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The Liberals retain power in Ottawa with promises for new policies and tax plans. Kim Parlee speaks with Nicole Ewing, Director, Tax and Estate Planning, TD Wealth, about the potential impact on your personal finances.
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- Canadians have voted, and another Liberal minority will be in place. Here to give us her take on what this could mean from a personal finance perspective is Nicole Ewing. She's director of Tax and Estate Planning at TD Wealth. Nicole, great to see you. I know that election platforms don't always translate into policy, simply because of, as I mentioned, it's a minority government. But what caught your attention?
- Yeah. And that's exactly-- again, we've had the opportunity to review the platform. We've digested it. We've heard from the party. But we don't yet know what it's actually going to look like when we see any of that legislation in place. And so many of the platform initiatives will require updates to legislation, or perhaps new legislation. And the devil's in the details, right? So we know that sometimes that legislation doesn't exactly mirror what we understood the initial objectives to be. So we'll be waiting to see what that actually looks like and, with a minority government, what level of compromise needs to be made.
But big picture, this was a lot about real estate. There's certainly a lot of initiatives that we should be paying attention to on the real estate front, so a big one being the tax-free first home savings account, which is a bit of a hybrid between the TFSA and an RSP. This is for first homebuyers who are under age 40 to allow them to do 40,000 of savings on a tax-free contribution and tax-free withdrawal basis, we think. We also saw a moratorium on foreign property ownership, so preventing some of that speculative, perhaps, investing in our markets, preventing the non-recreational residential properties from being purchased by non-residents for two years.
We have a home flipping tax that's being talked about for properties that we've owned for less than 12 months, lower mortgage insurance rates, which is good news to a lot of individuals, where we'll see CMHC insurance rates reducing by 25%. More real estate, we had rent to own initiatives being talked about, increased oversight to combat the money laundering in the real estate space. So a lot of real estate initiatives, certainly, but that's not the whole story.
So we did see-- we're hearing about what some are calling a wealth tax, essentially a minimum tax on those income earners who could be subject to the top rate but have, through the use of excessive credits and deductions, reduced their rate. What's interesting in that space is we already have an alternative minimum tax. It's been on the books for decades now, and is utilized.
So it will be interesting to see how this initiative will differ, will it apply to different people or in a different manner than what we already have on the books. And then really, a lot of, again, investment in preventing abuse of tax measures or tax avoidance. So putting more resources into CRA to combat that sort of planning. So I think real estate is the big story, but there's a whole lot in there, as well, a lot of individual credits and deductions that people will want to familiarize themselves with and pay attention to.
- You mentioned the top, and some of the key things I think people should pay attention to, but one of them also is that it is a minority government. If you are required, when bringing out policy, to compromise, cooperate, however you talk about it, and the policy veers, let's say, left of center, if we take a look at the NDP platform, they talked about increasing the capital gains tax inclusion from 50% to 75%. So for you, as a tax professional, how do you digest this to figure out what you need to be watching?
- Well, you know, this has been a topic of conversation for many, many election cycles now. We've seen-- a 75% inclusion rate is not entirely unheard of. We have that in our history, that that was a rate at one time. But the Liberals have not indicated that that's something that they want to pursue at this time. It's something that people may want to pay attention to. If you are looking at divesting yourselves of significant capital property in the relatively near future, you may want to think about your timing on that sort of thing. But you know, including increasing the inclusion rate, it has been done. It's been talked about for a long time. But it wasn't part of the Liberals' platform, so what we'll see to what extent that compromise or cooperation veers us in that direction.
And the NDP also had some other-- their platform is quite different from the Liberals, their wealth tax very different than it's conceived of by the Liberal Party. They were looking at a 1% tax on those who have household assets above 10 million, which it was 20 million in 2019, it's 10 million now, so you can see the direction that the NDP is going with there, and to whom that would capture. But so many details would need to be really looked at in terms of what property is included in that, how are valuations being done, who is this going to apply to, what does the administration look like. So a very different, I'd say, proposal than the Liberals have come forward with.
- Nicole, I've only got about 30 seconds, but you know, when someone's listening to this, I mean, is there-- and you alluded to this in terms of when you talked about the capital gains rate inclusion, you know, you may want to do this, or you could do this. How do you figure out, if someone's listening to this, should I be doing something right now. And I'm going to-- and I know the answer is talk to an advisor because you've got to figure out your situation.
- That is my answer. It's always my answer. And this is where the real value of working with professionals in this space comes to fruition, is when we're looking at these broad policy initiatives or plans, how do they apply to me as the individual, and my personal circumstances? Am I looking at buying a yacht, or a boat, or a luxury vehicle this year? Then maybe what I need to pay attention to is a little bit different. Am I looking to support my senior family members in their aging years? I'll be looking at different things in the budget-- or pardon me, in the platform that would apply to me.
