PPP® Optimization Tips

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Photo by krakenimages on Unsplash
Photo by krakenimages on Unsplash

Tip #1
Roll existing RRSPs into the AVC component of your PPP®. Turns non-deductible investment management fees into corporate tax deductions. 

Potential Savings
1% Fee on AUM of $1,000,000 if Corporation pays tax at 26% = $2,600 refund of tax 

Tip #2
Apply for input tax credits for HST paid on your PPP® fees (commissions, IMFs etc.) 

Potential Savings
100% of HST can be refunded  E.g. $500 refunded

Tip #3
Ad hoc valuation filed using market dip (e.g. March 31st 2020)  – crystalizes deficits that can be replenished by the corporation with tax-deductible special payments.  Also allows to go “bargain hunting” in a depressed stock market 

Potential Savings
Assume PPP® with $1,000,000 before March 23rd that now has $600,000.  Corporate tax deduction on $400,000 special payment = $104,000 savings in corporate tax (using 26% corp.tax rate) 

Tip #4
Trigger Terminal Funding prior to age 65 to enable the client to retire on a partially unreduced and indexed pension. 

Potential Savings
If Terminal Funding corporate tax deduction is $500,000 (and tax rate is 26%) savings are $130,000 

Tip #5
Consolidate all of one’s RRSPs under the PPP® to give creditor protection to these amounts 

Potential Savings
Difficult to quantify the value of not losing one’s life savings to creditors 

Tip #6
Pension-income splitting with a spouse as early as age 50.  This can occur in parallel with Tip No. 4 (Terminal Funding) 

Potential Savings
If the annual pension is $100,000, the mere fact of splitting income with a spouse saves the couple $8,124 annually.  If a couple starts at 50, that’s $121,860 more savings than with a RRIF. [Ontario rates]

Tip #7
Allocation a portion of the pension fund to non-RRSP eligible asset classes that are not linked to the stock market. 

Potential Savings
Provides stability to the portfolio. (Difficult to quantify) 

Tip #8
Add adult children on the payroll of the family enterprise to the PPP® and recognize past service for them. 

Potential Savings
On the death of a retired PPP® member, there will be no ‘deemed disposition (e.g. $4,000,000 pension fund would save the survivors $2,000,000 in taxes on death) 
The PPP® Inter-Generational Wealth Transfer Strategy is one of the most tax-efficient ways to pass on family wealth.

Tip #9

If you are a BC Doctor, and you set up a PPP®, make sure to apply for your BC medical association subsidy (the CPRSP). Click here for the form.

Potential Savings

This program could result in an annual subsidy of over $7,000 that can be contributed to your PPP®depending on your length of service as a billing physician and other factors.

Tip #10

Don’t forget to claim your non-refundable pension amount credit ($2,000 annually) for each person in the couple if you are doing pension income splitting (See Tip #6).  Click here for the CRA to provide guidance

Potential Savings

If a couple does pension income splitting (See Tip #6) and now also claims $4,000 annually as early as age 50, having remembered to claim this credit will translate into $9,000 in savings by the time they reach age 65.

Tip #11

Speak to INTEGRIS specialists about PPP® structure optimization and how to best navigate through the sale of a company, keeping the PPP structure in place.


Potential Savings

Business assets are extracted over time from the operating company to the PPP® (moving assets from a taxable to a tax-sheltered environment).  The business owner may complete plan amendments to transfer sponsorship from an operating company to a holding company to prepare for the sale of the company in the future.  The PPP® contributions help with purification and qualifying for the lifetime capital gains exemption on company sale.

Connect with our Sales team at sales@integris-mgt.com to see if we can help your clients realize additional savings.