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Past interviews
A match made in Heaven
Jade Hemeon
June 9, 2000
Don't judge a book by its cover
David Cooke
June 2, 2000
A comeback for old tax haven
Ned Goodman
May 26, 2000
Strength in numbers
Grant Forster
May 24, 2000
Resources will rock
Roger Mortimer
May 15, 2000
Thou shalt not speculate
Larry Sarbitt
May 5, 2000
More is better than less
Stephen Kangas
May 1, 2000
Bite the bullet
Dan Hallett
April 25, 2000
The New Economy is not what you think
Stephen Waite
April 14, 2000
Rough sailing
Bob Haber
April 10, 2000
Taxing times
Garth Turner
March 24, 2000
Tax tips for everyone
Jamie Golombek
March 17, 2000
She could see it coming
Veronika Hirsch
March 10, 2000
Changes bring opportunities
Chris Jenkins
March 3, 2000
Good guys finish first
Allan Brown
February 25, 2000
For better or for worse, it's a Fidelity fund again
Bob Haber
February 11, 2000
Wealth Management for Everybody
George Mancini
February 4, 2000
Spanning the globe for entrepreneurs
Andrew Waight
January 28, 2000
Boomer fund manager
Ray Steele
January 21, 2000
The only way to go
Duncan Stewart
January 14, 2000
Silicon Valley East, way east
Bhim Asdhir
January 7, 2000


For more past issues, please check our full Fund People archives
  
Focus
Tax Planning
Highlights
  • Tips for fund owners
  • Implications of the new federal budget
  • Capital gains now more attractive than dividends

    • Tax tips for everyone

    LEVI FOLK, RICHARD WEBB AND PETER DIPLAROS
    Friday, March 17, 2000

    It’s that time of year again. But even if you feel like hiding under a rock, tax season will not go away. Jamie Golombek, Trimark’s taxation and estate planning specialist, shares some valuable advice for Canadian mutual fund investors.

    Jamie is the in-house tax expert for Trimark and knows all about the troubles of tax season. "The biggest worry Canadians have about taxes is getting an unexpected tax bill that they haven’t planned for," he says. But, surprisingly, he goes on to say that it is not necessarily a bad thing. "It’s only bad when it is unexpected and it throws off your financial plan."

    Many investors who sold BCE or Nortel stock during 1999 will find themselves in this situation if they forgot about the realized capital gains made in the stock, which are taxable. The good news is that the new federal budget reduces the tax burden of capital gains. "In Ontario, for example, you can get it down to 31 per cent of capital gains, from the current 38 per cent for someone in the top tax bracket," he says.

    The budget changes also have an effect on income investors. "Capital gains are now more tax efficient than dividends," Jamie says. He adds that even people who invest in GICs that yield about 7 per cent currently should look to equity funds instead. "It works out that equities could get a smaller return but still manage to beat the GICs after taxes."

    Interesting stuff. But Jamie goes on: "The biggest mistake people make is that they get excited about receiving a refund." That is a result of poor planning, he says. It has the effect of giving the government an interest-free loan for up to 18 months, while your money could have been working for you. "Little by little, it adds up to hundreds and thousands of dollars over forty years," he says. "If your refund is coming because of an RRSP contribution, it’s better to have your employer deduct less tax from your paycheque throughout the year."

    Jamie also has some very practical advice for mutual fund investors. "You have to remember to get the tax benefit of the commissions paid," he says. For front-end load funds, you should add the commission to the cost of the funds, and for deferred sales charge funds (back-end load) you should deduct the commission from the sale proceeds. "Most fund companies have very good reporting," he says, "and they keep track of your adjusted cost base, etc. but otherwise you’re on your own." Also, WRAP fees for managed products are deductible as Investment Counseling Fees.

    For people with families, Jamie stresses the importance of having a plan for your estate, including a will, powers of attorney and other measures such as insurance. "Tax time is a good time to remind yourself to update your estate plan," he says. Parents should also encourage their children who have summer or part-time jobs to file an income tax return. "They won’t pay any taxes, but they will start accumulating RSP contribution room which they can use later on," he notes. The RSP contributions could also come early and the tax deductions could be deferred until they are needed years in the future.

    Hopefully this information can help ease the pain of tax season. Not.

    Levi Folk, Richard Webb and Peter Diplaros are Investment.com mutual fund specialists and editors of the Fund Counsel newsletter. They can be reached by e-mail at peterd@hqinvestment.com.

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