My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a Chartered Professional Accountant. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. My posts are blunt, opinionated and even have a twist of humour/sarcasm. You've been warned. Please note the blog posts are time sensitive and subject to changes in legislation or law.

Monday, January 29, 2018

If You Are Not Learning – You Are Forgetting

As noted in October, I am planning to write occasional blog posts under the title “Let Me Tell You” that delve into topics that may a bit more philosophical or life lessons as opposed to the usual tax and financial fare. Today I discuss the importance of always striving to increase your knowledge by continuously learning.

My father-in-law, who is a very knowledgeable and smart man, has a saying “If you are not learning, you are forgetting”. He has repeated this mantra to his family and grandchildren for as long as I have known him. What a brilliant adage.

Knowledge is vital to our growth and understanding as people. It is also scary, since I seem to need post-it notes to remember anything these days, so I am hoping my knowledge inflow is exceeding my forgotten knowledge outflow 😊 But seriously, this is a great adage and I want to examine it in a little more detail today.

How To Keep Learning

My father-in-law and mother-in-law have sat in on classes at The University of Toronto for years, read vociferously and are patrons of the arts. While I am not exactly a “knowledge expert” it would seem to me the best ways to keep learning are as follows:

  • Attending courses & seminars at a college, university, library, or anywhere someone is speaking on a topic that interests you.
  • Reading books, newspapers, blogs (especially this one), etc.
  • Watching Videos and Listening to Podcasts – For many people, videos and podcasts are now their go to sources for knowledge.
  •  Listening and Observing – We meet many people who are far more intelligent and/or knowledgeable than us (or at least than me). Personally, I have found this source of knowledge to be my favourite, since in many cases, knowledgeable people are able to explain their thoughts in “plain English”, which is not always the case when reading a book or attending a lecture.

Knowledge Increases Our Awareness Of Our Ignorance

In 1962, while speaking at Rice University on the space program, President John F. Kennedy said, “The greater our knowledge increases, the greater our ignorance unfolds.” While the context of this comment was in relation to space travel it is a brilliant observation for life in general. The more we learn, the more we realize what we don’t know. Those who are self-aware enough to understand this never become arrogant or at least only slightly and are always open to learning and collaborating with others.

Why Keep Learning

There are multiple benefits from continuing to learn and increase your knowledge. I would suggest these three are amongst the most important:

1. Increases your chances for success in your chosen job or profession

2. Allows you to better interact with others

3. Provides for the transfer of knowledge to future generations

Job Or Profession

This is self-evident, but the greater knowledge you have about your chosen job or profession, the greater your chance for success and promotion. In addition, your job satisfaction increases, and people want to collaborate with you. General knowledge is also very important for your career as it allows you to connect and be respected by your co-workers on both a personal and professional level.

Interacting With Others

Greater knowledge also helps to make it easier for you to converse with others and have confidence in your comments and opinions. While knowledge and self-awareness do not necessarily go hand in hand, if you are self-aware or at least have spent some time learning about personal behaviour and that of others, you will understand your shortcomings and behavioural tendencies. You will also be able to communicate better with others if you have knowledge of their behaviours.

Generational Transfer of Knowledge

My father-in-law not only spouts the “if you are not learning, you are forgetting” mantra, but acts on it. Over the years he has shared his abundant knowledge either in a group or in a one on one session with his grandchildren. It always amazed me to hear how much the kids got out of the conversation and what they had learned.

While I may not have told you anything new in todays blog post, my objective was to remind you of how important it is to keeping learning, because, if not (chorus of grandkids response)—you are forgetting!

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.

Monday, January 15, 2018

Estate Administration - The Importance of Advertising for Creditors

After writing the last two weeks about the Tax On Split Income Rules and the Ontario Minimum Wage Increase, I thought I would try a less controversial topic this week; that being the importance of advertising for creditors.

