Tag Archive for: education

financial literacy

Unlocking Business Success: The Power of Financial Literacy for Entrepreneurs

As entrepreneurs and small business owners, you wear many hats, from marketing mavens to product developers. It’s impossible to be an expert in every aspect of your business. Still, there is one area that will pay huge dividends on the investment of time you make: financial literacy.

Financial literacy isn’t just about crunching numbers. It’s about understanding those numbers well enough to steer your business in the right direction. And in the unpredictable world of business, that understanding is priceless.

In this post, we’ll delve into the importance of financial literacy for small business owners, highlighting how mastering the basics can lead to smarter, more informed business decisions. So, whether you’re a seasoned business owner or just starting out, let’s embark on this financial journey together.

The Direct Impact of Financial Literacy on Business Success

Financial literacy is more than just a buzzword; it’s a foundational skill that can make or break a small business. Let’s dive into how understanding the financial ropes directly influences your business’s success.

Improved Cash Flow Management

Cash is the lifeblood of any business. A U.S. Bank study found that a whopping 82% of small businesses fail due to poor cash flow management1. By understanding the nuances of your cash inflow (sales, investments) and outflow (expenses, purchases), you can predict potential shortfalls and take proactive measures. It’s not just about making money; it’s about ensuring that money is available when you need it.

Informed Decision Making

Have you ever been of two minds about investing in new equipment or hiring more staff?

Financial literacy equips you with the tools to make these decisions confidently. By understanding your financial statements, you can gauge the health of your business, assess profitability, and determine the feasibility of big-ticket expenses. It’s like having a financial compass guiding you toward decisions that align with your business goals.

Risk Management

Every business faces financial risks like fluctuating market conditions or unexpected expenses. Being financially literate equips you to identify those risks early on.

For instance, if you’re aware of market trends, you might foresee a potential dip in sales and adjust your spending accordingly. Or, by regularly reviewing your financial statements, you might spot irregularities that could indicate fraud. Financial literacy acts as your business’s early warning system, helping you navigate potential pitfalls.

The Indirect Benefits of Financial Literacy

While the direct impacts of financial literacy, like cash flow management and risk assessment, are often in the spotlight, the indirect benefits can be just as transformative for small business owners. Let’s delve into these often-overlooked advantages.

Enhanced Confidence in Decision Making

When you understand your finances, you’re not just making decisions; you’re making informed decisions. Imagine being at a crossroads, unsure of which path to take. Financial literacy is like having a map, giving you the confidence to choose the right direction.

Better Relationships with Financial Institutions

Banks and creditors love working with informed clients. When you demonstrate a clear understanding of your financial position, it not only makes their job easier but also builds trust. This can lead to better loan terms, faster approvals, and even potential partnerships. Think of it this way: would you rather lend money to someone who knows exactly how they’ll pay you back or someone who’s just hoping for the best?

Long-term Business Sustainability

Financial literacy isn’t just about the here and now; it’s about the future. By understanding financial trends and the broader economic landscape, you can make strategic plans for growth and expansion. It’s like planting seeds today for a harvest tomorrow. Businesses prioritizing financial education tend to have a more sustainable growth trajectory, ensuring they’re not just a flash in the pan but a lasting presence in the market.

How to Improve Your Financial Literacy

Improving your financial know-how is more accessible than you might think. Here are some ways to chart your course to become more financially savvy.

Educational Resources

The digital age has blessed us with many resources at our fingertips. From online courses on platforms like Coursera and Udemy to insightful books like “Financial Intelligence for Entrepreneurs” by Karen Berman and Joe Knight, there’s no shortage of material to dive into.

Hiring a Professional

Sometimes, the best way to learn is from someone who’s been there and done that. Consider hiring an accountant or financial advisor, even just for a few consultation sessions. They can provide personalized insights, answer specific questions, and guide you through the intricacies of your business’s finances.

Plus, having an expert on speed dial can be a game-changer during those “I’m not sure what to do” moments.

Continuous Learning

The financial landscape is constantly evolving. Regulations change, new tools emerge, and market dynamics shift. Dedicate some time each month to stay updated. Subscribe to financial news outlets, join business forums, or attend workshops. By committing to continuous learning, you ensure that your financial knowledge doesn’t just grow but stays relevant.

In essence, improving financial literacy is a journey, not a destination. Whether you’re diving into online courses, seeking expert advice, or simply staying updated, every step you take strengthens your business’s foundation.

If you focus on developing and maintaining your financial literacy, the positive impact on your business will be profound.

If you’d like to have a conversation to help you get started, book a free consultation. We’d be happy to offer some advice.

Registered Retirement Savings Plan VS. Tax-Free Savings Account—What’s The Difference?

Both the Registered Retirement Savings Plan (RRSP) and the Tax-Free Savings Account (TFSA) allow you to build savings in a tax-sheltered environment. So, what are the differences between the two – and when does it make sense to invest in one over the other?

The purpose of the RRSP, as its name states, is for long-term savings for your retirement. The TFSA is a more flexible vehicle to save for more immediate goals, such as buying a new car, house, or creating an emergency fund. And it may also be used to save for retirement.

