Author Archives: Brian Poncelet

Proposed changes around passive income create big concerns

1. Business owners don’t have an advantage.

My point last week was that a business owner who saves for retirement through his or her corporation is actually worse off over the long run because of the level of tax paid annually on investment income inside the corporation – even under the current rules. Under the proposed changes, things get even worse for the business owner.

2. Business owners are behind in saving for the future.

The Liberals will stick to their script: The proposed changes around the taxation of passive income in corporations will affect so few business owners that no one should take offence, they will say. The changes will only impact those with more than about $1-million invested inside their corporations. What does this tell us about business owners? That they are way behind in saving for retirement. If these folks were saving what they should to secure their futures (it takes much more than $1-million to provide a standard of living in retirement that middle-class Canadians have become accustomed to), the proposed changes would affect many more business owners – not a small percentage. The fact that the proposed changes will affect a smaller number of Canadians should be a real concern to the Liberals. Setting the bar so low at $1-million means most business owners will be affected if they are saving appropriately. So, how exactly will these proposed changes encourage business owners to save more and create greater financial security? They won’t.

3. Using registered plans is not an option for many.

“Hold on,” you say. These business owners have every opportunity to use registered retirement savings plans (RRSPs) and tax-free savings accounts (TFSAs), so it’s nonsense that they will be hurt by restrictions on building savings in their corporations. This view ignores the fact that business owners very often require earnings to remain in the corporation to: build cash for future growth of the business; improve the balance sheet to meet financing requirements (RRSPs cannot be used as collateral); provide security for the company during economic downturns, maternity leaves or disabilities, fund taxes for intergenerational transfers; or to buy other businesses and diversify corporate holdings. Whatever is left after these uses can provide taxable income for retirement.

4. Long-term planning will be thrown into disarray.

Thousands upon thousands have been saving for the future through their corporations. I know many who have figured out how much to save for the future based on reasonable assumptions about earnings and taxes. If the rate of tax increases so significantly, many will suddenly find themselves significantly short of where they should be by now to provide a secure financial future.

5. The costs of compliance will skyrocket.

If the Liberals plan to grandfather certain investment assets so that they won’t be subject to the new higher tax regime, this will create a burden on the business owner to track “buckets” of investments that will be subject to different rates of tax. What a nightmare this is going to be. The reality is that these different “buckets” are likely to be invested in the same investment account. How will the income be separated into differently taxed buckets?

6. It’s a burden on Canadian business owners only.

The proposed measures around passive income will apply only to Canadian-controlled private corporations. What about public companies? Or foreign-controlled private companies? It hardly seems fair to put Canada’s private business owners at a disadvantage here. If revisions are made to affect public and foreign private corporations, how will the changes impact foreign investment in Canada? The issue gets a lot more complicated – and political – than even the Liberals were expecting.

It’s time to scrap the proposals and take more time to study the issues. Rushing into changes is a recipe for unpredictable disaster, particularly given the more favourable tax environment that is shaping up south of the border.

Apple Pay Cash to leverage Discover Network

The Apple Pay Cash card, which was just introduced in December with the latest iOS 11 update, is part of newly introduced functionality that Apple has added to Apple Pay, its mobile wallet. US users now have the ability to send and receive peer-to-peer (P2P) payments via Apple Pay in the firm’s messaging platform, iMessage. Funds are then added to a virtual Apple Pay Cash card that is issued by Green Dot, a prepaid card firm, to be used for online and in-store purchases.

This partnership should help grow usage and adoption of Apple’s payment offerings, which in turn will increase the number of transactions performed on Discover’s network.

