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No risk = Loss
Some people are more comfortable with money sitting in a 2%
GIC account. Did you know that while you are protected from
the crazy swings in the capital markets, you might in fact
be in a loss position?
Why? See this example:
| Principal (Beginning of year) |
$50,000 |
| Plus: Annual Interest (2%) |
$1,000 |
| Less: Income Tax (46%) |
$460 |
| Less: Inflation
(2%) |
$1,000 |
| Net cash at end
of year |
$49,540 |
($50,000 x 2%)
CDIC Insurance
Effective February 23, 2005 the amount of deposit insurance
coverage in Canada Deposit Insurance Corporation (CDIC) member
institutions has risen to $100,000 (formerly $60,000). However,
CDIC insurance does not cover stocks, corporate or government
bonds, foreign currency deposits or mutual funds. Hence, your
GIC or term deposit is covered to the tune of $100,000 if
the bank goes bankrupt in many cases.
Strong Canadian Dollar = Cross Border Shopping
On July 5, 2004, the Canadian US exchange rate was 1.3256
and on September 26, 2005, the rate was 1.1724. With the strong
dollar, you could benefit by purchasing and importing major
capital items, for example, expensive cars and equipment from
the States. In addition to paying duty, Goods and Services
Tax and Ontario Sales Tax when you import the item, you might
also have to modify the car to meet the Canadian safety standards.
Despite all these expenses, you could still save approximately
$10,000 if you purchase a brand new Porsche Carrera from the
States ($115,650 from a Canadian dealer vs $106,000 from the
States). Ensure equipment warranty extends to Canada on your
equipment purchases.
Payroll Service
If you have been performing the payroll function in house,
you realize how much time and effort is involved. Consider
engaging an outside payroll service company e.g. Ceridian
and ADP to perform these functions. The cost for the payroll
service is roughly $50 - $70 per month and it will likely
save you or your staff approximately 1.5 - 2.0 hours per month.
Instead of doing the payroll yourself, have an outsider to
do it and focus your attention on providing dental services.
You should be able to generate $5,400 - $7,200 per year based
on $300 per hour compared with the small savings of $600 -
$840 per year.
Salaries Paid in Kind
A court case in 2005 concluded that salaries ($7,000) paid
to each of the taxpayer's sons could be in kind (in this case,
motorcycles and snowmobiles) as well as in money. Despite
this court case, the best defensive measure is to provide
proper documentation i.e. cancelled cheques and T4.
Surge Protectors to Protect Your Wallet
Consider buying surge protectors for all expensive equipment
and other equipment which serves as the lifeline to your practice
including:
| 1) |
telephone
answering system |
| 2) |
computers |
| 3) |
alarm
monitoring system |
The need is further increased due to recent power outages.
Sewer Backup
Ensure that your property insurance covers sewer backup and
theft including that perpetrated by your employees. Review
deductibles.
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