Who Is Eligable?

The RRSP has no minimum age, but you must have “earned income” in the prior year to create contribution room. Earned income includes income from employment, self-employment and certain other sources, and is reduced by some employment-related expenses, and business and rental losses. The RRSP matures in the calendar year in which you turn 71.

For the TFSA, you can begin contributing as of age 18, and there is no maximum age.

How Much Can You Contribute?

With an RRSP, you can contribute up to 18% of your earned income in the preceding year, up to a maximum annual limit ($27,830 for 2021). Your contribution room is reduced when you have an employer-sponsored pension plan. The contribution for the year must be made by the 60th day of the following year – so, close to the end of March – and you can carry forward any unused contribution room indefinitely.

Keep in mind that if you overcontribute to your RRSP by more than $2,000, there is a penalty of 1% per month. You can deduct up to the greater of your actual contributions and your contribution limit for the year from your taxable income, reducing the amount of tax you pay on other sources of income.

TFSA contributions must be made by December 31 of the relevant year. Here are the annual contribution limits:

2009-12               $5,000

2013-14               $5,500

2015                  $10,000

2016-18               $5,500

2019-21               $6,000

Similar to RRSPs, unused TFSA contribution room can be carried forward. For example, if you turned 18 in 2018 and have never contributed to a TFSA, your limit in 2021 is $23,500 ($5,500 + $6,000 + $6,000 + $6,000).

And as with an RRSP, you also face a 1% per month penalty if you go over your contribution limit.

Withdrawing from The Fund?

With an RRSP, you may be able to withdraw funds to buy your first home or finance a return to school without being liable for taxes right away.

  • The Home Buyers Plan (HBP) allows you to withdraw up to $35,000 to help pay for your first home; you pay this money back into your RRSP through instalments over 15 years.
  • Under the Lifelong Learning Plan (LLP), you can withdraw up to $10,000 in a calendar year, to a maximum total of $20,000, to finance full-time education or training for you, or for your spouse or common-law partner. These funds must be paid back through instalments over 10 years.

Any unpaid instalments for either the HBP or LLP are added to your taxable income for that year. Any other withdrawals from your RRSP are also included in your taxable income in the year that you receive them, and you cannot re-contribute that amount once you have withdrawn it.

Just as there was no tax deduction for TFSA contributions, you do not pay tax on TFSA withdrawals. You can recontribute the withdrawn funds to your TFSA in a subsequent year (just not the same year you withdrew it). The amount withdrawn gets added to your contribution room for future years.

How Does Having A Spouse Help?

If you have a spouse or common-law partner, you can invest up to your contribution limit to a spousal RRSP. Generally, the amounts your spouse withdraws from these plans would be included in their taxable income, rather than in yours. Some restrictions apply.

If there is a significant difference between the incomes of two spouses, the spousal RRSP can minimize the total tax that the family pays in retirement by splitting income between one spouse in a higher tax bracket and the other in a lower tax bracket.

There are no spousal TFSAs. However, you can give money to your spouse for their own TFSA contribution and the income earned will not be subject to tax.

When To Invest In One VS The Other?

There are many factors that would affect whether investing in your RRSP rather than your TFSA may make sense, and these can be quite complex. Here are some general factors that you may consider helpful.

YOUR TAX BRACKET

If you are in a higher tax bracket when you are making the contribution and expect to be in lower tax bracket when you will be withdrawing the funds, the RRSP can offer significant advantages. But if you are in a lower tax bracket when contributing, those benefits will not be as great – though you still benefit from deferring tax from the year you made the contribution to the year that you withdraw the funds.

YOUR TIMELINE FOR WITHDRAWAL

The timeline for when you expect to need the funds is another important factor. When your RRSP matures in the year that you turn 71, you have two options for relief from being liable for taxes immediately: You may transfer the balance in the account to a Registered Retirement Income Fund (RRIF), or use it to purchase an eligible annuity.

RRIF plans require that you withdraw a minimum amount each year, based on your age. It’s also worth noting that any RRSP or RRIF withdrawals or annuity payments are added to your taxable income and may trigger a 15% clawback of the Old Age Security for income above a certain amount ($79,845 in 2021).

While the HBP and the LLP offer you some flexibility to access your RRSP funds without paying tax, the TFSA is much more flexible since you can withdraw funds on a tax-free basis and recontribute them in a future year.

YOUR INVESTMENT TYPE

Your choice of investment type may also affect your choice of RRSP vs. TFSA. For example, if your portfolio includes United States stocks, their Internal Revenue Service (IRS) recognizes the RRSP as a retirement savings account and does not withhold tax on the dividends you receive.

On the other hand, the IRS does not recognize the TFSA in the same way, so there will be a 15% withholding tax charged on those dividends. There is no foreign tax credit to offset that 15%, as there would be for investments in a non-registered account.

The RRSP and the TFSA are both important savings vehicles for Canadians. Understanding the differences between the two can help you make the decision when to use either (or both!) to meet your savings goals.