Over the years, I have written numerous times on the various issues associated with being named an executor, including this laundry list of requirements. Included on this list is the necessity to advertise for any creditors of the estate.

My guest blogger today is Patrick Hartford, who is the founder and managing director of NoticeConnect, which is a platform for publishing and accessing legal notices online to simplify the process of advertising for creditors. Patrick will discuss the importance of advertising for creditors and the risk to an executor if they do not do so.

Please note that while I agree it is important to advertise for creditors, the policy of this blog is to not endorse any specific company, so you will need to do your own research as to whether you engage NoticeConnect or not.

With the legal disclaimer out of the way, I thank Patrick for his blog post on this important, but often neglected estate issue.

Estate Administration - The Importance of Advertising for Creditors 

By Patrick Hartford

The majority of estate trustees in Ontario - both executors and administrators - are not advertising for creditors. This is a problem because trustees who do not publish a notice to creditors risk personal liability.

When someone dies, any outstanding debts of the deceased must be paid before the assets of the estate can be distributed to the beneficiaries. Whatever is leftover after the creditors have been paid can then be inherited by the deceased’s spouse, children, pets, etc.

It is the job of the estate trustee to identify and pay these outstanding debts.

Some debts are easy to identify, particularly if they involve a secured creditor like a mortgage lender. But there are often other debts that the trustee has no way of identifying. They could be old utilities or credit card bills, municipal taxes, or any other type of debt. The likelihood that outstanding debts exist increases if the deceased lived and worked in multiple cities or did business online.

It’s unrealistic to expect a trustee to play detective and track down every possible debt the deceased may have had. Instead, the law says that a trustee should ‘advertise for creditors’. In Ontario, this is governed by section 53 of the Trustee Act. Other provinces have similar legislation.

The trustee publishes a public advertisement, called a ‘notice to creditors’, stating that a deceased’s estate is being administered and any outstanding creditors have a set amount of time (typically 30 days) to come forward with their claims. When this time period expires, the estate will be distributed with regard only to claims that have been filed.

The law says that an estate trustee who advertises for creditors will be protected from liability if a previously unknown creditor comes out of the woodwork after the assets of the estate have been distributed. Conversely, if an estate trustee does not advertise for creditors, an outstanding creditor can sue the trustee personally for the full amount of the debt. There is no statutory limit or cap to this liability.

So why aren’t trustees publishing notices to creditors?

Sometimes because they are confident that the deceased had no outstanding debts that they are unaware of. This can be risky. Estates lawyers will tell you stories about clients who didn’t advertise for creditors, only to be caught by surprise later.

Another reason is the fact that advertising for creditors used to be prohibitively expensive. Notices to creditors used to be published in print newspapers, and publishing ads in multiple cities would easily cost thousands of dollars. While the estate covers this cost, few trustees wanted to spend this much money for print ads that few people would ever read. Fortunately, with the advent of services for publishing notices to creditors online and its acceptance in Superior Court (see this page for various articles and discussions on this case), the cost of advertising for creditors has been dramatically reduced and has restored its efficacy.

If you’re an estate trustee, it’s important to protect yourself from liability. Advertising for creditors will prevent you from having to pay the deceased’s old debts out of your own pocket.

Patrick Hartford, is the founder and managing director of a platform for publishing and accessing legal notices online. Over 200 law firms, banks, and legal service organizations in Ontario have trusted NoticeConnect for publishing estate notices to creditors their clients.

The above blog post is for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Readers are advised to seek specific legal advice regarding any specific legal or estate issue.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.

Monday, January 8, 2018

Ontario’s Minimum Wage Increases

Today, I am writing about the changes to the Ontario minimum wage. For full disclosure, I wrote this blog post during the holiday break, with the intent to try and have a fair-minded discussion about this issue. However, as you likely know, all heck broke loose last week in respect of this issue, when certain retailers took steps to reduce the impact of the minimum wage increases and Ontario Premier Kathleen Wynne responded strongly informing them if they wish to pick a fight, pick it with her and not their employees.