  • Discover has a massive reach, which includes a large acceptance network, giving Apple Pay Cash users more chances to use their cards. Discover was accepted by 9.3 million merchants in the US as of 2014, just slightly trailing Visa and Mastercard, which were accepted by 9.5 million merchants, according to the Nilson Report. Discover is also the fourth-largest credit card brand in the US, with roughly 44 million customers as of mid-2016.
  • Apple Pay’s new P2P payments feature could lead to millions of dollars being added to accounts, which could drive transactions on Discover’s network. US mobile P2P volume will reach $336 billion in 2021, worth 46% of total US P2P volume. That’s up from $19 billion and 3%, respectively, in 2015. By leveraging one of the most popular chat apps in the world, Apple Pay should see more users adopt the payment option — as of early 2016, over 17 billion messages were sent on the service daily. As more users send and receive funds, many will likely opt to keep funds in their Apple accounts rather than waiting for funds to clear into their bank accounts. This would likely lead to increased transactions via Apple’s virtual debit card, which will be handled on the Discover Network.

Jaime Toplin, research analyst for BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on mobile P2P payments that:

  • Forecasts the growth of the P2P market, and what portion of that will come from mobile channels, through 2021.
  • Explains the factors driving that growth and details why it will come from increased usage, not increased spend per user.
  • Evaluates why mobile P2P isn’t profitable for companies, and details several cases of attempts to monetize.
  • Assesses which of these strategies could be most successful, and what companies need to leverage to succeed in the space.
  • Provides context from other markets to explain shifting trends.

How to cut down your heating bills this winter

Get a better thermostat. Ariel Darmoni, managing partner at 123 Remodeling, a general contractor firm featured on HGTV, said the quickest way to cut down on home-heating bills, with long-term results, is to install a smart thermostat. Although they can be pricey, some utility companies offer rebates on these appliances, reducing your total cost.

Darmoni says to look for a smart thermostat that has sensors homeowners can put in other places in the house to detect cold spots. One example of this type of smart thermostat is ecobee4 ($249), the newest version in the ecobee line. It comes with a sensor, and more can be purchased.

“Older thermostats would just take temperatures where the thermostat was located. If it was in the hallway, it would measure the temperature there, but it may still be chilly in the living room,” he said.

Smart thermostats will measure your energy usage and show you the results via apps, which can be opportunities to save more money on energy usage.

Whether you purchase a smart thermostat or still use a manual programmable one, the EPA says, to see cost savings, lower the thermostat’s temperature when you’re away or at night by 8 degrees from normal comfort levels.

By lowering the thermostat by 8 degrees, homeowners can save about $180 a year, said Dina Dwyer-Owens, co-chairwoman of Dwyer Group, parent company of the Neighborly community of home service brands.

To keep from heating rooms that are used less, such as a guest bedroom, shut the heat register to that room and close the door, Darmoni added.

Targeted insulation. Caulking and applying weather stripping around leaky windows and door frames will seal out the tiny drafts that suck out warmer air, Darmoni and Dwyer-Owens said. As unattractive as it may look, plastic sheeting on rattling windows will help cut down on heat loss.

Especially in older homes, but even in newer homes, cold air can seep through wall outlets. One telltale sign is if the wall outlet is particularly cool to the touch or drafty when plugging in a device. Dwyer-Owens says hardware and big-box retailers sell pre-cut foam insulation that fits around switch plates and can be tucked behind the wall plate.

“It’s a leak that’s happening, and you probably don’t think about,” she said.

Water heaters can benefit from a blanket, Dwyer-Owens said. Newer units may have sufficient insulation, which should be at least R-24, the EPA said. If the heater is warm to the touch, give the unit its own winter jacket. Pre-cut hot-water heater blankets cost about $30, and some utilities offer rebates to purchase them, she said.

The EPA said that by insulating the water tank, homeowners can cut standby heat losses by 25 to 45 percent and save about 7 to 16 percent in water-heating cost.

“Depending on how inefficient your water heater is, you can save about $50 annually,” she says, which offsets the cost of the blanket in less than a year.

Give your furnace some TLC. Change air filters regularly as a clean filter prevents dust and dirt buildup and is less taxing on the system. While you’re at it, make an appointment with a technician to tune up your furnace, she said. Do it now, since this time of year, technicians get busy. Not only does tuning up the furnace keep it running well, a technician can spot any problems and prevent a breakdown on the coldest day of the year.