Disclaimer:
Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

BC Employer Training Grant Program

Training and educating employees can quickly become an expensive process which may make it difficult for them to access the skills training programs needed to keep up with labour market demands. To help increase access to these programs and help ease the financial burden that training may have on employers, the government of British Columbia offers the British Columbia Employer Training Grant program.

Employers may receive a reimbursement of 60-100% of eligible training costs up to $300,000 per fiscal year (April 1 – March 31). To qualify, the employer must pay all the training and training-related expenses, in full, and submit a reimbursement application with itemized receipts before the training program has begun. Training and educational programs must improve employee job-related skills that lead to a job for an unemployed person or a better job for a current employee. Further information regarding the program and access to the online application portal can be found by clicking here.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Coping With Stress - Avisar Charter Professionals

6 Simple Ways To Cope With “New Normal” Stress

We can all agree that adapting to the changes brought by the coronavirus has been stressful for all of us. But what does it mean when we acknowledge that we are “stressed out”? And what can we do to cope as we continue to navigate these unusual times?

For almost a year now, we’ve had to rearrange our schedules, homeschool our children, isolate from our loved ones and deal with empty store shelves. The most stressful part is likely living with the fear that our loved ones could be harmed by this virus.

Of all the things the pandemic has taught us, we’ve learned that what is most important to us as human beings is our health and well-being. And while we’ve been adjusting to keep ourselves and our families safe, we’ve had to endure an incredible amount of stress along the way. How does that affect our health?

Let’s paint a picture … imagine you’re camping, and you encounter a grizzly bear. Your family is in the tent, but you’re outside making a fire before the sun goes down. You lock eyes with that grizzly bear, and your body immediately releases the stress hormones adrenaline and noradrenaline, and the more critical measure of stress, cortisol – lots of it. Your heart races, your breathing quickens, your pupils dilate, and you focus on nothing else but the situation at hand.

Your automatic response will be one of two things: Stand your ground and scare off the grizzly, or slowly back away and get the heck out of there with your family. This response is what is commonly known as the “fight or flight” response. Now, that’s an extreme example, but that same physiological response is triggered on a lesser scale when you encounter daily stressors. When that becomes chronic, your body is constantly in fight-or-flight mode, which can lead to a slew of health problems down the line. There is a reason stress is called “the silent killer.”

How Stress Manifests Day-to-Day

You might be thinking, “I can handle my life. I don’t feel stressed out.” The problem with chronic stress is that it manifests in small ways that we become so used to, that we don’t even realize it’s happening! Here are some ways you can tell you’re battling chronic stress:

ENERGY

  • You wake up feeling unrefreshed.
  • You have difficulties getting out of bed in the morning (even after 8-plus hours of sleep).
  • You have difficulties falling and/or staying asleep.
  • You find yourself unable to keep up with work the way you used to.
  • You are experiencing “brain fog.”
  • Exercise makes you more tired.

NUTRITION AND DIGESTION

  • You often crave salty or sugary foods.
  • You have difficulty digesting your food.
  • You often have heartburn or reflux.
  • You are constipated and/or have loose stools.

PHYSICAL AND MENTAL HEALTH

  • You are gaining or losing weight (without trying).
  • You are less interested in sex.
  • You often get sick or acquire infections.
  • You are becoming more irritable and impatient.
  • You are starting to experience more physical pain.
  • You are experiencing low moods, making it difficult to find joy in life.
  • You are having panic attacks.

If any of these seem familiar to you, you could be dealing with symptoms of chronic stress and maybe even burnout. The response I talked about earlier – the release of adrenaline, nor-adrenaline and cortisol – is an adaptive response that helps us survive.

The problem is, when we are chronically stimulating the release of cortisol, it affects how our bodies function by influencing changes in our hormones, the function of our gut (think: gut-brain connection) and changes in the neurotransmitters in our gut and brain. This negatively affects our mood, our energy, our sleep quality, our blood sugar and blood pressure, our digestion and so much more.

What Can You Do To Ease Your Stress?

Taking a step back from daily duties to allow yourself to heal would work wonders; but, as a professional, I know that’s nearly impossible. Gathering with loved ones, going out for a social outing, or travelling are usually great stress relievers for people, but these, too, are near-impossible in the world’s current climate.

But there are some measures you can take that are proven to decrease stress and help get you back as much normalcy as possible:

  • Meditate! If you haven’t yet tried it, or are skeptical, it can be difficult to get into. However, studies have proven that meditation can decrease cortisol levels. As a stress-relief method, it’s both effective and free!
  • Try a cortisol-managing supplement. Just remember to always first get advice from a naturopathic doctor (ND) on which supplement is right for you. Each supplement marketed for stress will affect your cortisol levels in different ways.
  • Decrease your caffeine intake. I know, I’m sorry. Caffeine can mimic the symptoms of stress and anxiety. Try to keep it to just one cup of dark roast, black or green tea per day.
  • Have a regular bedtime. Melatonin, the hormone that helps you fall asleep, works on an opposite cycle with cortisol: When melatonin is high, cortisol is low, and vice versa. Try wearing some blue light-blocking glasses to get that melatonin flowing every evening!
  • Do nothing for 15 minutes per day. And I mean nothing. Don’t eat, clean, read or use your phone. Find a spare 15 minutes to allow your mind to rest. This is an alternative if you’re resistant to meditation.
  • Exercise. Unless you are at the point where exercise exhausts you, 30 minutes of exercise per day is a proven way to decrease your cortisol levels and help manage your stress. You can combine this with the previous 15-minutes tip – go for a walk and, instead of listening to music or a podcast, let your thoughts keep you company.