I have updated the post to account for some of these recent events and comments, but the intent remains the same, an attempt to have an even-handed review of the issues surrounding this significant labour change. In my opinion, that review ends in two conclusions:

1. The various studies related to minimum wage increases are not conclusive.
2. Small business owners, in general, will take steps to maintain their bottom line and in many cases, those steps will likely be diametrically opposed to the government policy intent. 

So, what is all this uproar about? As of January 1st, the Ontario Liberal government increased the minimum hourly wage to $14, with a further increase to $15 on January 1, 2019. That is a 32% increase since the beginning of 2017. This follows the lead of Alberta which plans to increase its minimum wage to $15 by October 2018.

This issue is very complex. I have conflicting views: through the prism of an individual and fair-minded person, I feel higher minimum wages, especially in high cost provinces like Ontario and Alberta are necessary to keep workers in these provinces, and to allow those individuals to maintain a minimum standard of living. As an advisor to small businesses, and a former employer of 35 or so people, I also understand one of the main objectives of a business is to make money and increase the bottom line. The margins on products or services are very often correlated to the cost of wages and salaries and thus, any increase to these expenses, can have significant profit consequences.

What the Studies Show

In December of 2017, the Bank of Canada released this report, titled "The Impacts of Minimum Wage Increases on the Canadian Economy".

 Some of the key findings of the paper are as follows:
  • 8% of employees in Canada work at the minimum wage and estimates in the literature suggest that changes in the statutory rate have historically affected the wages of up to 15 per cent of employees with lowest wages. 
  • There could be a very modest inflationary effect ranging from 0.0-.02 percentage points over the next couple years.
  • The increases in the minimum wage lead to higher real wages, which push up firms’ marginal costs, and thus inflation increases accordingly as a fraction of firms adjust their prices in the short term.
  • Weaker labour demand leads to reduced employment and lower hours worked, although the net impact on labour income is positive.
  • Employment losses may amount to about 60,000 workers (it is my understanding this does not mean 60,000 in job losses, but means 60,000 fewer jobs may be created and in the detailed part of the report, it states the number could be as low as 30,000 or as high as 136,000 depending upon the measure used).
  • Consumption would be reduced slightly as the higher inflation would elicit a slight interest rate increase, which would more than offset the higher labour income.
  • Potential output should remain unchanged in the short run. Longer-term effects are possible through automation, productivity changes or changes in labour force participation. The sign of these longer-term effects is, however, ambiguous.
In this Talent Economy article titled “How Does the Minimum Wage Impact the Economy?" a U.S. publication, the author references several academic papers. The first study by The Institute for Research on Labor and Employment, finds “that a $15 minimum wage in California would increase earnings for 38 percent of the state, and businesses would see a reduction in turnover and increases in productivity. Raising prices by 0.6 percent through 2023 would offset increased payroll costs” which reflects a positive outcome of a higher minimum wage.

Yet, in the same article, the author quotes a report published in August 2016 from The Heritage Foundation that finds that a nationwide minimum wage of $15 per hour would lead to 9 million jobs lost, and states with lower costs of living would see the most negative impact. “Efforts to create jobs and reduce poverty should not center on forcing employers to pay higher starting wages,” the story concludes.

So, the studies are not conclusive one way or the other.

The Government's Position

In this Toronto Star opinion piece written yesterday by Kathleen Wynne, the Premier of Ontario, she opines the minimum wage increase is about fairness and opportunity for the citizens of the province. She does not feel the economics gains in Ontario have been shared equally by employers with their employees.

Premier Wynne states the following in the editorial "Big businesses and major corporations continue to celebrate record profits, while many people in this province juggle multiple jobs and still can’t afford the basics. CEOs enjoy massive salary increases while their workers can’t pay their bills.
That’s not right, and it's not who we are as a society".

