Waters & Meredith

Serving Niagara..

Client Information Newsletter: 1st Quarter 2001

CONTENTS

  • Canada Pension Plan
  • Employment Insurance
  • Workers Safety and Insurance Coverage
  • Probate Not required In Ontario
  • Ontario Retail Sales Tax (RST) - Reduced Rates
  • Canada Pension Plan - Early Retirement
  • Foreign Content In RRSP's
  • RRIF Minimum Withdrawals
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    CANADA PENSION PLAN

    1. The contribution rate for 2001 has increased from 3.9% of insurable earnings to 4.3%.


    2. The new annual maximums are:
      3. (a) Insurable Earnings - $38,300 with a $3,500 exemption
      (b) Employee Contribution - $1,496.40 (up from $1,329.90)
      (c) Employer Matching Contribution - $1,496.40
      (d) Self-Employed Contribution - $2,992.80
      (e) Self-employed persons will be able to deduct up to $1,496.40 from their income for the equivalent-to-employer portion of CPP starting with the 2001 taxation year

    Back to Contents

    EMPLOYMENT INSURANCE

    1. The contribution rate has decreased from 2.4% of insurable earnings to 2.25%.


    2. The new annual maximums are:
      3. (a) Insurable Earnings - $39,000 (unchanged)
      (b) Employee Contribution - $877.50 (down from $936.00)
      (c) Employer Contribution (1.4 times employee) - $1,228.50 (down from $1,310.40)

    Back to Contents

    WORKERS SAFETY AND INSURANCE COVERAGE

    1. The maximum annual insurable earnings are $60,600.

    PROBATE NOT REQUIRED IN ONTARIO

    1. It is possible to avoid probate fees by having a testator execute two (2) wills.


    2. One of the wills covers assets, such as the shares in a private company, that an executor can "safely" turn over to the heirs without the protection inherent in a grant of probate.


    3. Recently the court made the point that probate was not mandatory and sometimes was not required if there is sufficient proof of ownership of the assets so that a distribution could be made without probate.


    4. In another case the Justice decided that probate was not mandatory where "no person having an interest in the estate, including those with a continuing interest, had raised the validity of the will as an issue".

    ONTARIO RETAIL SALES TAX (RST) - REDUCED RATES

    Warranty Repairs
    1. RST paid on parts and labour used to carry out repairs to tangible personal property under warranty contracts, extended warranty contracts, service or maintenance contracts, or guarantees will be completely phased-out by April 1, 2004. During the phase-out period, the RST rates will be:
      2. Year Ended Rate
      March 31, 2001 6%
      March 31, 2002 4%
      March 31, 2003 2%
      March 31, 2004 1%
    Automobile Insurance Premiums
    1. RST paid on premiums for automobile insurance will be completely phased-out by April 1, 2004. During the phase-out period, the RST rates will be:
      2. Year Ended Rate
      March 31, 2001 4%
      March 31, 2002 3%
      March 31, 2003 2%
      March 31, 2004 1%

    CANADA PENSION PLAN - EARLY RETIREMENT

    1. If you earn less than the maximum Canada Pension Plan (CPP) retirement pension, the CPP considers that you have substantially stopped working.


    2. In 2000, this means earning less than $763 per month, or $9,156 per year.


    3. There is a question on the application that asks if you have substantially or completely stopped working, and the CPP may check the information you supply.


    4. Once you qualify for a pension, you can continue to receive it even if you decide to return to work. However, you cannot contribute to the CPP on any future earnings.


    5. Your pension would normally be payable the month after your 65th birthday.


    6. The amount of the pension is reduced by 0.5% for each month that you start your pension before your 65th birthday.


    7. If you start your pension at age 60, your monthly payment will be 30% lower than if you wait to age 65.


    8. Your pension can start the month after your 60th birthday.

    FOREIGN CONTENT IN RRSP’s

    1. Effective for 2000, the limit was raised to 25% from 20%.


    2. As of January 1, 2001, the limit increases to 30%.


    3. Canada represents less than 3% of the world’s equities.


    4. Foreign investments have outpaced domestic stocks for decades - with this year being the exception.


    5. Anyone who wishes to have his or her entire RRSP portfolio invested outside of Canada is able to do so today.


    6. There are actually several strategies available.


    7. The first is simply to hold Canadian mutual funds within an RRSP that maximizes foreign content.


    8. Secondly, derivative funds can be purchased. Some portfolio managers will invest 80% of their assets in Canadian T-Bills, which will allow the fund to be considered 100% RRSP eligible. They would then invest 20% in derivatives such as international index funds. This will give you full access to the market.

    RRIF MINIMUM WITHDRAWALS

    Age at start
    of year    		 RRIFs set up before
    the end of 1992    		 RRIFs set up after
    the end of 1992
    70 5.00% 5.00%
    75 6.67% 7.85%
    80 8.75% 8.75%
    85 10.33% 10.33%
    90 13.62% 13.62%
    94 or over 20.00% 20.00%

    We welcome comments you may have on this newsletter as well as suggestions for future topics.

    The information herein is provided for your general information and action should not be taken on the basis of this newsletter, but only on the advice of your own individual advisor, applying this advice to your individual situation. Please call if you have any questions.

    Waters & Meredith
    Chartered Accountants
    Telephone: 905-356-4324
    Fax: 905-356-0964
    E-mail: wm@watersmeredith.com

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