While we cannot change many of the factors that are causing us stress, these small lifestyle adjustments are still within reach.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

The Latest In Antivirus Technology: What You Need To Know

The need for antivirus protection came to us just shortly after computers started talking to each other. For years most people needed to install and maintain an up-to-date antivirus program to remain unaffected by malicious activity. Cybersecurity threats have advanced significantly since then. Fortunately for us, a new generation of defences has evolved along with them.

What’s Wrong With Traditional Antivirus Solutions?

Most of us know what antivirus solutions do for us. We may not all know the technical details, but we get it. Special software is needed to protect your computer (often referred to as an “endpoint”) from malicious intent that may lie in wait. Antivirus software is installed on a computer and, as long as it is updated regularly, it monitors files for bad code and quarantines them if issues are detected.

This essential premise has not changed – you still need to protect yourself against malicious code being propagated by nefarious individuals; what has changed is the method of attack, what is attacked and the resulting outcome.

Traditional antivirus has become a victim of its own success. Attackers now know where the defence is installed and how it scans and searches for the viruses, and they have exploited the fact that traditional software relied on “updates,” or signature files that told the antivirus software what to look for. In most cases this meant looking for a particular bad file that had been unwittingly installed.

The traditional defence also came into play primarily during the scan, when the antivirus software would run scheduled investigations looking for trouble. What this meant was that, in the time between scans, there was vulnerability.

Since then, traditional antivirus software has become susceptible to newer attack scenarios like:

  • memory-based intrusions
  • PowerShell scripting language weaknesses
  • macro-based attacks
  • remote log-in masking and cracking

What Are “Next Gen” Antivirus Solutions?

The single largest advantage of next-generation antivirus (NGAV) solutions is that they not only prevent many different types of attacks, but they also are no longer tied to the target computer and can actually learn from attacks as they happen.

While traditional defensive software depended on the placement of a file (or the manipulation of code in an existing file), NGAV no longer has this limitation, as it is focused on events.

Events involving things like processes, applications, network connections or even files are monitored and malicious intent is determined based on how these events change as the result of attacks.

NGAV is a significant step forward in several aspects:

  • First, NGAV applications tend to be cloud-based. This means a lower dependency on local installations, and new information can continually, and more quickly, be shared with all subscribers – no need to wait for scheduled updates.
  • Second, NGAV has taken advantage of advancements in the area of machine learning. Essentially, the NGAV programs are capable of learning what the normal operation of your programs looks like and able to identify deviations caused by malicious code.

The newer capabilities also include some extremely complex advancements in the areas of threat intelligence and behavioural analysis. These carry extreme value in that the systems are able to monitor and identify not just malicious programs, but also the impacts those programs have.

Essentially, any changes impressed on the target system are identified right away by the impact they have. Rather than the system needing to wait for a file definition update to tell it there is new malicious code to watch for, the NGAV discerns the change in normal operation and takes action. With this significantly improved threat intelligence, the defence can be executed lightning fast.

NEXT GEN VERSUS TRADITIONAL

The biggest difference between the traditional and NGAV programs is one of timing. Traditionally, your defences were reactive to intrusion: Attackers developed a new way to attack, and once those attacks were encountered, studied and built, updates were made available to prevent those exact problems in future. With the machine learning and artificial intelligence of new systems, a proactive approach is now available.

The advantages of NGAV are furthered by the fact that business networks, and even those at home, are increasingly more interconnected with various types of devices. It is commonplace now for even small to medium-sized (SMB) organizations to have multiple layers of connected devices.

Servers, computers, mobile devices and network gear all create entry points for malicious software and need to be protected. Before NGAV, each one of these would need its own versions of antivirus software, and each would come with its related maintenance and updates.

Closing Thoughts

Cybersecurity importance has continued to rise over the last few years. Ransomware, malware and denial of service attacks are on the rise, and smaller organizations are just as vulnerable as larger targets. Even most business insurance companies are now offering cybersecurity coverage due to the prevalence of these activities. Without proper coverage, your data – including customer and transactional details – can be copied, shared or held for ransom. But with these next-generation antivirus solutions, you can help protect your electronic assets.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Fed Budget 2021 Personal measures

Federal Budget 2021: Personal Measures

COVID-19 Benefit Amounts – Tax Treatment

Budget 2021 proposes to allow individuals the option to claim a deduction in respect of the repayment of a COVID‑19 benefit amount for the year when the benefit was received, rather than the year in which the repayment was made. This option would be available for benefit amounts repaid at any time before 2023.

