Cottage Life: A family asset that everyone enjoys

Bernie Hanna
Financial Focus

Every summer, thousands of Canadians pack their bags and their families into the car, and leave their homes behind. Their destination: the family cottage.

For many, the cottage is like a second home. It’s a chance to enjoy some down time from fast-paced city life, relax in the beautiful outdoors, and spend invaluable time with friends and family. It’s an asset that generations, both younger and older, can enjoy. With the height of summer now upon us, what better time to consider the preservation of this asset? After all, whether it’s your cottage or your parents’ cottage, you probably both want to keep it in the family.

For taxation purposes, a cottage is considered a capital asset. As such, it is treated like all other assets. When the owner dies, it can be automatically rolled over to his/her spouse, tax-free. However, upon the death of the spouse, it’s deemed to be disposed of at fair market value. The result? Probably a hefty tax bill; and if your heirs don’t have the cash on hand to pay those taxes, chances are they’ll have to sell the cottage to do so. If you are the owner of a family

cottage and are concerned with the tax issues that may arise, an insurance policy may be the answer you are looking for.

(This article is submitted by Bernie Hanna, Vice President and Investment Advisor with CIBC Wood Gundy’s Burlington office. He may be reached at 905-631-2561 or 1-800-650-2999. The views of Bernie Hanna do not necessarily reflect those of CIBC World Markets Inc. Individuals are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors. CIBC Wood Gundy is a division of CIBC World Markets Inc., a subsidiary of Canadian Imperial Bank of Commerce and Member CIPF.)

Many factors provide total job satisfaction

Katie Kitchen on
Human Capital

While compensation is obviously important to employees, it’s a fact that pay is only one part of ‘total rewards’ people consider when assessing a job opportunity. A recent Deloitte paper cites a study that identified the top five job-satisfaction factors according to
what employees identify as important. Included are:

1) Benefits.

2) Compensation.

3) Work/life balance.

4) Job security.

5) Feeling safe in the work environment.

There are many different types of benefits, and identifying which ones to offer employees can be challenging, but you should consider:

• What benefits would employees value?

• What is the competition offering?

• What can we afford? What are potential tax implications?

When designing benefits packages, some of the following are commonly considered:

(i) Health insurance including medical and dental coverage.

(ii) Life insurance and disability insurance.

(iii) Group retirement plans.

(iv) Sick days, vacation time.

In addition to the “benefit aspect,” offering these benefits may represent a potential tax windfall to employees — some of these benefits may be non-taxable to the employee or the benefit is not immediately taxable to the employee and the cost of offering the benefit is a deductible expense to the employer. Some employers reward employees and teams who have gone ‘above and beyond’ or exceeded certain targets with a variety of rewards. For example:

• Gifts.

• Prizes or awards related to sales or other work performance.

• Trophy/plaque.

• Seasonal celebrations.

• Celebrations to mark achievement of particular goals.

From an income tax perspective, CRA has indicated it will not seek to tax the recipients of these “rewards” where the fair value, when measured by objective standards, is nominal (i.e., costing less than $100 per employee participant). Job security is also mentioned above as one of the ‘top five’ factors considered by employees. Offering an ‘education benefit’ program for management or technical courses directly related to some aspect of an employee’s position, either through a forgivable loan or paying tuition fees in full or in part, will provide benefits to both employers and employees. When assessing changes to the compensation package you offer your employees,

think about ‘total rewards’ and design a comprehensive compensation package that integrates the key variables mentioned in this series.

• Make them consistent with your business strategy, values and the results you want to achieve — reward what is important.

• Ask employees what they want. Tools like Deloitte’s Rewards Dialogue can help keep employers informed about employees’ expectations/changing preferences and external factors.

With reward expenditures for many firms approaching 40 percent of their revenues, it’s important to start looking at rewards as an investment in your business, instead of a cost.

(Katie Kitchen is a Senior Consultant with Deloitte’s Human Capital group within South-western Ontario. With five offices in South-western Ontario, Deloitte is Canada’s largest professional services firm, serving the Audit, Tax, Consulting, Financial Advisory, and Enterprise Risk needs of Private Companies and their owners, Public Companies and the Public Sector.)