Page 24 – Eye Care Business Canada

Creating a Professional Corporation

Finance|Wealth, Resources, Tax & Legal Matters

Dr. Roxanne Arnal, CFP^®

Creating a Professional Corporation is a privilege that exists in most provinces in Canada. Many years ago, the tax benefits were obvious. With the tax reforms of the late 2010s, near perfect integration was achieved. Today, creating a professional corporation is no longer a simple decision.

Generally speaking, you should consider incorporation if:

You are earning more than you need to cover your expenses.
You have reached a financial position to save beyond your TFSA and RRSP.
You are taking on an ownership position and creating a business you can sell in the future.

What are the annual obligations of a corporation?

A corporation is a tax entity. Much like you, a person, is a tax entity. As a result, the corporation will need to file an annual tax return and pay taxes on earnings. In addition, the corporation needs to legally file a registry return – essentially to prove that the entity is still alive and confirm that the owners haven’t changed.

How are corporations taxed?

Unlike the graduated personal tax rates, corporate tax rates are fixed. Of course, with exceptions! One such exemption is the Small Business Deduction, where on the first $500,000 of active business taxable income, the corporation is taxed at about 12% depending on your province or territory. For earnings beyond this amount, the tax rate jumps up to the general corporate tax rate, which is about 50% depending on your province or territory. And of course, there are always exceptions.

And then there is passive income, like investment income, which is not eligible for the small business deduction. If you realize passive income greater than $50,000 in any given year, you will also start to chip away at the $500,000 maximum eligible for the small business deduction.

Why this matters?

If you are looking to create your professional corporation for the sole purpose of building your investment portfolio, you will likely be disappointed in the outcome. Like all tax planning strategies, there are pros and cons. Yes, when you take a business dollar and invest, you are investing about $0.88 versus about $0.50 personally at top marginal tax rates. So, from a compounding perspective, you can potentially grow your wealth quicker. The drawback occurs if your passive investment earnings exceed $50,000, on top of the tax integration that occurs when you get the money to your pocket.

Remember, in order to spend this money on fun stuff in your freedom years, you will need to get it out of the corporation. This will either occur by declaring dividends or taking salary. Both of these trigger tax before the money becomes available for your use. Tax integration today has removed many of the original benefits that existed in using this strategy.

What are the benefits of a Professional Corporation (PC)?

A professional corporation offers you another tax planning strategy. At the time of writing, having qualified shares in a PC that you can subsequently sell and utilize the Lifetime Capital Gains Exemption (LCGE) – you have a win that can amount to a tax savings of up to $250,000. Yes Please! Of course, not so fast. There are rules around qualifying for the LCGE too.

From a wealth creation perspective, a corporation provides you with another opportunity to diversify your portfolio by adding choices for your future. We don’t know what the future tax system will be, so having access to many different options will leave you with greater flexibility.

There are of course other advantages. A corporation can own property and insurance policies. It can borrow money and manage expenses.

Setting up a Professional Corporation

Starting a corporation will require the filing of legal documents and applications. A professional corporation has the additional layer of the professional requirements. It is therefore critical that you review your college rules for corporations. These can be different from province to province, and from profession to profession, so be sure you and your lawyer understand the rules that apply to you.

I also recommend that you consult both your tax accountant and your lawyer prior to completing any applications. If you have been in business for several years, there may be assets to transfer into the corporation. If there will be multiple shareholders, as in a group practice, you will want to be sure that the share structure is set correctly and is adaptable for future needs.

Of course, you will also need to speak to your general insurer for both the commercial business coverage and liability coverage.

Lastly, be sure to speak with your financial advisor. As your Chief Financial Officer, I’m here to help you ask the right questions. I help you manage your team and ensure that you have thought about the potential issues, like shareholder agreements. Ah yes, another topic for another day!

Have more questions than answers? Educating you is just one piece of being your personal CFO that I offer. Call or email today to start your plan.

