Brice Scheschuk, CPA, CA

For our last (of 4) strategy pieces on advanced RRSP planning, we look at the “meltdown strategy”. This strategy aims to replace excess RRSP assets with non-registered assets, but is the riskier that the others we have discussed because it uses an investment loan (leverage). The meltdown strategy follows the same principal as the preceding posts – it can be more tax efficient over the long-term to spread out RRSP/RRIF withdrawals over more years. This, of course, depends on both your and your spouse’s retirement date. We talked 2-weeks ago about how a spousal RRSP being key if you think your spouse will retire before you…but I digress. For the meltdown strategy, you would obtain an investment loan to be invested in a non-registered account. You would then pay the interest component of the loan by withdrawing (deregistering) the exact same amount of funds from your RRSP. From a tax perspective, you are accomplishing an offsetting income inclusion (RRSP withdrawal) with an interest expense deduction from the loan – because the cash from the loan is invested in a non-registered taxable account, you can write off the interest. Said another way, you’ve created an offsetting income-expense balance, at least in theory (there are withholding taxes on RRSP withdrawals so sizing is key), which is why you should consult your tax professional before implementing anything like this. It is quite simple to create a tax-efficient non-registered account strategy targeting capital gains. Even heavily discounted bonds will accomplish this quite nicely. This is a complex strategy so you’ll need someone reliable to model this out for you, but it has the potential to help you restructure your savings if you find yourself very RRSP heavy.

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I strongly believe that entrepreneurship and innovation are the two things that we need to nurture and encourage in order to drive collective wealth creation for all Canadians in the coming decades. The recent federal budget policies about capital gains are going in the opposite direction as they will have a direct effect to slow down private investments in such a critical sector - the knowledge economy - and ultimately slowdown innovation and the little efforts that could help us bring back Canadian productivity to where it must be to compete on the global stage. This is not a tax on the wealthy, it’s a tax on innovation and entrepreneurship. I encourage all founders, entrepreneurs and investors to sign the letter below.

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The last policy a rational government would do to address a productivity and GDP per capita problem would be to raise capital gain taxes. Canada is not in an enviable spot in this international comparison by McKinsey of productivity growth per employee versus the nation's starting productivity level (Exhibit 3). Compared to advanced economies, Canada ranks poorly for both its level of productivity and its growth rate. Canada needs better government policy to incentivize the private sector to invest, take risk, drive productivity growth and raise the future standard of living for all. The recent federal budget does the opposite. Jock Finlayson John Manley Ted Woodhead David Williams https://lnkd.in/gzDJuJkc

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#Entrepreneurs and #innovators forgo compensation in the short term in order to benefit from the companies they build. Reducing capital gains disincentivizes innovation and drives high growth startups out of Canada. #capitalgains #budget2024 Canadian Lenders Association

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In late 2022, Spearhead Corp Dev decided to take on platform searches, adding to its traditional add-on work for large corporates and portcos of mid-market PE. Up to that point, the EV of live deals for which Cameron Vernest's team collected docs was $10-$20m. Searching for platforms (>$10m EBITDA) would mean the avg live deal size would go up. How much would it move that metric in our overall pipeline, we didn't know. A year later, we now know: it's now north of $35m. We're bumping up against the upper limit of what #outbound on the buy-side is known to yield results. Important to monitor this, and provide that transparency to clients. Another thing we didn't know was: how much harder would it be to actually collect docs from these larger targets? We expected it to be hard, but not as hard as it turned out. Took us a year to get back to our "collected docs" volumes. And this is with a larger team. The challenge of collecting docs for $15m EV targets vs. $35m EV targets is far bigger than the ~2x jump in deal value. It's an obvious conclusion, but its impact across the org continues to be felt. We're better for it, for sure.

