Summary:
In this episode of Financial Planning for Canadian Business Owners, Jason Pereira, award-winning financial planner, university lecturer, writer, and host interviews Kim Moody, Director of Canadian Tax Advisory Services at Moodys Gartner Tax Law in the Calgary area. Kim Moody talks about the expertise that Moody Gartner offers, the general percentages of taxation that businesses face, the differences in paying dividends and salaries, the Kiddie Tax rule, and what to know before paying family members.
Episode Highlights:
● 01:07: – Kim Moody explains Moodys Gartner and what they do.
● 02:05: – How are corporations taxed in Canada?
● 03:47: – What is the tax benefit of not taking money out personally against the business?
● 05:09: – Kim talks about the limit of $50,000 in passive income.
● 08:38: – Why is the belief that paying dividends is better than paying income a fallacy?
● 12:00: – Corporations are giving up their CPT contributions if they are paying out dividends and giving up the ability to earn RST.
● 13:26: – What does it take to pay a salary or dividend to a family member?
● 15:37: – How have the rules changed for paying dividends to family members?
● 20:15: – Kim Moody talks about the Kiddie Tax rule.
● 22:13: – The average business owner makes less than $70,000 a year to take care of their families and generally work more than a 40-hour work week.
● 26:06: – It is not about being careful what you wish for, it is about what is best for the country.
3 Key Points
1. Moodys Gartner has a very strong Canada-United States bench handling
anything in the cross borner private client space, with offices in Toronto, Edmonton, Calgary,
2. Corporations are taxes on active business income, generated in Canada, then the first $500,000 is subject to a preferential rate which varies by province but is typically 10%. Anything over that is taxed at the general rate between 25-27%.
3. There is a limit of $50,000 in passive income that a small business can make before it starts to potentially suffer because they will pull back on the ability to use the lower tax rate.
Tweetable Quotes:
● “Moodys Gartner is a tax law firm. We also have a companion accounting firm, Moody's Private Client and we service private clients, high net worth and ultra high net worth private clients at a tax specialist level.” – Kim Moody
● “Maximize the referral by not taking those funds out so that ultimately you maximize and use the time value of money so when you ultimately do take the money out and pay another level of personal tax, you are dealing with more” – Kim Moody
● “Would you pay an arm’s length person the same amount of money for the same services? If the answer is yes, then more than likely that salary that you are paying to the family member is reasonable, then all is well.” – Kim Moody
Resources Mentioned:
● Facebook – Jason Pereira’s
● LinkedIn – Jason Pereira’s
● jasonpereira.ca – Jason Pereira’s
● Linkedin – KimMoody
● moodystax.com – Moodys Gartner Tax Law
● FintechImpact.co – Website
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