For these purposes, COVID-19 benefits would include:

  • Canada Emergency Response Benefits (CERB) / Employment Insurance Emergency Response Benefits;
  • Canada Emergency Student Benefits (CESB);
  • Canada Recovery Benefits (CRB);
  • Canada Recovery Sickness Benefits (CRSB); and
  • Canada Recovery Caregiving Benefits (CRCB).

Individuals may only deduct benefit amounts once they have been repaid. An individual who makes a repayment, but who has already filed their income tax return for the year in which the benefit was received, would be able to request an adjustment to the return for that year.

Canada Recovery Benefits (CRB)

Budget 2021 proposes the following in respect of CRB:

  • The maximum CRB would be extended by 12 weeks to a maximum of 50 weeks. The first four additional weeks will be paid at $500 per week, with subsequent weeks paid at $300 per week. All new CRB claims after July 17, 2021 would receive the $300 per week benefit, which will be available until September 25, 2021.
  • The maximum Canada Recovery Caregiving Benefit would be extended by 4 weeks, to a maximum of 42 weeks, paid at $500 per week.
  • Legislative amendments would be made providing the authority for additional potential extensions of CRB, EI and related programs until November 20, 2021.

Employment Insurance (EI)

Temporary Measures

Budget 2021 proposes to extend many of the temporary EI measures commenced in 2020, including:

  • Maintaining a 420-hour entrance requirement for regular and special benefits, with a 14-week minimum entitlement for regular benefits, and a new common earnings threshold for fishing benefits.
  • Simplifying rules around the treatment of severance, vacation pay, and other monies paid on separation.
  • Extending the temporary enhancements to the Work-Sharing program such as the possibility to establish longer work-sharing agreements and a streamlined application process.

Other Benefits

  • Sickness benefits would increase from 15 to 26 weeks, as of summer 2022.
  • Self-employed fishers who submit an EI claim for the winter 2021 fishing benefit period would have extended temporary eligibility for the entire benefit period.

Consultation on long-term changes

Consultations on long-term reforms to EI will be commenced, focusing on the need for income support for self-employed and gig workers; how best to support Canadians through different life events such as adoption; and how to provide more consistent and reliable benefits to workers in seasonal industries.

Disability Tax Credit (DTC)

Budget 2021 proposes several changes which would provide broader access to the DTC. These proposals would apply to the 2021 and subsequent taxation years, in respect of DTC certificates filed on or after Royal Assent.

Mental Functions

The DTC is generally available to individuals who are markedly restricted in their ability to perform a basic activity of daily living due to a severe and prolonged impairment in physical or mental functions.

Budget 2021 proposes to expand the definition of mental functions necessary for everyday life to include: attention, concentration, memory, judgement, perception of reality, problem-solving, goal-setting, regulation of behaviour and emotions, verbal and non-verbal comprehension, and adaptive functioning.

Life-Sustaining Therapy

Individuals can qualify for the DTC where they undergo therapies that have a significant impact on everyday life. Under current rules, the therapy is required to be administered at least three times/week for a total duration averaging at least 14 hours a week.

Also, only certain types of therapy are allowed to be included in this computation.

To better recognize additional aspects of therapy for this computation, Budget 2021 proposes to:

  • expand the types of activities which can be included in the 14 hour per week minimum to include:
  • medically required recuperation after therapy;
  • activities related to determining dosages of medication that must be adjusted on a daily basis, or determining the amounts of certain compounds that can be safely consumed;
  • the time reasonably required by another person to assist the individual in performing and supervising the therapy where the individual is incapable of performing therapy on their own due to the impacts of their disability; and
  • reduce the requirement that therapy be administered at least three times each week to two times each week, retaining the requirement that therapy require an average of not less than 14 hours a week.

These proposals would apply to the 2021 and subsequent taxation years, in respect of DTC certificates filed on or after Royal Assent.

Canada Workers Benefit (CWB)

The CWB is a non-taxable refundable tax credit that supplements the earnings of low- and modest-income workers.

Budget 2021 proposes to enhance the CWB by, for example, by increasing the phase-out thresholds for individuals without dependents and families (from $13,194 to $22,944 and from $17,522 to $26,177, respectively in 2021). The phase-out rate is also slightly increased. Corresponding changes would be made to the disability supplement.

Budget 2021 also proposes to introduce a “secondary earner exemption” to the CWB which would allow the spouse or common-law partner with the lower working income to exclude up to $14,000 of their working income in the computation of their adjusted net income, for the purpose of the CWB phase-out.

These measures would apply to the 2021 and subsequent taxation years. Indexation of amounts would continue to apply after the 2021 taxation year, including the secondary earner exemption.

Northern Residents Deductions (NRD)

Budget 2021 proposes to expand access to the travel component of the NRD. Under the current rules, the claim is limited to the amount of employer-provided travel benefits the taxpayer received in respect of travel by that individual.

