New rules

mean tax
game changes

WELCOME to the wonderful world of tax reform! All
those income tax changes proposed over the last couple
of years have now become law.

Let’s Jeave the theory behind
and get on with the job of paying
as little income tax as legally
possible under the new rules, most
of which took effect last Jan. 1.

dollars
and sense

Michael Grenby

caer ria,

“It’s too soon to know how Ot-
tawa will apply the general anti-
avoidance rules,’’ said John Gun-
nell, of West Vancouver, tax part-
ner of Touche Ross & Co.,
chartered accountants. ‘‘But there
are still! several approaches people
may use to reduce tax.””

I have space here for only a brief
summary of Gunnell’s ideas. Get
further information and advice be-
fore applying them, (The tax per-
centages shown are totals: federal
plus B.C.)

e SPLIT 'N’ SAVE. There are
now only three tax brackets. If
your net income is more than
$27,500, try to shift income to
somebody in the under-$27,500

bracket — and save between about
14 and 45 per cent (total) tax on
that shifted income.

Review the various income-split-
ting ideas I have listed in previous
columns, including spousal
RRSPs, family allowance ac-
counts, giving money, having
higher-income spouse pay bills
while lower-income spouse invests
and so on.

© SHELTER SOONER. Every
investor, no matter how small, will
miss the $1,000 investment (inter-
est-dividend) income deduction,
one of tax reform's victims.

So make RRSP contributions as
early each tax year as possible, to
shelter interest and dividends from
the taxman. Declare compounding
interest only every three years
unless this will push your income
into a higher tax bracket.

e PENSION BREAK SUR-
VIVES. The first $1,000 of private
pension income you get each year
continues to receive a tax break.

Because of the new tax credit
system, this pension income will be
tax-free to people in the lowest tax
bracket. Those in the two higher
brackets will save a total of about
$260 tax.

So if you don’t have private
pension income, consider using
RRSP and non-RRSP funds to
create at least $1,000 a year. If you
are under 65, you must meet cer-
tain conditions to qualify.

© USE IT OR LOSE IT —
MAYBE. Take advantage of the
capital gains exemption while ii
still exists. What politicians have
given us, they can quickly take
away again — especially after an
election.

See Save
Pago 73

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71 - Wednesday, October 26, 1988 - North Shore News

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