learn more about our Transactional Services web page or talk to your Accountant.
For over 60 years, Ward & Uptigrove has been a member of and given back to the community. Many charitable and community organizations have struggled to hold fundraisers and networking events this year.
In 2021, the Partners of Ward & Uptigrove selected charitable organizations for a one time, large donation. Partners have personal connections to these charities that play an active role in helping to make our community a great place to work and live. Many of these organizations have connections to our staff, clients or our community.
Ward & Uptigrove continues to also support many other organizations. Our contribution is a demonstration of our gratitude for some of the many great organizations that support individuals and our community.
Ward & Uptigrove has joined the Carbon Footprint Initiative to champion Maitland Conversation’s goal of reducing the local carbon footprint and helping to improve the health and resiliency of the watershed to deal with the growing effects of climate change.
We’ve created a sustainability committee that has raised awareness with our staff and assisted with programs to reduce our carbon emissions including
In 2022, we plan to further our commitment by investing in nature planting natural vegetation that sequesters carbon, clean up projects and fundraising initiatives.
Through the Maitland Conservation Foundation, individuals and businesses can contribute to projects that protect and enhance watershed forests, rivers and soil. To learn more, visit their website.
As we reflect on 2021, our 63rd year, we recognize another year of growth and progression with our staff.
We are proud to congratulate the following staff members on their development and progression into new roles this coming year.
Michelle Vanderwal, CPA, CA
Partner
Jenny MacDonald, CPA
Principal
Vanessa Martin
Senior Accountant
Scott Stephenson
Senior Accountant
Maralee Parkhouse
Accounting Supervisor
Jill VanderWier
Senior Accountant
Chris Raben
Intermediate Accountant
Shanna Yang
Senior Accountant
Amina Sulemanovski
Intermediate Accountant
Diane Nonkes
Bookkeeping Team Lead
Cheryl Laffin
Senior Bookkeeper
Jennifer Goertzen, CRSP
Senior H&S Professional
Emily MacRobbie, CHRL
Senior HR Professional
Tonya Wilson
Senior HR Coordinator
Amy Fitzsimmons
Executive Administrator
Hanne Nauwelaerts, CHRP
HR Coordinator
Paul Hak, CPA, CMA
Partner
After 35 years with Ward & Uptigrove, Paul Hak is retiring from the Partnership and the firm.
We are thankful for all of Paul’s contributions to the firm and wish him all the best in his retirement!
Brenda Sippel
Administrative Assistant
Amanda Annis
Senior Accountant
Drew Chalkley
Accounting Support Consultant
Leah Frizzle, CHRP
HR Professional
Deanna Furnemont
Payroll Administrator & Bookkeeper
Anika Haque
Intermediate Accountant
Janelle Hill
Bookkeeper & Payroll Administrator
Virginia King
Bookkeeper
Rachel Kinzel, CPA
Senior Accountant
Joyce Newbigging
Accounts Receivables Clerk
Eleni Palacios
Junior Accountant
Brayden Pellett
Intermediate Accountant
Luuk Postuma
Applications Analyst
Chance Quinlan
Junior Accountant
Alexis Rock
Administrative Assistant
Tyler Seguin
Intermediate Accountant
Kate Smith
Junior Accountant
Kristy Smith
Administrative Assistant, Wealth Management
Aasiya Syed
Junior Accountant
Mark Tasker
Junior Accountant
Kimberly Wass
Administrative Assistant
Cassandra Watson
Junior Accountant
Stephanie Wilkinson
HR Administrator
Mark Woynillowicz
Tax Manager
Alyssa Wright
Junior Accountant
