(March 23, 2004) The federal budget is being billed by advisors as the non-event of the year. While filled with tiny tidbits, the “wow” factor was missing, according to many advisors contacted by Advisor.ca.

That said, sometimes no news can be good news. For instance, advisors are breathing a sigh of relief that Ottawa didn’t change the tax incentives for individual clients’ income trust holdings (although they have limited pension fund participation to 5%).

“I have quite a few clients who have [these trusts] and there’s been a concern about what happens if the government takes away the tax incentives for investing in income trusts,” says Clark Shewfelt, vice-president and senior investment advisor with Wellington West Financial in Surrey, B.C. “So this is great news.”

Jim Rogers, chair of Vancouver-based Rogers Group Financial, is also relieved about income trusts. “They are an emerging vehicle for retirees looking for income and are well off not having been taxed more.”

The budget’s educational initiatives were also seen in a positive light, although most advisors’ client bases admittedly aren’t lower income families. But Heather Clarke, director of financial planning for Investors Group in Winnipeg, notes the Canada Learning Bond and the increased Canada Education Savings Grant amounts to lower income families will boost awareness of RESPs. “More people will want to open up RESPs,” she explains. “Financial planners may be approached by new prospects who want to start one. It’s just another reason to go back to clients and encourage them to start saving for education.”

Amin Mawani, a CFP and associate professor of taxation at York University in Toronto, concurs. “Many families cannot afford not to start saving for their children’s post-secondary education,” he says. “Right now, I see [people in their mid-twenties] who are $70,000 in debt after an MBA degree. That’s a quarter of a mortgage.”

Small business owners will be happy the $300,000 low income deduction rate will be put in place next year instead of 2006. “Every dime counts with small business owners,” notes Anthony Windeyer, a CFP and business, insurance and estate planning specialist with Coast Capital Savings in Vancouver. He plans to design programs to help his clients keep under or at that $300,000 threshold.

Federal Budget

Advisor Al Nagy was pleased that Canadian soldiers will no longer pay income tax while on high-risk missions overseas, since he has a few clients who will be directly affected. “I have 24 [client] families who work for the military, some of whom are clients based in Afghanistan,” says the CFP with Investors Group Financial Services in Edmonton. “They’re excellent clients from the point of view that they’re really focused on saving.”

Overall, Rogers applauds the prudence of this budget. “[Finance Minister] Ralph Goodale is continuing to balance the budget and seems committed to reducing the federal debt-to-GDP ratio over the next 10 years,” he says.

However, Rogers would have liked to have seen tax prepaid savings plans fleshed out more. “It should have warranted some consideration on their part because it’s a useful idea that has already gone past the concept stage,” he says.

Rogers also wishes the government would have more incentives in place for those who want to save more than the standard RRSP contribution limits. “Canadians who have the wherewithal to save more for retirement have not been well served by the federal government,” he says.

In that vein, Windeyer would like to see rewards for clients who are taking their financial security into their own hands, such as purchasing long-term care insurance, instead of relying on public homecare facilities. “In the U.S., you can deduct a portion or all of the premiums for long-term care,” he notes. “Here, the government still has not made it tax deductible.”

What do you think about today’s federal budget? Share your thoughts about Goodale’s offering with your peers in the Talvest Town Hall on Advisor.ca.

Filed by Deanne N. Gage, Advisor’s Edge, deanne.gage@advisor.rogers.com, with files from Heidi Staseson.


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