On April 7th, 2022, Federal Finance Minister Chrystia Freeland tabled her second budget. Due to the financial expense of the pandemic and strong headwinds from geo-political concerns in Europe and Asia, expectations were rampant that new taxation measures would be required. To the surprise of many, we did not see these significant measures tabled. There were no increases to the capital gains inclusion rate, and other than extending alternative minimum tax for those with incomes greater than $400,000 where they are paying low taxes through aggressive planning, much of what was anticipated was not included in the 2022 budget.
For GBL clients and advisors, we did not find any measures within the budget that impacted Individual Pension Plans (IPPs), Health Benefit Plans (HBPs), Fair Market Valuations (FMVs) or Retirement Compensation Arrangements (RCAs). There have, however, been measures in the last two budgets that would impact taxation of stock options. For many sectors like Tech or Mining, companies often used these options to impede cash flow and incentivize executives to remain with the company. As taxation of profits over $200,000 would not receive the capital gains tax treatment, unfunded benefit arrangements, such as Supplemental Executive Retirement Plans (SERPS), which can be paid out with an RCA, may offer a tax efficient solution as an alternative to options.
It is important to note that modernizing the General Anti Avoidance Rules (GAAR), through consultation, has been tabled in the budget. IPPs and RCAs are well defined in the income tax act and can be alternatives to more aggressive planning.
At GBL, we focus on solutions for clients which provide safe solutions for uncharted economic waters.
Founded in 1995, GBL is a leading provider of retirement, health, and cross-border solutions for business owners across Canada. With offices in Calgary and Toronto, we have served 6,000+ clients, have 3,000+ Financial/Investment Advisors in our network, actively manage 2,000+ IPPs and RCAs, and have created 1,000+ HBPs and 3,000+ FMVs. We’re known for our industry leading client service and administration, as well as our top-notch actuarial group. Contact us today at [email protected] or 403.249.1820 and follow us to learn how we can help Build Your Future.