Submitted by a member - with thanks - Dec 2006

E-News Nov. 8, 2006
Georgian Bay Chapter

Chairman’s Report

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It all started in Collingwood in 2003

Pension Splitting is now Canadian law!

Pension Splitting was signed into law at 6:07 PM, Nov 7 2006 in the House of Commons by a vote of 184 Yeas and 84 Nays. (Liberals opposed)

The portion applicable to pension splitting is the following:

4. Pension income splitting

Canada's income tax system generally requires each individual taxpayer to report and pay tax on all of the income they earn. This is the case even if the individual, like many Canadians, actually uses much of their income to support other family members. The current system gives some limited relief for taxpayers in this situation, for example through tax credits for the support of a spouse or common-law partner or dependent children, but it still attributes the income itself exclusively to the person who earns it.

Recognizing the special challenges of planning and managing retirement income, and to provide targeted assistance to pensioners, this package includes a new mechanism for pension income splitting.

The measure will allow any Canadian resident who receives income that qualifies for the existing pension income tax credit to allocate to their resident spouse (or common-law partner) up to one-half of that income. This measure will significantly increase the incentive to save and invest for family retirement security.

For individuals aged 65 years and over, eligible pension income includes lifetime annuity payments under a registered pension plan, a registered retirement savings plan or a deferred profit-sharing plan and payments out of or under a registered retirement income fund. For individuals under 65 years of age, eligible pension income includes lifetime annuity payments under a registered pension plan and certain other payments received as a result of the death of the individual's spouse or common-law partner.

For income tax purposes, the amount allocated will be deducted in computing the income of the transferor (the person who actually received the pension income) and included in computing the income of the transferee (the person to whom some or all of the pension income is allocated). Since it will in many cases increase the transferee's

tax payable, both persons must agree to the allocation in their tax returns for the year in question.

The pension income splitting allocation will be available for the 2007 and subsequent taxation years, and must be made one year at a time.

For the complete Government announcement click here:

<http://www.fin.gc.ca/news06/06-061e.html
http://www.fin.gc.ca/news06/06-061e.html

To read how it happened read Toronto Star editorial, click here:

<http://www.thestar.com/NASApp/cs/ContentServer?pagename=thestar/Layout/Article_Type1&c
=Article&cid=1162939814356&call_pageid=970599109774&col=Columnist969907622164
http://www.thestar.com/NASApp/cs/ContentServer?pagename=thestar/Layout/Article_Type1&c
=Article&cid=1162939814356&call_pageid=970599109774

To read National Post "Bad news obscures the great news", columnist Jonathan Chevreau, click here:

<http://www.canada.com/nationalpost/columnists/story.html?id=a74f609e-17bb-43ef-bd12-573db38e903c
http://www.canada.com/nationalpost/columnists/story.html?id=a74f609e-17bb-43ef-bd12-573db38e903c

For BDO Dunwoody background on new legislation; Income Trusts,

Pension Splitting and Seniors' Tax Credit, click:

http://www.bdo.ca/library/publications/tax/fastfacts/06-05.cfmhttp://www.bdo.ca/library/publications/
tax/fastfacts/06-05.cfm

Adjust your tax installments:

I am advised by Kurt Oelschlagel, CA, TEP, BDO Dunwoody that you can adjust your Income-Tax Installments for 2007 when you file your 2006 return by estimating the calculations that splitting pension income will have if you choose that option. In this way you can reduce the amount in your 2007 quarterly payments. You are, of course, responsible for any penalties if you choose other than the estimate prescribed by Revenue Canada.

We strongly recommend that you consult your financial advisor and/or accountant for advice on how to optimize your personal situation

Thanks to all our supporters from all political parties. If you have not already done so I recommend that you thank Minister Flaherty for his courage and decisiveness on the Pension Issues. To remain non partisan we cannot endorse any political party but we can acknowledge when some politicians have the courage to do the right thing. Helena Guergis, Bruce Stanton, Patrick Brown and Larry Miller supported the issue. Garth Turner, MP Halton played an essential pivotal role.

For updates click here:

<http://georgianbay.carp.ca/http://georgianbay.carp.ca and

<http://www.pensionsplitting.ca/www.pensionsplitting.ca

Dan Braniff

Chair, Georgian Bay Chapter CARP

Mission Liaison, Common Front for Pension Splitting