Roxanne Arnal is a former Optometrist, Professional Corporation President, and practice owner. Today she is on a mission to empower the finances of her former colleagues.

These articles are for information purposes only and are not a replacement for personal financial planning. Everyone’s circumstances and needs are different. The values provided here are subject to change and should not be construed as fact. Errors and Omissions exempt.

ROXANNE ARNAL,

Optometrist and Certified Financial Planner

Roxanne Arnal graduated from UW School of Optometry in 1995 and is a past-president of the Alberta Association of Optometrists (AAO) and the Canadian Association of Optometry Students (CAOS). She subsequently built a thriving optometric practice in rural Alberta.

Roxanne took the decision in 2012 to leave optometry and become a financial planning professional. She now focuses on providing services to Optometrists with a plan to parlay her unique expertise to help optometric practices and their families across the country meet their goals through astute financial planning and decision making.

Roxanne splits EWO podcast hosting duties with Dr. Glen Chiasson.

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Changing Landscapes – Selling & Buying a Practice

Buying-Selling A Practice, Practice, Webinar

The second event of the “Changing Landscapes: Opportunities & Options for Canadian ECPs” will focus on Selling & Buying a Practice and will be held Monday November 1st (7:30 PM Eastern).

The Canadian market has experienced transformational change in the past year.

Major players have had substantial capital injection and new Canadian market entrants are making their play for market share, creating more opportunities and options for Canadian ECPs.

Join leaders and spokespersons from the world of independent optometry supported by B+L and major eye care groups/organizations including IRIS, FYidoctors, Vision Alliance Corporation, OSI/SOI, Eye Recommend and, new to Canada, Specsavers. ROI Corporation, Canada’s leading health practice brokerage will also share their experience.

This event is a must-attend for any practitioner looking to exit their business, start a new practice or formulate a strategic partnership.

Speaker List Includes:

Jackie Joachim, Chief Operating Officer, ROI Corporation
Dr. Daryan Angle, VP Business Development, IRIS Group
Dr. Wes McCann, Central Optometry, ON, Eye Recommend
Dr. Michael Naugle, VP Optometric Partnerships, FYidoctors
Gord McFarlane, Managing Director of Corporate Development, FYidoctors
Dr. Skylar Feltis, YXE Vision Group, SK, OSI Group
Dr. Warren Toews, YXE Vision Group, SK, OSI Group
Dr. Trevor Miranda, Cowichan Eyecare, BC, Independent Practice
Dr. Robert Allaway, Chief Optometry Officer, Vision Alliance Corporation
Mike Protopsaltis, Partnerships Director, Specsavers

The event series will be moderated by Roxanne Arnal, OD and Certified Financial Planner (TM), bringing an informed and unique perspective to the events.

Event registration is now open. Click Here for Details.

PREMIER SPONSORS

PARTNER & FRIEND SPONSORS FOR THIS EVENT

Follow up Events:

The final event in the series will be held Monday November 8th 7:30 PM (Eastern).

Career Pathfinders| Making Informed Choices (November 8th)
Career options and opportunities for both young and experienced ODs have never been greater as new organizations offering unique business models enter the market and established entities respond to the changing environment.
Click Here for Detailed Information.

Registration for the first event Monday October 25th, “Technology Drivers of Change” is open.
Click here for detailed information on this event.

Click here to register for any of the Changing Landscape Events

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Leases and Landlords – Their Impact on Values and Practice Sales

Buying-Selling A Practice, Practice

The right of first refusal in a lease agreement

The first time the value of a lease is considered is should be when it is being signed. Understandably, the tenant looks at key items such as rent, additional costs, terms, renewals and any other clauses that may be inserted. After much negotiation, the lease is signed, and the owner begins running the practice.

If only things were truly that simple.
When the lease is first signed, many might not be thinking about the eventual sale. Agreeing to things like demolition and relocation clauses may be required but owners must know how these affect the value of the practice and its potential sale.

