Training & Practice Management / Formation et gestion d’une pratique (continued from page 48)
Nature of Investments Owned and the Investment Income Generated The stage you are at in your professional practice will impact the nature of investments held by your professional corporation, and the investment income or gains generated from such. • Growing a young practice and the need to access cash or investment capital for assets or improvements; • Managing a stable practice; or • Winding down a mature practice and gearing up for retirement. In growth years, your wealth advisor has options in recommending certain investment structures depending upon your needs – is there a chance the invested funds may be needed in the short term, or are they for retirement? In the latter instance, investment structures are available that minimize realized income and gains. Such investments would be more focused on capital appreciation, and aligned with your investment mandates. Your tax professional should be aware of an investment’s nature of return and not be quick to judge in cases where realized income is minimal and accrued and unrealized capital gains are significant: that may be the whole point. For those managing a stable practice, managing the $50,000 (or upper threshold of $150,000) is key. Your wealth advisor and tax professional should discuss the quantum of your compensation, where your investment capital should be held (personal versus corporate), and managing your corporate tax rate proactively.
With the introduction of the TOSI measures, corporate Individual Pension Plans (IPPs) and life insurance are more readily recognized and recommended as investment structures to: • shelter or minimize corporate passive income; • and set the stage for retirement or other wealth transfer measures. For physicians nearing retirement, the $50,000 (or upper threshold of $150,000) should not be a significant concern, as the professional corporation will no longer be generating active business income. Provided it is not associated with another active business corporation, the clawback of the active business tax rate will be a non-issue. In the two to three years leading up to retirement, collaboration between your wealth and tax advisor is crucial as investments, and the nature of investment income should be re-evaluated. At this stage, the focus is on “de-accumulation” and generating passive income that flows easily from the professional corporation, now characterized as an investment holding company, to the shareholder. Once you cease practicing, as active income is no longer generated, the ability to pay salaries ceases and only dividends are paid to you as the shareholder. As outlined above, there is not one black-and-white answer addressing physicians’ compensation or corporate investment strategies in response to the TOSI provisions. With all things “tax”, it depends… Both your wealth advisor and tax professional should be asking you questions that foster dialogue that allows them to identify what is important to you, and tailor their investment and tax recommendations to deliver best outcome.
The information in the article has been provided to the COA by O’Neill Financial Inc. and COAplan Inc. It is always recommended to seek independent advice related to your particular circumstances as necessary.
Upcoming COA/CORS/CORA Annual Meeting Dates Dates de la prochaine Réunion annuelle de l’ACO, de la SROC et de l’ACRO 2019
Combined with the 2nd ICORS Meeting June 19-22 juin CORA Meeting/Réunion de l’ACRO June 19 juin Montréal, QC www.2019icors.org
2020
2021
June 3-6 juin
June 16-19 juin
CORA Meeting / Réunion de l’ACRO June 3 juin Halifax, NS
CORA Meeting / Réunion de l’ACRO June 16 juin Vancouver, BC
COA Bulletin ACO - Spring / Printemps 2019
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