Under the new approach, a taxpayer would have the option to claim, in respect of the taxpayer and each “eligible family member”, up to a $1,200 standard amount that may be allocated across eligible trips taken by that individual, allowing individuals with no employment benefits to claim this deduction.

For residents of the Intermediate Zone, this effectively becomes a $600 standard amount.

An eligible family member would be an individual living in the taxpayer’s household who is the taxpayer’s spouse or common-law partner, their child under the age of 18, or a related individual who is wholly dependent on them for support and is either their parent or grandparent or dependent by reason of mental or physical infirmity.

Claims would still be limited to the least of this new number, the total expenses paid for the trip and the cost of the lowest return airfare to the nearest designated city.

This measure would apply to the 2021 and subsequent taxation years.

Postdoctoral Fellowship Income

Budget 2021 proposes to include postdoctoral fellowship income in “earned income” for RRSP purposes. This measure would apply in respect of postdoctoral fellowship income received in the 2021 and subsequent taxation years.

This measure would also apply in respect of postdoctoral fellowship income received in the 2011 to 2020 taxation years, where the taxpayer submits a request in writing to CRA for an adjustment to their RRSP room for the relevant years.

Defined Contribution Pension Plans – Fixing Contribution Errors

Budget 2021 proposes to provide more flexibility to plan administrators of defined contribution pension plans to correct for both under-contributions and over-contributions. This measure would apply in respect of additional contributions made, and amounts of over-contribution refunded, in the 2021 and subsequent taxation years.

Other Measures

Budget 2021 also announced plans for a wide variety of other programs, including:

  • Child Care – Providing new investments totaling up to $30 billion over the next 5 years, and $8.3 billion ongoing for Early Learning and Child Care and Indigenous Early Learning and Child Care, with the goal of providing regulated child care for $10/day on average, within the next five years.
  • Student Loans – Extending the waiver of interest accrual on Canada Student Loans and Canada Apprentice Loans until March 31, 2023 and extending the doubling of the Canada Student Grants until the end of July 2023.
  • Home Renovation Loans – Providing interest-free loans of up to $40,000 to homeowners and landlords who undertake retrofits identified through an authorized EnerGuide energy assessment. This program will also include funding dedicated to support low-income homeowners and renters including cooperatives and not-for profit owned housing. The program would be available by summer 2021.
  • Old Age Security Enhancements – Providing pensioners who will be age 75 and older as of June, 2022 with a one-time additional payment of $500 in August 2021. Budget 2021 then proposes to increase regular OAS payments for pensioners 75 and over by 10% on an ongoing basis as of July 2022.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

All About CASL

What You Need to Know About Canada’s Anti-Spam Law

Almost every business sends electronic messages. If yours is one of them, you must be familiar with Canada’s anti-spam legislation (CASL). Though the legislation has been fully in effect since July 1, 2014, there remains a lot of confusion around it. CASL affects every type of business from private enterprises to not-for-profit groups and charities.

Who Does CASL Affect?

CASL’s anti‐spam provisions affect everyone who sends commercial electronic messages (CEMs) to, from or within Canada. A CEM is any electronic message that encourages participation in a commercial activity, regardless of any expectation of profit.

The term is “tech‐neutral;” in other words, it applies to emails, text messages, social media and other similar forms of communication. The general rule is, unless exempt under the legislation, a sender must have the consent (either express or implied) of the recipient before sending a CEM.

Why Should You Care?

There is a reputational risk if your business or not-for-profit group breaks the law, but CASL also allows for the imposition of rather significant fines. The maximum penalty for a breach by an individual is $1 million and for an organization is $10 million.

In addition to the potential risk posed to your business or not-for-profit group, the legislation also imposes what is called “vicarious liability”. This means that not only is the organization that violates the law held accountable but so are its officers and directors, and employers are responsible for the actions of their employees. This means that any of these individuals may also be fined.

Does The General Public Care?

The Canadian Radio-television and Telecommunications Commission (CRTC) is responsible for the enforcement of CASL. Between April and September 2018, the CRTC received 137,000 complaints. That’s more than 5,000 complaints each week, which represents a lot of very annoyed consumers.

While not every complaint will result in an investigation and the imposition of a fine, you don’t want to be on the receiving end of either. Significant fines have already been imposed. The first instance occurred in 2014, when a Quebec business was fined $1.1 million for sending emails in violation of the legislation. Very few businesses can survive paying a penalty of that size.

Consent

As noted above, unless you fit within one of the exceptions set out in CASL, you must have the recipient’s consent before sending a CEM.

There are two categories of exceptions:

  • exceptions where neither consent nor mandatory content rules apply
  • exceptions where mandatory content rules apply but consent is not required

You can’t request consent if you don’t have consent

Unless you fit within one of the exceptions, you must have the recipient’s express or implied consent in order to send a CEM. It should be noted that a CEM asking for consent is still a CEM. In other words, you need consent in order to send such a request.