Obviously not all clauses are created equal. A demolition clause in a building of 30 stories is very different to one in a stand alone building at the corner of a major intersection. While a sale may not be on the horizon for many years down the road, it is important to pay attention to the finer points of the lease so that when the time does come, the assignment from one owner to the next is as smooth as it can possibly be.

An Interesting Case Study
Recently, we encountered a very interesting and frustrating situation. We successfully found a purchaser for our client. It was a very good fit and all parties were working in good faith towards a successful close.

In the course of a sale, the landlord is almost always notified after due diligence and financing are waived. An owner does not want to prematurely alert a landlord and risk the word getting out that they are selling.

Our situation was following this process nicely. When the time came to seek the landlord’s assignment of the lease it was declined. Even though the lease, and most do, stated that the landlord could not unreasonably withhold the assignment, in this case, it was withheld.

My lawyer friends will always agree that the definition of “unreasonably” is up for debate. However, the landlord was willing to provide clear rationale as to why the assignment was declined. Despite the bank providing an approval for 100% financing, the landlord was not confident in the new owner’s ability to run a successful business.

Many landlords will take a personal net worth statement from the applicant and most applicants withhold information for fear of being overcharged.

Unfortunately, not only did this particular purchaser not complete this exercise properly, the resumé provided did not give the landlord confidence that the purchaser could run a successful business.

The landlord felt this office was a key anchor in his plaza and did not want to risk the future success. The other factors that may have influenced the decision of the landlord lay with the vendor.

In the lease, it was clearly written that the practice could not be sold within two years of the lease being signed. It also required the vendor to notify the landlord prior to listing the office for sale. In this case, both of these requirements were not fulfilled.

A Good Lease Does Impact Value
Owners must be strategic when it comes to the sale of their practices. As a tenant, if you have been difficult or challenging, then it is possible these actions can influence the landlord down the road.

Many owners thought the pandemic, (particularly for those with practices located in retail shopping centres), gave them the opportunity to renegotiate lesser rent or remove such clauses. Unfortunately, this was often not the case. In fact, those seeking a rent reduction often found themselves with additional clauses that were not in the original lease.

Remember, in negotiations, everyone has to give something up in order to get something. Also, it seems that the pandemic made landlords even more cautious than before.

With multiple tenants unable to pay rent due to restrictions and limitations, landlords had added expenses that needed to be covered.

The Federal government may have provided some relief but in the end, the pandemic has certainly taught all of us valuable lessons.

A lease definitely affects the value and sale of a business.

The more carefully the lease is crafted, the better the odds that the practice will sell at a higher price, which helps facilitate an exit strategy for the owner.

By understanding the lease and its contents, the owner stands a greater chance of being more profitable while reducing the inherent risks and exposures that are typical with all commercial lease contracts.

It is very common for things to be left out or misconstrued, whether intentional or not. It is always best to have your lawyer or a qualified expert review the documentation process before a lease is signed.

A final word – make sure renewals are also reviewed carefully. Sometimes in the rush of taking care of this “one or two pager”, items can be included that were not in the original lease.

Practice owners have worked extremely hard to build and operate a successful practice. This practice is an asset that must be protected.

Therefore, regardless of what stage a practice is in, long-term planning and attention to detail are paramount when it comes to leasing commercial space.

JACKIE JOACHIM

Jackie has 30 years of experience in the industry as a former banker and now the Chief Operating Officer of ROI Corporation. Please contact her at Jackie.joachim@roicorp.com or 1-844-764-2020.

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Episode 22: Keeping the Patient in the Centre of New Technology

Eyes Wide Open, Podcasts

Dr. David Schwirtz, Optometrist, Vice President Innovation, IRIS the Visual Group, shares his views on technology advances and the importance of ensuring that technology remains at the centre of patient care, creating a better experience for both the patient and the practitioner.