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What can I say that has not already been said. This latest salvo to give Canadians a “tax break” is so misguided, it’s tough where to start. 1. The GST break is a total nightmare for small businesses to administer. Refer to the article below for a summary in how this not an insignificant endeavour for small businesses in which many are still in recovery since COVID. (Given the recent capital gains taxation changes to small business, the anti-entrepreneurial narrative continues). It is doubtful the GST break will stimulate increased spending so it is likely to add costs to the entrepreneurs with no corresponding increases in revenues. 2. The $250 cheque to Canadians is the bigger head-scratcher. This populist measure (of desperation?) is already attracting alot of debate. Anywhere from why do they need to do this for people earning just under $150,000 or why are the excluding it for people on fixed incomes, on disability etc. But what cometh will be taken away when the increase in the carbon tax takes effect April 1, 2025. This $6.3BB outlay (together with the GST break) comes at a time when the government has overspent $24BB this year and has yet to announce exactly how much they have blown past the guardrails in their deficit spending in 2024. The Parliamentary Budget Officer is still waiting for the overdue report in how bad is the deficit this year. What ever happened to the fairness for future generations?? This last ditch effort to try to turn around very bleak polling for the government by mortgaging the future for the next generation is not good public policy. We need to reduce wasteful spending, reform our taxation system, and execute a prosperity agenda so that we can grow the economic pie for future generations. https://lnkd.in/gekT_tNZ

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Canada's economy is experiencing a concerning trend as both domestic and foreign investors are pulling out at a record pace. Canada has so much to offer and there is no reason we shouldn't be leading the pack. Solution: let's get back to the basics. Set a vision and build an anti-fragile economy. what are your thoughts.... Check out the full article here: https://lnkd.in/ens5cnSk

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Chrystia Freeland, Justin Trudeau, as a young Canadian, I can assure you that the #capitalgains tax increase will have the opposite effect of your intentions. I mean this politely and with compassion but you are not well-informed enough. I will continue advocating against this change until a public statement is made regarding its broader impact on Canadian #purchasingpower. Please listen to your public. We need to be lean to avoid further diminishing our countries purchasing power and to get our #realGDP growth back on track! We have already seen that these programs that will build the homes suffer from #procurement and #incentive issues such as the #ArriveCan app. Now is not the time for you to lend more for these programs its the time to make them happen with what we have, if I can do it so can you. I will continue to advocate for a more informed decision regarding its long-term effects on purchasing power. I encourage everyone to sign the petition for its removal. Sign the petition here: https://lnkd.in/gKWhAqf7 Read the issue of purchasing power here: https://lnkd.in/g4qCg6hy CCing Pierre Poilievre, Danielle Smith, Government of Canada, Office of the Prime Minister of Canada | Cabinet du premier ministre du Canada, Office of the Deputy Prime Minister and Minister of Finance of Canada, Sean Fraser Reference: https://lnkd.in/gS-Gvp75

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This is unforgivable. What will also be unforgivable is that no one will be held accountable. If you breached corporate policy like this in the private sector, you would be summarily fired. With this scale of breach, senior management would also go. #trudeaumustgo #ethics #procurement

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Even the FT notices Canada sorry plight! A warning from the breakdown nations Outside of Canada, the common view is not that bullish. "Take Canada first. Widely admired for how it weathered the global financial crisis of 2008, it missed the boat when the world moved on, driven by big tech instead of commodities. Canada’s per capita GDP has been shrinking 0.4 per cent a year since 2020 — the worst rate for any developed economy in the top 50. New investment and job growth is being driven mainly by the government” Jim Thorne added this: ‘The FT unloaded on Canada in this article. The average Canadian is over exposed to Canada. Until the Liberal/NDP coalition is gone and the damage is accessed my suggestion is that investors outside of Canada will continue to pull money from this market. Global Capital markets do not have home biases.’ Our market is cheap but not cheap enough due to how it is run. It also does help having radical and economically damaging policies here in BC.

