It’s the start of the New Year, and if there’s one thing we think everyone can agree on, it is really nice to see 2020 not hitting the door on the way out.

A New Year brings new promises, in the form of resolutions. Late-night host Conan O’Brien sums up how we all feel about the crazy year just ended, saying that his resolution for 2021 is “spend less time with my family.” Ouch.

Save with SPP took a look around the Interweb to see what people are resolving to do this year on the savings front.

At the Save.ca blog, there’s some good resolution advice on what to do with any extra money that comes your way in 2021, perhaps via a raise, a bonus, or a lottery payout.

“Whatever the source of the windfall, a good rule of thumb is to divide the extra money among the past, present, and future. If you have significant debts, use one-third of the windfall to pay some of those off, addressing concerns from the past. Save one-third, looking to the future,” the blog tells us.

“Use no more than one-third to address your present wish list — things like home improvements or even the purchase of something you’ve had your eye on but couldn’t previously afford,” say the folks at Save.ca.

Other advice for 2021 – save big by eating more at home, leave the ATM card at the house, and “pay yourself first.” You should “start adding yourself to the list of bills that need to be paid. Pay yourself with a set amount designated for investment or savings each month,” Save.ca advises.

The CBC suggests a “30-day spending detox” immediately as the New Year begins. The broadcaster quotes Calgary finance expert Lesley-Anne Scorgie as saying a “detox” means “turning the taps off to that habitual spending that you were doing throughout the month of December — and, let’s face it, for many months before the holiday season as well.”

The detox, she says in the CBC article, can be carried out by reducing spending “on anything that’s non-essential.” Suggestions include take-out coffee, subscriptions to streaming TV services, “the nails, the rims for your car,” and so on, she states.

A bunch of little cuts can add up to $25 a day – or close to $700 a month – that can be put away in a savings account, Scorgie says.

CityNews Toronto reports on recent research by Bromwich+Smith, which found Canadians “are eager to make fundamental life changes in 2021 following months of pandemic induced lockdowns and restrictions.”

Sixty per cent of those surveyed want to “support small and local businesses going forward,” the broadcaster notes. Fifty-nine per cent want to “enjoy the little things in life,” and 47 per cent want to live “more frugally.” Other top resolutions included being kinder to others (41 per cent) and travelling to other provinces (35 per cent), CityNew reports.

Whatever you do to improve your finances, take small steps, advises noted financial reporter Pattie Lovett-Reid.

Talking on BNN Bloomberg’s show The Open, she says thinking too large “may be too big and audacious a goal,” she explains. Instead, she recommends we say to ourselves “OK, what can I do each month to move forward our financial plan?” If you succeed, great, if you don’t, there are many more months to go, she notes. “You have to know how much you owe, and how much you own – that will give you an opportunity to make changes, and to get corrective action in place,” she explains.

Looking for a 2021 resolution? How about this – why not increase your contribution to the Saskatchewan Pension Plan. It’s a quick and easy way to pay yourself first, whether you contribute weekly or monthly, or via a lump sum. Not an SPP member? Check out SPP today; in 2021 SPP is commemorating 35 years of providing retirement security.

Join the Wealthcare Revolution – follow SPP on Facebook!

If you haven’t been following the financial media closely through the lazy, hazy days of summer, you may be unclear what income tax changes have been proposed and how they might impact you, particularly if you have an incorporated small business.*

As committed in the Federal Budget 2017, on July 18, 2017 the Department of Finance issued a discussion paper providing details about tax planning strategies involving the use of private corporations and setting out “proposed policy responses to close loopholes and bring greater fairness to the tax system.” Interested parties have been invited to submit comments to fi******************@ca****.ca by October 1^st.

This paper focuses on three issues:

1. Sprinkling income using private corporations which essentially means income splitting by paying out dividends or capital gains to other family members who may not actually be working for the corporation to reduce total taxes. The Government is seeking input on proposed rules to distinguish income sprinkling from reasonable compensation for family members.
2. Holding a passive investment portfolio inside a private corporation, which means retaining and investing money in the corporation instead of paying it out annually because corporate income tax rates are much lower than personal rates.
3. Converting a private corporation’s regular income into capital gains which can reduce income taxes by taking advantage of the lower tax rates on capital gains. Income is normally paid out of a private corporation in the form of salary or dividends to the principals, who are taxed at the recipient’s personal income tax rate (subject to a tax credit for dividends reflecting the corporate tax presumed to have been paid). In contrast, only one-half of capital gains are included in income, resulting in a significantly lower tax rate on income that is converted from dividends to capital gains.

Also read:  Tax Planning Using Private Corporations – The New Liberal Proposals (Blunt Bean Counter)

This has resulted in a huge outcry from groups as diverse as the Canadian Federation of Independent Business, the Canadian Chamber of Commerce and the Canadian Medical Association.

In a BNN video interview, Scott Johnston, a partner at CBM lawyers in B.C. says the Liberal plan would punish small business owners, not “fat cats.” He counsels more than 800 small businesses in the Vancouver area.

“You are comparing employees with entrepreneurs who may make nothing for years and have no guarantee their business will succeed,” he says. “They are the ones who are taking risk and putting their homes on the line. They don’t have fat government pensions and they don’t receive medical, dental or parental benefits.”

Canadian farmers are also worried about federal tax changes, but the proposals are the last thing they have had time to think about during the busy harvest season. The Western Producer says “the impact of the tax changes could be humongous,” including:

• Rules to make it more difficult and risky for full-time farmers to share farm income with spouses and children.
• Regulations that could make it dangerous to use farm earnings to help pay for children’s post-secondary education.
• Rules that discourage farms from renting out their land or saving cash within a farm company.
• Changes that could make it risky to divide ownership of a family farm’s land base among a number of children, while allowing the land block to remain intact.
• Rules that encourage farmers to sell their land to neighbours or strangers rather than their own children.

In contrast, the Canadian Nurses Association representing primarily salaried nurses issued a statement on September 5^th supporting the proposed changes. In her statement, Canadian Nurses Association (CNA) president Barb Shellian said:

“CNA commends Minister Morneau’s aim to achieve federal tax policy that treats all sources of income similarly and equitably, based on the principles of social justice. Accordingly, CNA supports the proposed changes to the federal tax code that reasonably strengthen the rules on increasingly popular but potentially unfair tax advantages for incorporated high-income earners. CNA further recommends a more comprehensive review of the Canadian tax system with an eye to simplification and ensuring all hard-working Canadians are treated fairly and equitably.”

Also read: Dissenting doctors write open letter in support of federal tax reforms

While both Finance Minister Bill Morneau and Prime Minister Justin Trudeau have said they are fully committed to the proposed tax changes, as in all cases “the devil is in the details.” It remains to be seen if any significant modifications to the proposals will be made prior to passage and the planned January 1, 2018 implementation date. We will update you when more information becomes available.

Also read: The good, bad and the ugly of Ottawa’s proposed corporate tax changes

*In the spirit of full disclosure, the tax status of my company Sheryl Smolkin + Associates Ltd. will be impacted by the proposed changes

—
Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
	Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.