So working with professionals who understand your personal situation, understand what's important to you, know where you're currently at. And when we have financial plans-- so a proper financial plan has contemplated so many of these what ifs, what if things change in the future. So we don't need to plan in a vacuum, we don't need to do any kind of knee-jerk reactions to this, but work with our professionals who understand our personal circumstances and can advise us appropriately.
- Nicole, thanks so much.
- Oh, my pleasure.
[MUSIC PLAYING]
- Yeah. And that's exactly-- again, we've had the opportunity to review the platform. We've digested it. We've heard from the party. But we don't yet know what it's actually going to look like when we see any of that legislation in place. And so many of the platform initiatives will require updates to legislation, or perhaps new legislation. And the devil's in the details, right? So we know that sometimes that legislation doesn't exactly mirror what we understood the initial objectives to be. So we'll be waiting to see what that actually looks like and, with a minority government, what level of compromise needs to be made.
But big picture, this was a lot about real estate. There's certainly a lot of initiatives that we should be paying attention to on the real estate front, so a big one being the tax-free first home savings account, which is a bit of a hybrid between the TFSA and an RSP. This is for first homebuyers who are under age 40 to allow them to do 40,000 of savings on a tax-free contribution and tax-free withdrawal basis, we think. We also saw a moratorium on foreign property ownership, so preventing some of that speculative, perhaps, investing in our markets, preventing the non-recreational residential properties from being purchased by non-residents for two years.
We have a home flipping tax that's being talked about for properties that we've owned for less than 12 months, lower mortgage insurance rates, which is good news to a lot of individuals, where we'll see CMHC insurance rates reducing by 25%. More real estate, we had rent to own initiatives being talked about, increased oversight to combat the money laundering in the real estate space. So a lot of real estate initiatives, certainly, but that's not the whole story.
So we did see-- we're hearing about what some are calling a wealth tax, essentially a minimum tax on those income earners who could be subject to the top rate but have, through the use of excessive credits and deductions, reduced their rate. What's interesting in that space is we already have an alternative minimum tax. It's been on the books for decades now, and is utilized.
So it will be interesting to see how this initiative will differ, will it apply to different people or in a different manner than what we already have on the books. And then really, a lot of, again, investment in preventing abuse of tax measures or tax avoidance. So putting more resources into CRA to combat that sort of planning. So I think real estate is the big story, but there's a whole lot in there, as well, a lot of individual credits and deductions that people will want to familiarize themselves with and pay attention to.
- You mentioned the top, and some of the key things I think people should pay attention to, but one of them also is that it is a minority government. If you are required, when bringing out policy, to compromise, cooperate, however you talk about it, and the policy veers, let's say, left of center, if we take a look at the NDP platform, they talked about increasing the capital gains tax inclusion from 50% to 75%. So for you, as a tax professional, how do you digest this to figure out what you need to be watching?
- Well, you know, this has been a topic of conversation for many, many election cycles now. We've seen-- a 75% inclusion rate is not entirely unheard of. We have that in our history, that that was a rate at one time. But the Liberals have not indicated that that's something that they want to pursue at this time. It's something that people may want to pay attention to. If you are looking at divesting yourselves of significant capital property in the relatively near future, you may want to think about your timing on that sort of thing. But you know, including increasing the inclusion rate, it has been done. It's been talked about for a long time. But it wasn't part of the Liberals' platform, so what we'll see to what extent that compromise or cooperation veers us in that direction.
And the NDP also had some other-- their platform is quite different from the Liberals, their wealth tax very different than it's conceived of by the Liberal Party. They were looking at a 1% tax on those who have household assets above 10 million, which it was 20 million in 2019, it's 10 million now, so you can see the direction that the NDP is going with there, and to whom that would capture. But so many details would need to be really looked at in terms of what property is included in that, how are valuations being done, who is this going to apply to, what does the administration look like. So a very different, I'd say, proposal than the Liberals have come forward with.
- Nicole, I've only got about 30 seconds, but you know, when someone's listening to this, I mean, is there-- and you alluded to this in terms of when you talked about the capital gains rate inclusion, you know, you may want to do this, or you could do this. How do you figure out, if someone's listening to this, should I be doing something right now. And I'm going to-- and I know the answer is talk to an advisor because you've got to figure out your situation.
- That is my answer. It's always my answer. And this is where the real value of working with professionals in this space comes to fruition, is when we're looking at these broad policy initiatives or plans, how do they apply to me as the individual, and my personal circumstances? Am I looking at buying a yacht, or a boat, or a luxury vehicle this year? Then maybe what I need to pay attention to is a little bit different. Am I looking to support my senior family members in their aging years? I'll be looking at different things in the budget-- or pardon me, in the platform that would apply to me.
So working with professionals who understand your personal situation, understand what's important to you, know where you're currently at. And when we have financial plans-- so a proper financial plan has contemplated so many of these what ifs, what if things change in the future. So we don't need to plan in a vacuum, we don't need to do any kind of knee-jerk reactions to this, but work with our professionals who understand our personal circumstances and can advise us appropriately.
- Nicole, thanks so much.
- Oh, my pleasure.
[MUSIC PLAYING]
