Waters & Meredith

Serving Niagara..

Client Information Newsletter: 1st Quarter 2002

CONTENTS

  • Canada Pension Plan
  • Employment Insurance
  • Workers Safety and Insurance Coverage
  • Probate Not required In Ontario
  • Canada Pension Plan Early Retirement
  • RRIF Minimum Withdrawals
  • Foreign Content In RRSP's
  • 2002 Automobile Deduction Limits
  • Corporate Tax Rate Reductions - Federal
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    CANADA PENSION PLAN

    1. The contribution rate for 2002 has increased from 4.3% of insurable earnings to 4.7%.


    2. The new annual maximums are:
      3. (a) Insurable Earnings - $39,100 with a $3,500 exemption
      (b) Employee Contribution - $1,673.20 (up from $1,496.40)
      (c) Employer Matching Contribution - $1,673.20
      (d) Self-Employed Contribution - $3,346.40
      (e) Self-employed persons will be able to deduct up to $1,673.20 from their income for the equivalent-to-employer portion of CPP starting with the 2002 taxation year

    Back to Contents

    EMPLOYMENT INSURANCE

    1. The contribution rate has decreased from 2.25% of insurable earnings to 2.20%.


    2. The new annual maximums are:
      3. (a) Insurable Earnings - $39,000 (unchanged)
      (b) Employee Contribution - $858.00 (down from $877.50)
      (c) Employer Contribution (1.4 times employee) - $1,201.20 (down from $1,228.50)

    Back to Contents

    WORKERS SAFETY AND INSURANCE COVERAGE

    1. The maximum annual insurable earnings are $64,600, up from $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.

    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. 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.


    3. 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.


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


    5. The amount of the pension is reduced by 0.5% for each month that you start your pension before your 65th birthday. The earliest you can start is the month after your 60th birthday.


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

    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 10.00% 8.75%
    85 20.00% 10.33%
    89 100.00% 12.71%
    90 - 13.62%
    94 or over - 20.00%
    1. The minimum withdrawal can be based on the age of your spouse if this is more beneficial.

    FOREIGN CONTENT IN RRSP’s

    1. As of January 1, 2001, the limit increased to 30% of the cost of the assets in a RRSP.


    2. Canada represents about 2% of the world’s equities.


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


    4. One strategy is to hold Canadian mutual funds that maximize foreign content within an RRSP.


    5. Alternatively, 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 foreign markets.

    2002 AUTOMOBILE DEDUCTION LIMITS

    1. The ceiling on the capital cost of passenger vehicles for capital cost allowance purposes is $30,000 plus applicable sales taxes.


    2. The limit on deductible leasing costs is $800 per month plus applicable sales taxes.


    3. The maximum allowable interest deduction is $300 per month for loans related to vehicle purchase.


    4. The taxable benefit relating to the personal portion of automobile operating expenses paid by employers is 16¢ per kilometre.


    5. The limit for tax-exempt allowances paid to employees is 41¢ per kilometre on the first 5,000 kilometres driven and 35¢ for each additional kilometre.

    CORPORATE TAX RATE REDUCTIONS - FEDERAL

    1. The general federal corporate tax rate was reduced to 25% from 27% on January 1, 2002.


    2. The rate for small business income remains as 12% under $200,000 and 21% between $200,000 and $300,000.


    3. The general federal corporate tax rate is scheduled to fall by 2% per year until it reaches 21% in January


    4. A federal surtax rate of 1.12% is in addition to these rates for all years.

    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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