1. 2014 Alberta Tax Rate Update Cédric Paquin, B.Comm, CA, CFP Regional Vice-President, Wealth Planning United Financial, a division of CI Private Council LP

2. General Update Federal tax brackets & clawback lower limits indexed by 0.9% Increase in the capital gains exemption to $800K; indexed CRA prescribed rate back to 1% on January 1, 2014 TFSA limit $5,500; Contribution room $31,000 RRSP limit $23,820 (2013) to $24,930 (2014) –2013 Deadline (March 3, 2014)

3. 2014 Top Personal Tax Rates - AB Gross-up on non-eligible dividends decreases from 25% to 18% 2013 27.71%

4. Integration of ABI Salary vs. Dividends

5. 2014 Salary vs. Dividend - AB ABI Corporate Rate Tax Deferral Savings / (Cost) $100K Dividend Under $500K14%25%(0.69%)($690) Over $500K25%14%(0.47%)($470) Elimination of savings to flow ABI through a corporation (1.2% - 2013)

6. Pay salaries and/or bonus to decrease corporate income to SBD limit and maximize RRSP Consider enough salary to maximize: –RRSP ($138,500) –CPP ($52,500) –IPP ($135,000 – approx) Salary vs. Dividends - General Rules

7. Retirement income strategies –CPP benefits vs. withholdings –RRSP, IPP, RCA –Retirement Allowance Dividend gross-up may reduce or eliminate –OAS –Age, GST, CCTB and other credit –Provincial credits Cash flow: CPP withholdings & tax installments SRED Salary vs. Dividends - Other Factors

8. Integration of Investment Income Retirement Holdco Strategies

9. Refundable Dividend Tax on Hand (RDTOH) $1 for every $3 dividend paid to shareholders 33% Dividends 13.34% Capital Gains 26.67% Investment income Prevents tax deferrals on investment income Tax prepayment/cost encourages paying dividends out of a Holdco/Investco. Reduces flexibility in compensation planning

10. 2014 Passive Income - AB AB Other Income Capital Gains Eligible Dividends Up front44.67 %22.34 %33 % Refundable26.67 %13.34 %33 % Net tax18 %9 %0 %

11. Example – 2014 AB Income earned through corporation Corporate income$ 1,000 Corporate tax(447) After-tax amount553 Dividend refund267 Available for distribution 820 Personal tax of individual (245) Net cash to individual$ 575 Income earned directly by individual Personal income$ 1,000 Personal tax(390) Net cash to individual$ 610 vs. Summary Tax pre-payment: $57 Tax cost: $31

12. 2014 Integration Failure - AB AB Other Income Capital Gains Eligible Dividends Tax savings (cost) (3.1 %)(1.6 %)(0 %) Tax deferral (prepayment) (5.7 %)(2.8 %)(13.7 %) Investment income has become less integrated for all provinces!

13. Capital Dividend Account (CDA) To integrate non-taxable amounts CDA balance Non-taxable portion of capital gains Capital dividends received Net proceeds of a life insurance policy

14. CDA Strategies With Investments Pay out capital dividends before realizing capital losses Trigger capital gains to offset non-capital losses Example: Opco with $10K in expenses and $30K in loss carry forwards -Trigger $80K capital gain ($40K taxable capital gain) -Nil corporate tax / $40K added to CDA account -Pay $40K tax free capital dividend to shareholder Advantages: -Extract funds tax free -Reduce tax cost of investment income in corporation -Bump-up ACB -Use up corporate losses that will otherwise expire -Lock-in CDA balance

15. Corporate Investments - General Tax Strategies Accumulation Phase Withdrawal Phase Draw from corporation as quickly and tax efficiently as possible -Pay out shareholder loans and CDA tax free -Create personal income to take advantage of lower tax brackets, credits and deductions Investments that defer distributions and capital gains avoid RDTOH and enhance compensation planning Pay dividends to recover RDTOH Defer tax and plan for retirement using: -Holdco and/or corporate beneficiary of family trust -RRSP & IPPs

16. 2014 Tax Free Amounts - AB Federal: $ 48,843 Alberta: $ 48,843 Eligible Dividends Federal: $ 43,430 Alberta: $ 21,652 Non- Eligible Dividends

17. Retirement Income Strategies Non-Reg vs. RRSP vs. Investco.

18. RRSP vs. Investco Client objectives: higher cash flow or maximize estate? RRSP Draws Higher tax on death No spousal trust on death Recover AMT Consider high tax and clawbacks during RRIF RRIF after 65 for pension credit and splitting Corp Draws Lower tax on draws Effect of gross-up on OAS, Age, GST, CTB and other credits Higher donation credit Recover RDTOH Reduce prof/admin fees

19. Draw from RRSPs to use up AMT, deductions and credits. Draw from high value RRSPs if in low tax bracket and projecting high tax bracket and OAS clawback after age 71 Convert higher RRSP to RRIF to fund lifestyle expenses after age 65 and use pension splitting Convert RRSP to RRIF after age 65 for pension credit RRSPs vs. Non-reg

20. Consider T- Class for individuals drawing on open accounts and: - subject to high tax rates and clawbacks, - have charitable intentions, or - don’t mind leaving large tax bill on death Spousal income splitting (but not with corporate class!) - Payment of lifestyle expenses by higher taxed spouse - Sale of lifestyle assets - Low interest loans to spouse or Family Trust Open Accounts

21. Investments with low distributions (Corp class & T-class) Capital gain instead of interest or dividends Management fees that exceed investment income Convert non-deductible debt to deductible debt RRSP deductions Using open investments to reduce net income

22. Thank you Assante Wealth Management’s advisory services are offered through Assante Financial Management Ltd., Assante Capital Management Ltd. and Assante Estate and Insurance Services Inc. Assante Estate and Insurance Services Inc. is owned by Assante Financial Management Ltd. and Assante Wealth Management (Canada) Ltd. ®The Assante symbol and Assante Wealth Management are registered trademarks of CI Investments Inc., used under licence.