Express consent means that you expressly agree to receive CEMs. That consent can be oral but only if it is verified by a third party or recorded. Consent must not be bundled with terms and conditions. This means that, for example, it is insufficient to include the consent in the terms and conditions accepted to buy goods or use a service.

Further, opting‐out isn’t enough. People have to opt‐in to receive CEMs. In other words, people must take an active step to signify their consent. This could include checking a box or typing in a word or email address.

Implied consent

Examples of implied consent include the following:

  • existing business relationship if you either:
  • purchased services within the past two years
  • made an enquiry within the past six months
  • existing non‐business relationship if in the past two years, you either:
  • made a donation or gift to, or performed volunteer work for, a charity registered under the Income Tax Act or a political party
  • were a member in a “club,” “association” or “voluntary organization”

It should be noted that clubs, associations and voluntary organizations are non‐profit entities organized and operated exclusively for the social welfare, civic improvement, pleasure, or recreation or for any purpose other than personal profit if no part of their income is payable to any owner, member or shareholder.

Mandatory content of CEMs

Subject to certain exceptions, each CEM must contain the following information:

  • the sender’s name, telephone number and email / web address, as well as their affiliates and beneficiaries
  • a physical mailing address, which remains accurate for at least 60 days after the message is sent
  • an unsubscribe mechanism

The unsubscribe mechanism must be “readily performed.” This means that it must be quickly accessible, simple and easy to use. It is very important to keep the communication distribution lists up to date. If someone has unsubscribed, you must remove them from your distribution list. Any opt‐out or unsubscribe request must be honoured “without delay” and, at a maximum, no later than 10 business days after it is received.

Exceptions to Consent and Mandatory Content Rules

The exceptions to the requirements for mandatory content and consent are few and narrowly defined. A few such exceptions include the sending of CEMs:

  • solely as an inquiry or application regarding recipient’s existing commercial activities
  • between employees, representatives, consultants or franchisees of an organization regarding the organization’s activities
  • to enforce a right
  • by a charity that is registered under the Income Tax Act and has fund raising as its primary purpose

Exceptions With Mandatory Content But Consent Not Required

You are exempt from the consent requirements but must comply with the mandatory content requirements if you are sending a CEM to:

  • provide a requested quotation
  • facilitate, complete or confirm a commercial transaction that the recipient previously agreed to enter
  • provide warranty, recall or safety info about a purchase
  • provide info about an existing employment relationship or related benefits

Conclusion

CASL is complicated legislation. This overview is intended to highlight the most important provisions in a simple way. It does not cover all the details. In order to ensure that you are in compliance with CASL, you must review the legislation and its regulations in their entirety and seek counsel.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Disaster Recovery Planning: Steps to Protecting Your Organization

Disasters come in many shapes and sizes. Natural disasters are certainly caused for concern, but chances are that disruptions to your organization are more likely to involve application, communication or hardware failures.

Properly planning for such unexpected events will not only help you respond effectively; it will also save you a significant amount of money.

What is a Disaster Recovery Plan (DRP)?

The cost structure of potential downtime will dictate many of the specific components of the DRP and where the emphasis needs to be placed. Typically, a reasonable DRP will include the following:

  • formal documented sets of steps, lists and instructions needed to return to normal business operations
  • instructions of a precautionary nature as well as prescribed reactions for recovery
  • list of assets, key applications and data
  • important details, such as locations and other relevant information
  • contact information for all relevant personnel (both internal and external) and key third-party resources

The Business Cost of Downtime

Understanding the cost incurred by the organization when systems go down is crucial to the concept of disaster recovery planning. Building an effective DRP will ultimately involve cost trade-offs, so it is imperative that one understands the dollar impact of specific system downtime and loss scenarios. These costs will vary greatly between businesses of different sizes, industry types and technological complexities. In a recent study, Gartner determined that costs exceeding US$5,600 per minute are possible. When determining these costs (beyond the traditional downtime costs), be sure to consider the following:

  • payroll costs of idle employees
  • overtime after recovery to get business back on track
  • lost revenue that cannot be recouped
  • lost customer trust

Preparing The DRP

The purpose of a detailed DRP is to bring consistency and predictability to unplanned shocks to the business system.

The following is an outline of the steps required to develop your first DRP.

After the Plan is Ready

A DRP is not a static document. If left unchecked, a DRP will quickly become dated and create a false sense of security. Plan deliberate practices of the recovery procedures to ensure proper understanding and effective execution by all stakeholders. Schedule regular reviews, and update the plan as needed. If gaps are present in the plan, work to fill them as your budget will allow. Your environment will change, sensitivity to downtime will evolve, and new technologies will be released – all of which will impact the accuracy and effectiveness of your plan. For that reason, a DRP requires constant re-evaluation and modification to help ensure its success.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Your Credit Score: What Does It Mean?

We’ve all received email ads for websites that can help us find our credit score, with monthly updates, for free. It’s little wonder that many Canadians are now fixated on that three-digit number. Surely a good credit score means that you are on the right path to financial security, right? 