Business Owners Position

Business owners are far from a homogeneous group and have varied situations and opinions on the topic. However, in general their position seems to be that minimum wages are an admirable social position, but it is not a practical policy, especially for certain industries such as restaurants and retail outlets (For example, it has been reported by the Great White North Franchisee Association, that the cost of implementing minimum wage hikes to each Tim Horton’s franchisee is $6,968 per employee and for the typical store, that results in increased costs of $243,889). Many small business owners feel the increase in minimum wage should be much smaller, phased in over more years and done in conjunction with tax policy that assists lower earning citizens.

How Retailers and Business Owners Can Manage Rising Minimum Wages

As discussed by BDO Canada LLP in this report titled “Nine Ways Retailers Can Manage The Rising Minimum Wage” there are both tactical and strategic options retailers can consider to reduce the impact on their businesses, where the impact of the minimum wage increase is significant.

Tactical Options

The BDO reports provides tactical options including: reducing employee headcount, optimizing shifts that employees work, reducing store hours to match customer shopping behaviour, reducing costs in other areas of the business and finally raising prices, which in effect, passes the wage increase onto the consumer.

In Ontario last week, there were widely reported cases where well known franchise owners scaled back work breaks, benefits and banned employees from accepting tips in an attempt to try and offset the minimum wage increase. These reports led to a huge outroar and publicity. These cases should cause business owners pause for thought; in that, tactical changes must also consider how your customers will react if the changes become public.

Strategic Options

The BDO report notes strategic options range from expanding technology beyond the self-checkout, optimizing government incentives, outsourcing non-core functions, and by giving the consumer more for their money.

In this article by Brenda Bouw in The Globe and Mail titled “Ontario small-business owners raising prices to cover minimum wage hikes”, the author considers the connection between tactical (price increase) and strategic (better client service) when she quotes retail consultant Doug Stephens of the Retail Prophet. Mr. Stephens says if prices are increased; “businesses could also view it as an opportunity to boost their customer service, by giving them more for extra money”. He goes on to say businesses should view this as “a watershed moment to design better and more enjoyable customer experiences that are actually worth more to their consumers”.

Issues Are Not Always Black and White

I have and have had, many small business clients who bend over backwards to never fire employees and to assist them as much as possible and some have even made 100% retention of their employees a condition of them selling their company. Often business owners are portrayed as heartless and just chasing the almighty dollar, yet, I have found many small business owners are the exact opposite and they care deeply about their employees. But, people are in business to make money, so while they may be conflicted in their actions and concerned for their employees, in most cases, their bottom line will influence their decisions.

Increasing the minimum wage has significant consequences to both a provinces employees and employers. Hopefully the economy is strong enough the next few years to absorb these increases, but in the end, only time will tell how these wage increases will impact Ontario and Alberta and whether the governments policy and intention will be served.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.

Monday, January 1, 2018

The Revised Tax On Split Income Rules

On December 13, 2017 the Liberals released a new and improved version of their income sprinkling/tax on split income (“TOSI”) proposals. The government’s backgrounder stated, “the revised draft legislative proposals include changes to better target and simplify their application”. I can agree with the targeted assertion; as some overly expansive drafting was corrected, but simplification, not in my world.

The new rules while more objective than the previous version, are still very subjective. In my opinion these revisions will just create more angst among the small business owners caught by these proposals and will result in court cases for years. Add in that these rules were released the week before the Christmas holidays and not issued in conjunction with the passive income rules that are supposedly to come in the next budget (planning for dividends may be dependent or intertwined with the final passive rules) and I don’t think the Finance Minister will be winning any politician of the year awards from any private business associations.

In my opinion, all these TOSI rules would not be necessary if the government would have simply disallowed income sprinkling for anyone under age 25 that that does not work full-time in a business and for all Canadians (whether business owners or not) started taxing spouses as a single-family unit. But then, nobody asked me.

Today, I will summarize whom I see as the winners and losers of these new proposals and those caught in the grey area. Finally, I will provide some details on the revisions to the TOSI rules.

