DOLLARS AND SENSE

‘REMEMBER MR. Smith?
He retired in last week’s
column at the age of 50
after accepting a severance
package from his employer.

With advice from Elio Luongo
and Tony Lobmeicr of KPMG
Peat Marwick Thorne, chartered
accountants, we helped Smith
sharply reduce the $120,000 in-
come-tax bill he faced as a result

’ BUSINESS ‘BRIEFS

- WOMEN’S MEETING

—T H-E-W E S.T E RN

-- Businesswomen’s Association will.
celebrate its 15th birthday on
Sept. 15. at the Coast Plaza at
Stanley Park hotel from 6:30 to 10
p.m. ;

.- The’ group was formed 15 years
“ago ,to” provide support and
fellowship to women in business.

The assocation also raises funds
‘to continue supporting programs
and encouraging young women to

; 8 QUALITY WORKMANSHIP
; PRECISION REPAIRS

of his retiring allowance and pen-
sion payout,

Today, as we continue our
summertime series of tax tips, we
find Smith has already grown
bored with golfing and the cot-
tage, and is thinking about getting
back to work — although he
wants some flexibility as to when
and how he works.

“If Smith sets himself up as
self-employed, he could save or
defer thousands of dollars in tax,’”
Luongo said. ‘‘He needs to know
how to start out, what deductions
to claim and whether he can pay
family members in a lower tax
bracket to work for him.”’

Note: Use this information to
prompt further research on how
the relevant strategics might apply
to your situation and what specific
steps you should take.

In many cases, you should also
seck the advice of a tax expert —
especially when large amounts of
money could be involved.

(@ YEAR-END. When you start
your own business, you may
choose any date as your year-end
and the first year needn't have 12
months.

Smith expects to make about
$75,000 a year after taxes. ‘“‘If he
chooses a year ending Jan. 31,
1994, he won’t have to report his

enter the business world.

In conjunction with YWCA, the
Western Businesswomen’s
Association currently offers an
annual $1,000 scholarship to
young women showing an interest
in business.

REAL ESTATE

WHILE: SALES activity has
slowed down from fast year’s re-
cord-setting pace, the Greater

Vancouver real estate market re-

mains healthy, says Derek Innes,
regional B.C. manager of the
Vancouver-based National Real
Estate Service.

His comments follow the release

of the company’s summer 1993
B.C. lot price survey, which com-
pares average prices in June 1993
and October 1992. for 33-foot,
66-foot, 70-foot, half-acre and
waterfront lots throughout B.C.
“While sales were down about
10% from last year, Innes said
homes priced below $300,000 con-
tinue to be in strong demand. He

‘ added the condominium market is

also very strong.

“Affordability remains a key
factor for potential Greater Van-
couver homeowners, which is why
the condominium and townhouse
markets continue to be so active,”

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CONSULTATIO

Be

income until the 1994 tax year,”’
Luongo said. ‘‘Assuming he has
no other income or deductions,
that means he won't have to pay
his $25,500 tax bill unti! April 30,
1995.

“But there could be a further
saving if Smith chooses a year end
so that his total taxable income
will be $29,500 in year one — to
take advantage of the lowest tax
bracket — with the remaining
$45,500 in the second year. That
would reduce his tax bill over the
two years to about $17,950 — a
saving of $7,550."

Hi EXPENSES, When you are
self-employed, you may deduct
any reasonable expense incurred to
earn business income — office
supplies, car expenses (the rules
are so complex I'll devote a com-
plete column to them later in this
series), other travel, promotion
and so on.

There are some limits. For ex-
ample, if you take potential clients
out for meals or a hockey game,
you may claim only 80% of the
expense.

You normally cannot deduct the
cost of equipment but instead,
each year claim depreciation: a
percentage of the cost.

-Keep all receipts and be
prepared to show how these ex-

Prices for single-detached
homes have risen about 20%
overall in Greater Vancouver this
past year, with some areas such as
Richmond experiencing price hikes
of up to 27%.

Activity in the high-end market,

e Se

penses had a reasonable chance of
producing new or increased
business.

As long as your business has ‘“‘a
reasonable expectation of profit,”
even if expenses exceed income
you should be able to deduct the
loss from your other income. If
you have no other income, you
may carry back the loss three
years or forward up to seven years
to claim the deduction against
income in those years.

@ HOME OFFICE. As long as the
work space at home is your prin-
cipal place of business, or used
exclusively to carn income from
the business and used regularly to
meet clients or customers, then
you may deduct a reasonable por-
tion of home expenses — any
mortgage interest or rent, property
taxes, heat and light, insurance
and so on.

“*But be careful about claiming
capital cost allowance (deprecia-
tion),’’ said Luongo. ‘‘This could
affect your claim for the principal
residence capital gains exemption
when you eventually sell.”

If your business loses money,
you aren’t allowed to claim home
office expenses that year, although
you may be able to claim them
against future income from the
business.

News - 35

& SPLITTING INCOME. Pay
family members who are in a
lower tax bracket to work in your
business. You deduct this expense,
they declare the income. This can
save the family as much as $500
for every $1,000 paid.

Pay them what you’d pay an
outsider to do the same work.
You may have to withhold and -
remit payroll deductions like in-
come tax, CPP and possibly UIC.
WG GST. If business revenue will
exceed $30,000, you must register
for (charge, collect and remit) the
Goods and Services Tax.

But that means you may also
claim “input credits’? for the GST
you pay on your business pur-
chases. You can often use one of
the simplified systems and ‘‘may
even get a cash benefit from using
one of the quick methods,”
Luongo said.

Even if business revenue is
$30,000 or fess, it could be to your
advantage to register for the GST.

Mike Grenby is a North Shore-
based columnist and independent
financial adviser who works with
individuals; he will answer your

. questions as space allows — write

to him c/o The North Shore ,
News, 1139 Lonsdale Ave., North
Vancouver V7M 2H4,

EEL ENC T

in particular, has been sluggish in
recent months and some price
correction is anticipated in that
area, Innes said.

He added that the taarket is not
expected to crash as it did in
1981-82 but added that the cur-
rent slow-down in sales activity is

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“Low interest rates, a stable
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1993,”’ said Innes.

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