Wednesday, April 3, 1991 — North Shore News - 514

SINESS

Deductions are the key to getting GST credit

IT’S TIME to take another look at the Goods and Services
Tax — with an eye to saving and making as much money

as possible whether you are employed,

don’t work outside the home.

Evelyn Jacks, author of Jacks
on GST (McGraw-Hill, $48.95),
says consumers can’t avoid the
GST, short of buying fewer goods
and services.

“So concentrate on lowering
your (family) net income as much
23 possible to enable you to claim
some or all of the GST credit —
which can run as high as several
hundred dollars a year,’* said the
Winnipeg-based Jacks, who
manages Canada's largest cor-
fespondence tax school as well as
education, policies and procedures
for the 120 branches of U & R
Tax Services.

Even if family net income is
more than around $25,000, you
should still qualify for some of
the GST credit.

“To help reduce that net in-
come figure, which appears on
Jine 236 of your tax return, make
sure you claim every possible
deduction,’” said Jacks.

Look for, among others, max-
imum RRSP contributions, safe
deposit box rental, interest paid to
buy Canada Savings Bonds on the
payroll plan, all eligible moving
expenses, child care expenses
(which can include, within limits,
summer camp costs) and so on.

self-employed or

Michael
Grenby |

DOLLARS AND SENSE

If you are an employee who can
claim travel, promotion, office in
the home and other expenses, ‘‘be
sure to keep track of all reccipts
and show the GST you pay,”’
Jacks said.

“Starting with this, 1991, tax
year, you will be able to file a
separate GST rebate form when
you do your tax return at the
beginning of 1992.°* That will pay

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off because a full rebate of the
GST is worth more than merely
deducting the amount.

For example, fet’s say you pay
$321, which includes $21 GST,
and you are in the 45-per-cent tax
bracket.

If you simply deduct the $321,
you will reduce your tax by
$144.45 (45 per cent of $321). But
if you claim your GST rebate,
your total tax savings will be $156
(rebate of $21, plus 45 per cent of

said consultants,
freelancers and people whe run a
small business out of their homes
appear to having the most trouble
with the GST.

“If your self-empioyment in-
come is less than $30,000, you
don’t have to register for the
GST,” she said. ‘‘But that means
you are not allowed to claim input
tax credits for the GST you pay
out on your business expenses.

‘Because you can’t recover this
extra cost, you probably have to
raise your prices — which your
customers may not like.’’

The reason? Most businesses
charge GST on the goods and ser-
vices they sell. So they claim an
input tax credit for the GST paid
on goods and services they buy
from consultants and other suy.-
pliers.

But if the suppliers don’t charge
the GST and simply raise prices,
the businesses end up with a
deduction rather than a combina-
tion of deduction and tax credit
~~ as in the previous example.

Let’s say you charge Company
A $1,000 for the work you do. If
you are registered to collect GST,
you can claim an input tax credit
for the GST you pay on your
business expenszs. You also add
$70 GST to your $1,000 bill.
Company A cun then get the $70
back by claiming an input tax
credit.

But if you are not registered
under GST, you cannot claim an
input tax credit for the GST you
pay on your business expenses. So
you raise your $1,000 price by $70
to compensate you for your GST
expenses. In this case, because the

extra $70 is a price increase rather
than a GST increase, Company A
cannot claim back the $70 as an
input tax credit.

So Company A (if it’s in the
45-per-cent tax bracket) ends up
with only a $31.50 tax reduction
instead of a $70 tax rebate. If
Company A is a family business,
in the 23-per-cent tax bracket, the
tax reduction is only $16.10 — in-
stead of $70.

Even if your self-employment
income is below the $30,000
threshold which requires GST reg-
istration, it could still make sense
for you to register — not only so
you can claim input tax credits for
the GST you pay on your business
expenses but also so your custom-
ers can claim full credits rather
than the smaller tax breaks pro-
vided by deductions.

Mike Grenby is a Vancouver-
based columnist and independent
personal financial adviser; he will
answer your questions as space
allows in his column — write to
him c/o North Shore News, 1139
Lonsdale, North Van. V7M 2H4.

As apartment owners, we get to deliver

The government has said there will be no
GST on residential rent. What they didn’t say is that it wil/ be
on most services and products that go into supplying
and maintaining your rental unit. That means increases in all
those costs- which we have to pass on to our renters.

the bad news. Take the GST.

They get their GST. We get the flack.

Like any other business, we fuce regular cost increases.
Like any other business, we must pass these on to ourcustomers
or we'll quickly be out of business. And if that happened,
there'd be even less rental accommodation than there is now.
These days, cost ticreases are a fact of everyone's life.
When it comes to rent increases, we're usuully just the messenger.

VALUE

oa

f ' GREATER VANCOUVER APARTMENT OWNERS’ ASSOCIATION |