Unfortunately, no! A high credit score is no guarantee that you will not face financial difficulty, or even bankruptcy, in the future. There are many misunderstandings about what the credit score is, what factors affect it and who it was developed for (hint: it’s not you).

What Is A Credit Score?

Credit scores are a product developed by credit bureaus to sell to banks and other lenders as well as insurance companies. They are portrayed as a “measure of trust” – that is, a higher credit score provides lenders with more confidence that you will pay them back. Lenders are primarily interested in maximizing their profitability, which depends on you carrying balances and paying interest as well as paying them back. What’s in their best interest is not necessarily what’s in yours.

The credit bureaus access data from your financial institutions and phone and utility companies. They then apply their algorithms to come up with a three-digit score. Credit scores from different credit bureaus can be different, as they weigh the importance of certain factors differently or use different time frames for your credit history.

What factors affect your credit score?

The most important factor that affects your credit score is your repayment history, accounting for 35% of your score. To have a high score, it is important that you make all required payments on time. However, you get no benefit for paying the balance in full or for making extra payments against a debt. Nor are all payments tracked; for example, faithfully paying your rent on time will not improve your credit score.

Your credit utilization (i.e., the ratio of your credit card balance to your credit limit) accounts for 30% of your score. It is meant to track whether you are getting close to “maxing out” your available credit, which will make you a riskier customer for a new lender. It is suggested that you maintain a balance of no more than 30% of your borrowing limit. Credit utilization only applies to “revolving credit,” such as credit cards and lines of credit. It doesn’t apply to instalment loans, such as mortgages or car loans. Perhaps surprisingly, your credit score does not take into account your salary or other sources of income, though this may be considered by lenders when they determine your credit limit.

The credit score rewards those with a longer credit history, which accounts for 15% of your overall score. It considers the age of your oldest account as well as the average age of all your accounts. It also rewards you for having multiple sources of credit, such as credit cards, car loans and mortgages. This credit mix accounts for 10% of your score.

The number of credit enquiries can impact your credit score. These are distinguished between soft enquiries for non-lending purposes (e.g., by you or a potential landlord) versus hard enquiries (e.g., when you are applying for a mortgage or loan). Isolated hard enquiries will not likely raise any red flags. However, if you apply for a lot of credit in a short period of time, lenders may get concerned that you are shopping for loans and potentially getting in over your head. Other factors that may affect your credit score include your personal stability (e.g., if you move frequently) and your professional stability (e.g., if you change jobs frequently).

It may seem counterintuitive, but paying off your car loan or mortgage or closing an old credit card that you no longer need could have a negative impact on your credit history and credit mix, which may actually reduce your credit score.

These algorithms may result in a scenario where a person who is unemployed, behind on their rent, and has a seven-year car loan that is “underwater” (i.e., the remaining balance on the loan exceeds the current value of the car), but who makes the minimum payments on their credit card every month, could have a higher credit score than someone who has paid off their mortgage years ago and has just one credit card that they pay off in full every month.

How can you improve your credit score?

Once you understand the factors that do and don’t affect your credit score, you can assess whether some of the common suggestions for improving it are in your best interests or in the best interests of the lenders. Obviously, making sure that you make all minimum required payments on all your debts is important to maximize the payment history.

There are several ways that you can keep your utilization rate under the 30% target. You might consider making multiple payments during each month if you have a significant purchase, or if you are approaching the target because of regular charges throughout the month.

Two methods that are often suggested, but should be approached with caution, are to ask for an increase in your credit limit or to take out an instalment loan to pay down the balance on a credit card (which could also have a positive effect on the credit mix factor). Both methods come with the risk of additional borrowing if you are not disciplined about managing your finances. It’s also worth noting that carrying credit card balances of up to 30% of your credit limit means that you will be paying a significant amount of interest each month.

You could improve your credit history by taking out longer loans, but, like many of the other suggestions, this will result in you paying more interest to the banks.

It is important to know your credit score and to check your credit report from each of the credit bureaus annually to ensure that there are no mistakes. Just remember that the credit score was developed by and for lenders and that it was not designed as a measure of your personal financial health.

And those free services with monthly updates? They make money by recommending financial products to consumers, for which they receive a referral fee. Some even have “coaches” to provide personalized tips to improve your credit score and offer product recommendations. So, if you receive a recommendation to get a consolidation loan to pay down your credit card balances, remember that that’s how these services make money. Don’t focus on improving your credit score by making decisions that are in the lenders’ best interest and not your own!

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Canada Emergency Response Benefit For Workers

On March 25, 2020, the Federal Government introduced the Canada Emergency Response Benefit (CERB) to support workers and help businesses to keep their employees.  If enacted into legislation, the CERB would apply to wage earners, as well as contract workers and self-employed individuals who would not otherwise be eligible for Employment Insurance (EI).  This taxable benefit would provide $2,000 a month for up to four months for workers (who grossed at least $5,000 in the past 12 months) who lose their income as a result of the COVID-19 pandemic.  Individuals would be able to apply for the benefit in early April and receive benefits within 10 days of application.    The entire Government announcement can be read here.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.