As this legislation is new and will likely still require some clarification, I want to make it clear that this post is solely for general information purposes. You should consult with your professional advisor, so they can review these proposals based on your specific fact situation.



1. Business owners over 65

2. Individuals who inherited shares of a small business

3. Businesses where shares, votes and value are allocated evenly among family members and are not service businesses

4. Canadians who work at least 20 hours a week on a regular and continuous basis in the family business

5. Retired owners that were caught under the initial rules because they were considered related even though an arm’s length person now ran the corporation


1. Beneficiaries of shares held by Family Trusts

2. Professionals

3. Small businesses that provide services and do not sell products

4. Estate freezes recently undertaken and/or where there is large redemption value remaining in the preference shares issued upon the freeze


1. Families were shares have already been distributed from a trust or were purchased upon incorporation and the parents have voting control

2. Estate freezes where most shares have been redeemed

The New Rules

The new rules are very detailed and I do not intend to regurgitate all of them here. I will summarize the rules only at a high level. For details and FAQ’s, please see this CRA link  (scroll half-way down the page to related products and you will see guidance and other more technical material).

The new rules have four key exclusions: 1. An excluded share test 2. Excluded business test 3. Reasonable rate of return test and 4. Retirement and inheritance exclusion.

I will summarize them below and discuss how they may affect you.

Excluded Shares- The share ownership test

The TOSI rules will not apply where you have attained the age of 25 and all of the following conditions are met:

  • You own at least 10% of the outstanding shares of a corporation in terms of votes and value and the corporation meets all the following conditions:

(a) It earns less than 90% of its income from the provision of services

(b) It is not a professional corporation

(c) All or substantially all its income is not derived from a related business

At first blush, this test seems like a god-send for private corporations where family members are shareholders and have attained the age of 25. However, in many cases the parents have the majority of the voting rights and may have significant value in preference shares as result of a prior reorganization or estate freeze. Where the issue is only votes, you may be able to reorganize your corporate share structure to meet this condition as the government has stated that even though the rules are applicable January 1, 2018, you have until December 31, 2018 to get your corporate house “in order”.

This rule will essentially preclude the use of family trusts for income splitting purposes other than the capital gains exemption. It is important to note, that the TOSI rules will not apply to capital gains on the sale of qualified farm or fishing property and to the sale of qualified small business corporations (“QSBC”). Most private corporation owners reading this blog post have shares that either qualify as QSBC shares, or can be made to qualify for the capital gains exemption through a purifying transaction (see this post I wrote on this topic). The exclusion for the sale of these shares is not age dependent (however, where an individual is under 18 and the sale is to a related party, the exemption will be problematic). Not that I want to look a gift horse in the mouth, but we have all these complex rules to prevent income sprinkling and you are still allowed to allocate the 2018 exemption amount of $848,252 to a minor?

Professional corporations are excluded, as they have been one of the main targets of the Liberals throughout this whole debacle. However, pay careful attention to the word “services”. At first glance you think services is just another arrow aimed at professionals, but services as written (it is not defined anywhere) would seem to include the services of a barber, gardener, massage therapist, computer consultant etc. Many small businesses may not meet this exclusion if they don’t earn at least 11% of their revenue from the sale of products. In my opinion, this provision may “blow-back at the government once it is better understood; assuming the literal interpretation is the proper reading. It should be noted that if you and your spouse/children 18 years old and over meet the labour criteria for the excluded business test based discussed below, then having a service business will not in itself preclude you from income sprinkling.

The related business in (c) above is just a provision to ensure a service business does not impose another business between it and the family member to get around the rules, although, some tax observers are concerned this provision could accidentally cause issues where shares are held through a holding company. This is one area that the Liberals will need to clarify.

