Underwriters call for a thoughtful approach to business tax and retirement fund changes

The Conference for Advanced Life Underwriting (CALU) has submitted for consideration, a number of recommendations it hopes the federal government will take into consideration when drafting the 2023 budget.

Among its recommendations, CALU calls on the government to support the successful transition of small businesses to family members, review and make changes to Registered Retirement Savings Plan (RRSP) and Registered Retirement Income Fund (RRIF) payment rules, and implement measures to contain costs and make dental care more widely available to Canadians, without hurting employer-sponsored plans.

The first recommendation addresses the government’s concerns that recent changes to the Income Tax Act, intended to facilitate genuine intergenerational transfers of shares, allows tax avoidance.

CALU says many small business owners, over three quarters, plan to retire in the next decade. Children are often groomed in the business and are ready to take over, but until 2021, rules in the Tax Act meant that more tax was paid when businesses were transferred to family, than if they were sold to a third party. The Department of Finance subsequently expressed concern that the exception granted to rectify this is under review, as it believes the Act, as written, could facilitate more tax avoidance. CALU asks the government to ensure that any changes continue to facilitate “genuine intergenerational transfers of shares while preventing tax avoidance.” 

Regarding RRSPs and RRIFs, they next ask the government to consider allowing unused RRSP room to be indexed annually, permit contributions past age 71, defer the requirement to convert an RRSP at age 75 and make more transparent the factors used to establish the minimum RRIF payment formula. It also addresses minimum payout formulas, asking the government to introduce a process for their regular review.

Finally, they advocate for the government to provide dental care plans only to Canadians who do not have any coverage, leaving workplace plans intact. They also advocate for a 35 per cent refundable tax credit, related to the cost of offering employee dental coverage, to qualifying small businesses.