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%)
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.
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|
|3)||alarm monitoring system|
The need is further increased due to recent power outages.
Ensure that your property insurance covers sewer backup and theft including that perpetrated by your employees. Review deductibles.