Excluded Business –The labour test

The TOSI rules will not apply where you are 18 or over and have been employed by an excluded business, which is “a business in which the individual is actively engaged on a regular, continuous and substantial basis in the taxation year of the individual in which an amount is received or in any five previous taxation years". The CRA states that “To access the exclusion in respect of five previous years of labour contributions, it is not necessary that the five previous years be consecutive or after 2017. Any combination of five previous years would satisfy the test”. The test will also account for businesses’ that are seasonal, such that the test will apply to the seasonal period

Finally, the CRA says “To provide greater certainty (but without limiting the generality of the test), an individual who works an average of 20 hours per week during the part of the year that a business operates will be deemed to be actively engaged on a regular, continuous and substantial basis for the year. If an individual does not meet the 20-hour threshold, then it will be a question of fact as to whether the individual was actively engaged in the business on a regular, continuous and substantial basis. However, even if an individual aged 25 or older does not meet the regular, continuous and substantial threshold, the TOSI will apply to amounts derived from a related business only to the extent that they are unreasonable (i.e., only the unreasonable excess will be subject to the TOSI)”.

This labour test is a fairly clear bright-line test; you must work over 20 hours per week for at least five previous years or you get into a subjective reasonability test that will likely result in most amounts being in excess of reasonability.

The CRA provided some guidance in the materials stating that records such as timesheets, schedules and logbooks will be sufficient to confirm the hours a person worked.

Reasonable Return on Capital Test

There are two tests within this exclusion:

1. Safe Harbour Test

2. Reasonable return test

Safe Harbour Test

Where an individual 18-24 years of age has contributed capital, and does not qualify for the excluded share or excluded business exclusions, they may still qualify for a “safe harbor exemption” (No that does not mean you take your money and hide it in a safe harbor in the Turks and Caicos).

It means that you will be provided an exclusion from TOSI income to the extent of your capital contribution x a prescribed rate (currently only 1%). i.e. If you contribute $100,000, you multiply the $100,000 x 1%=$1,000 and you can exclude $1,000. To be a blunt bean counter, this exclusion is pretty much useless, since a) The reality is that in probably 95% of the cases, most shareholders only contribute $100 or less to purchase their shares and b) as noted above, the low prescribed rate means even if you did contribute a fair bit of capital, such as $100k, your exclusion is still a meager $1,000.

Reasonable Return Test

For those 25 years of age and older, this very subjective test says that a reasonableness test is to be applied to such factors as:

  • Work performed 
  • Risks assumed by the individual in the business 
  • Any other factors that may be relevant

Your guess is as good as mine as to how this would be applied. Consider Mr. A who is a shareholder and works full time in his business. His daughter also a shareholder, is a computer science student who comes up with a software application that leads to over one million dollars in new revenue for the business. What is her "reasonable" entitlement to dividends?

Retirement and Inheritance

The initial drafting of the proposals appeared to have inadvertently caused the TOSI rules to apply to retired private corporation owners and Canadians who had inherited private corporation shares. The new proposals have addressed these concerns.

The new TOSI rules provide the following exemptions:

1. Where an active owner-manager (someone who met the labour contribution rules) reaches age 65, the TOSI rules will not apply to their spouse (no matter their age). Note: these rules do not mean you can split your dividends like you do your pension income. They only allow you to pay dividends to your spouse who is not excluded by any of the provisions and avoid the TOSI rules where you are 65 or over.

2. If you are over 18 and inherit shares in a private corporation from someone who met the TOSI one of the TOSI exclusions, those shares will continue to be excluded.


The new rules do not apply to salary. However, there has always been a reasonableness test for salaries paid to family members vis a vie what would you pay an arm’s length persons and that rule will still apply.

Prescribed loans

The new rules do not appear to prevent the use of prescribed loans where you purchase public securities. See this blog and speak to your advisor about whether this strategy would be advisable for your situation.

At this time, I am not entirely comfortable answering questions on these proposals, until we have further clarity. So, if you ask a question or provide a comment on this post, I may not answer the question or will couch the answer. So please don’t expect definitive answers if you ask a question.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.