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Targeting small businesses, founders, and entrepreneurs is wrong. The Canadian government's new capital gains tax increase (with small new exemptions for "certain" entrepreneurs) makes no sense. This is cynical politics and even worse economics.  >> It will not only affect (if it even actually affects) the 400,000 "rich" Canadians that they say they are targeting. Many of those who will actually pay the increased taxes are small business owners and entrepreneurs who rely on creating value in their companies so that they can sell them to fund their retirement. Their capital gains taxes will increase by 50%, jeopardizing their retirement. >> It will negatively affect and disincentivize capital formation and investment in Canada. It penalizes entrepreneurs and founders who usually "get paid" for their work and risk-taking when they sell their company and receive a capital gain. >> Importantly, it will reinforce the view held by many that Canada is not open for business—that this government does not care about innovation, entrepreneurship, or small business. This may lead our best and brightest to look to go to other countries to build and grow their businesses. This will cost Canada jobs and intellectual capital. >> Moreover, it will likely not even raise the $19 billion they assume (many of the "rich" people they supposedly are targeting with large capital gains will find ways to move their assets out of the country or take other measures to dodge or minimize the tax). As I noted above, it will target those who are working to build our economy. >>There may be a transitional increase in tax revenue for the government in the next two months as taxpayers sell some assets ahead of the June 25 deadline. These windfalls will not likely recur. >>This does nothing at all to improve our growth - even before this misguided policy, the OECD - OCDE predicted Canada would be the worst performing advanced economy over the next decade…and the three decades after that. >> John Ruffolo says this will "devastate a generation of founders." The National Post, Inc. reports that Jack Mintz and David Dodge agree that this federal budget is “one of the worst in decades.” Chrystia Freeland, Justin Trudeau and the Government of Canada: it is not too late to fix this. Don’t fund your programs on the backs of those Canadians who are risking everything and trying, against growing odds, to create a more prosperous future for themselves and our country. Shame.

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This Q1, 2024 venture capital(VC) data shows some disturbing, alarming even, developments in Canada's VC land. 74% of VC investments from abroad, materially up from long-term trends. Federal budget 2024 measures unlikely to reverse this development. VC fundraising 1/2 VC investments - so, unsustainable even with the $200 mm. Budget commitment. Cleantech investments treading water(at best) despite huge public sector push. This likely due, in part to higher cost of capital for a relatively high capital consumption sector plus ongoing uncertainty over fate of SDTC.

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This article speaks volumes about what is wrong with the two-tier Ontario educational system. On the one hand our public system is chronically underfunded while the catholic system is running surpluses (this is taxpayer money, by the way) and wasting taxpayer money on overpriced religious art and $45,000 diligence trips by trustees who know nothing about art. Personally, I consider this a breach of public trust. https://lnkd.in/g6XYGYg4

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My thoughts on $BCE, some ways we're positioning around it as a trade, today's market sell off after sleeping on yesterday's FOMC, and some hedged strategies we've been deploying via $IWM and $HEQT via BNN Bloomberg https://t.co/Urv9bRCeKy

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Wake up folks!-The NDP is putting BC’s very existence at risk. by Geoffrey S. Moyse KC The hidden radical reconciliation agenda is a threat to the province’s land base and society. (Quite the commentary from a retired senior lawyer who served as legal counsel to the Province of BC, advising six successive governments on Aboriginal law for 30 years. I also hear that the compensation discussions are using numbers that have The Treasury Board alarmed) I know that it is already happening in marine fisheries.....it won't come all at once but in less obvious transfers of control...and those that are going to be most affected are not in the room during these discussions because of the 'nation to nation' status of the negotiations. The general public has no concept of the implications of BC's DRIPA (Declaration of the rights of indigenous peoples act), which flowed from the UN declaration of the rights of indigenous peoples (UNDRIP). This UN goal had no legal basis in the UNDRIP form, but once national or other senior governments passed the law affirming it, like BC's DRIPA, it became the law.

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