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the HERALD Wednesday December 11 1991 Money Matters Pge9 Careful financial planning can lead to reduced taxes Herald Special Last time we covered tax plan ning and RRSPs There are those who consider Canada as a coun try of savers rather than in vestors which makes it all the more surprising that less than half of employed Canadians over the age of 18 contribute to an Let two or more Canadians gather together and it wont be long before the conversation turns to taxes especially income tax and the GST There is not much anyone can do about the GST but careful planning may help reduce income taxes Many Canadians turn the job of tax preparation over to specialists however it is still a good Idea to be as familiar as possible about tax options that may be available What follows is a general sum mary of some of the other items to consider for the inevitable ap proach of April 30 prepared with the assistance of the firm Ernst and Young Plan for rollovers If you have periodic pension in come of your periodic pen sion income may be rolled into a spousal RRSP before the end of the year in which your spouse turns 72 This rollover provision is only available until 1994 A lumpsum withdrawal from a pension may still be rolled into an as long as the rollover is made on a direct plantoplan basis Retiring allowances also ITS YOUR MONEY Paul J Rocket still qualify for rollover Consider a nondeductible overcontribution Starting in individuals will be able to make excess con tributions to their RRSPs of up to without incurring any penalty This amount will not be currently deductible but presents an interesting planning op portunity where you can shelter tax on the income earned on an additional 8000 Since the new rules provide for an indefinite carry forward of these undeducted contributions made after you can simply reduce a subsequent years contribution to utilize the advance contribu tion Plan for carry forward of unused contribution limits We all know there are times when the funds just arent available to make an con tribution as other financial con cerns and requirements take precedence Revenue Canada starting in allows a carry forward of unused contribution limits for a maximum of seven years This means you may make the contribution and claim the deduction in any year in the seven year carry forward period Warning dont use this provi sion as an excuse to be lazy about your contributions The more years you delay the harder it will be to make up the total unused contributions before the carry forwards expire In addition the delays will cause you to lose the taxfree compounding effects as well as the early tax deferrals Capital Gains and Investment Income With the of the 100000 capital gains exemption several years ago and in 1988 the cumulative net investment loss rules which limit the use of the exemption planning for tax considerations of investment income and capital gains has become far more complicated Assess position A previous article detailed how to determine the extent to which investment expenses exceed in vestment income and create a net investment loss If a loss exists it will limit the use of the capital gains exemption by the amount of the loss Realize gains to use exemption Even if a CNIL problem exists it may make sense to realize capital gains in if the gains are larger than the CNIL and at least part of the capital gains ex emption can be used This is par ticularly true if you expect the CNIL to grow in future years thus restricting the use of the exemp- New catalogue unveiling Dominion Seed House President Charles McLean and local town councillor Ann Currie unveil the companys new catalogue during a reception Thursday afternoon Herald Photo Local Halton Regional councillors appointed to standing committees As part of Wednesdays inaugural Halton Regional Council meeting the new councillors were officially appointed to a Regional Standing Committee The five local Regional Coun cillors include Halton Hills Mayor Miller Bill Robson Rick Pam Johnston and Marilyn Serjeantson PHOTO SPECIAL Mayor Miller and Coun will serve on the Regional Health and Social Services Committee Councillors Bonnette and will serve on the Planning and Public Works Committee while Coun Johnston will serve on the Administration and Finance Committee Committee members meet every second week to consider staff recommendations on issues per taining to the particular mandate of each committee In turn committee members recommend to the full Regional Council what policy should be adop ted In the end however Regional Council makes the final decision 1 HOUR SAME DAY NEXT DAY SERVICE Passport Photos WE RENT VIDEO CAMERAS CRAIGS PHOTO MuiminUA CANADIAN TIRE GEORGETOWN LOCATION St Georgetown OPEN SUNDAY 10 AM 5 PM tion to an even greater extent Estimate Your Tax Liability Yearend tax planning should always include an estimate of the total tax payable for the year Identify all sources of income and deductions Run through last years tax return and identify any changes in sources of income or expenses during the year Ensure that any expense payments are made before December 31st if you ex pect to claim a deduction for the year Keep in mind that a portion of family allowance and Old Age Security payments may be taxed back The amount of the repay ment is equal to the lesser of 15 per cent of your income in excess of and the Family Allowance payments received Ensure installment payments are up to date If more than per cent of your income comes from sources which are not subject to tax withholdings at source dividends interest rentals etc you are required to make install ment payments on a quarterly basis March June 15 September 15 and December 15 each year with the final payment being made the following April 30th Your tax installments should be based on the lesser of your 1991 tax and your estimated tax for 1992 Finally determine If minimum tax applies The minimum tax provisions require a recalculation of an in dividuals taxable income without allowing for certain deductions tax preference items which reduce regular taxable income for regular tax purposes Tax preference items which require addback to regular taxable income to arrive at an adjusted taxable income include RPP and RRSP contribu tions including catchup RRSP contributions of previously unus ed limits in the seven year carry forward period and tax shelter deductions eg losses created by CCA on certified Canadian films and and losses on drill ing funds and flowthrough shares created by exploration and development expenses and depletion claims In addition the nontaxable portion of any capital gains ie 25 per cent of the gains is added back while the grossedup portion of any taxable Canadian dividends is deducted A flat is then deducted fromt his amount to arrive at ad justed taxable income Federal minimum tax is calculated on ad justed taxable income at- a per cent rate You are required to pay t h larger of your regular tax and minimum tax liability If the minimum tax exceeds the regular tax the difference is car ried forward for up to seven years and refunded to you in those years if your minimum tax is less than your regular tax at that time Knowing some of the actions required before each yearend to minimize taxes is a key part of an ongoing financial planning pro gram For a free copy of tax rates and personal tax credits and long term comparison between an equity mutual fund and an RRSP Investment earning 10 per cent contact Peter C 10 Drive Georgetown Paul J Is the author of the best seller Why I Invest in Mutual Funds and President of Regal Capital Planners Limited a year old financial planning company with offices from coast to coast in Canada LOOK YOUR BEST For the HOLIDAY SEASON With A Perm or or a New Style from ANGELINA Book Your Appointment Now 8534312 For All Your Needs ANGELINA HAIRSTYLING Rosemary Rd Acton IfsBegLratoToLook ALotlfeQiristmas Meter has lots of fresh fcr the hobby Cootoea and other So Ire to 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