Does the house still feel drafty even after addressing common overlooked areas? It might be time to get an energy audit done, Dwyer-Owens said. The companies use infrared sensors to see where heat is being lost, so homeowners know whether they should have windows replaced or insulation added.

Buying your first home? Here’s what you do

1. Location, location

First things first, identify the area you like, the desirable amenities in the area, and perhaps more importantly, the undesirables that could affect your buying decision. What do I mean? No old dumps in the area, no commercial malls to be built right next door, or whatever else you might consider a “con.”

Visit the local municipal office and check with the planning and zoning departments to ensure you know exactly who and what your neighbours will be.

2. Mortgage matters

Next, visit a mortgage specialist at your bank, and also consult a reputable mortgage broker. Find out how much money you can borrow and what your deposit requirements are. This will allow you to focus on homes that are within your budget. Get a pre-approval in writing so you have something to rely on, because it is critically important that you do not get caught up in the rush of buying a home beyond your budget.

3. Housing type

Determine the type of home that makes sense for you and your family. Consider the pros and cons of condos, attached or detached lowrise, and options in between.

VERSUS… Condo living provides a carefree lifestyle – someone else cuts the grass and shovels the snow – but you pay condo fees and sometimes others determine how the amenities, if not your unit itself, can be used. Traditional detached homes provide the freedom to do what you want but maintenance and upkeep fall on your shoulders

4. Lawyer up!

Real estate lawyers are next. Check magazines and newspapers, listen to radio and watch real estate TV for potential lawyers. Go online and check out their websites. Do they give good, informative advice? Do they give you pricing up front? Do they make you feel comfortable? Call the Law Society of Upper Canada’s Lawyer Referral Service, which keeps lists of lawyers and refers requesting members of the public to lawyers who practice in the area requested. This just gets you someone in your area. You need to really check them out when referred. Speak to friends who have used a lawyer for the type of service you require and ensure they did the job professionally, courteously and for the price quoted

5. The agent advantage

Find a real estate agent. Be careful, you want someone who will work for you within your budget and desired area – not their’s! Drive around, check out signs, read the papers and speak to your lawyer.

Lincoln brings names back to luxury cars

Rather than the being known as the Lincoln MKX, it will be known as the Lincoln Nautilus. That is a startling takeoff from each other extravagance automaker out there.

You can purchase a Mercedes-Benz S550 or you may get a Lexus LS 460 L. You could get the Genesis G80 from Hyundai’s new extravagance mark or an Infiniti QX80 from Nissan’s.

In the event that you need a module crossover SUV you could get a BMW X5 xDrive40e iPerformance.

Among extravagance carmakers, the method of reasoning has dependably been the same. They need keep the attention on the brand name, not on the individual model name.

That is the reason Cadillac never again offers autos named Seville or DeVille yet rather offers the CT6 and XT5.

It’s likewise why Lincoln, over 10 years prior, changed the name of the Lincoln Zephyr to the MKZ

Why the Lincoln Aviator was supplanted by the MKX.

Yet, Lincoln has kept, or brought back, a few model names in its line-up in light of the fact that the specific names conveyed so much weight. The Lincoln Navigator, a full-sized SUV, has constantly kept its name.

The name Continental, once a different ultra-extravagance auto brand

Of its own, was brought in 2015 to go on Lincoln’s new full-measure extravagance vehicle.

Involvement with these two names showed Lincoln officials a lesson, said John Emmert, Lincoln’s showcasing administrator.

Individuals really recollected the Lincoln name better when it was connected to Continental or Navigator than without anyone else’s input.

Rather than going about as a diversion, the model names conveyed consideration and qualification to the general brand.

Likewise, Lincoln has been attempting to separate itself among extravagance marks by making an effort not to appear to be unapproachable and haughty.

Letters and numbers, he stated, don’t pass on the coveted warmth and mankind.

Like Navigator and Continental, it infers an awesome voyage, Emmert said. That is the thing that Lincoln is attempting to pass on with this name and with those it will give its different models.
The Nautilus will be accessible in the spring at costs anticipated that would be near that of the MKX, which begins at around $38,000.