About the Guest

Dr. Schwirtz joined IRIS the Visual Group in 2009 as a clinician and completed a residency in 2010.

In more recent years, Dr. Schwirtz has continued to serve IRIS The Visual Group as a Vice President. In the past, his responsibilities have included Professional Relations, Medical Affairs, Regulatory Affairs and Professional Development. Today, he continues his leadership role at IRIS as Vice President of Innovation and Head of Innovation for New Look Vision Group.

Outside of his executive role at IRIS, Dr. Schwirtz remains active as a practicing optometrist in the network and adjunct assistant clinical professor for his alma mater, Pacific University College of Optometry.

Episode Notes

Dr. David Schwirtz is a self-confessed technology nerd, with a keen sense of technology’s role in the patient journey.

He discusses the challenges of implementing new technologies particularly from the perspective a large corporation, where not all stakeholders move at the same pace of adoption.

Dr. Schwirtz details how the pandemic accelerated plans that had already been in place and, yet, how a brick and mortar structure provided resilience to their initiatives.

Specifically, he delves into IRIS’s ongoing relationship with Topology which provides a comfortable “perfect fit” with extreme accuracy, outside of the walls of a conventional practice.

He shares the vision of where Topology technology can take the group.

Resources

Dr. Glen Chiasson

Dr. Glen Chiasson is a 1995 graduate of the University of Waterloo School of Optometry. He owns and manages two practices in Toronto. In 2009, he co-hosted a podcast produced for colleagues in eye care, the “International Optometry Podcast”. He is a moderator of the Canadian Optometry Group, an email forum for Canadian optometrists. As a host of “Eyes Wide Open”, Glenn looks forward to exploring new new technologies and services for eye care professionals.

Dr. Chiasson enjoys tennis, hockey, and reading. He lives in Toronto with his wife and two sons.

Dr. Chiasson splits EWO podcast hosting duties with Roxanne Arnal.

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Changing Landscapes – Technology Drivers of Change Speaker List Announced

NextGenOD, PathFinders, Practice, Resources, Technology, Webinar

The speaker list for the inaugural “Changing Landscapes: Opportunities & Options for Canadian ECPs” event has been announced by Eye Care Business Canada.

The first of three events will focus on technology drivers of change and be held Monday October 25th (7:30 PM Eastern).
Industry thought-leaders will share their insights as to what technologies will have the greatest impact on eye care and eyewear in a Canadian market context.

Speaker List Includes:

Dr. Alan Ulsifer, CEO and Chairman of the Board, FYidoctors
Dr. David Schwirtz, VP Innovation, IRIS Group
Dr. Trevor Miranda, Cowichan Eyecare BC, Independent Optometrist
Dr. Damon Umscheid, Eyes 360, Okotoks, AB, Eye Recommend
Naomi Barber, Director of Optometry, SpecSavers

The event series will be moderated by Roxanne Arnal, OD and Certified Financial Planner (TM), bringing an informed and unique perspective to the events.

Tele-optometry, impact of omni-channel selling and remote face trace technology enabling touchless ophthalmic lens dispensing are among the factors to be discussed.

Event registration is now open. Click Here for Details.

PREMIER SPONSORS

PARTNER & FRIEND SPONSORS FOR THIS EVENT

Follow up Events:

The second and third events will be held on consecutive Monday evenings starting at 7:30 PM (Eastern).

Selling & Buying a Practice (November 1)
In the second event Industry experts will provide perspectives on the current state of play in the Canadian practice acquisition market. A must attend event if you are considering an exit strategy or looking to buy a practice.
Click Here for Detailed Information.

Career Pathfinders: Making Informed Choices (November 8th)
Career options and opportunities for both young and experienced ODs have never been greater as new organizations offering unique business models enter the market and established entities respond to the changing environment.
Click Here for Detailed Information.

Click here to register for any of the Changing Landscape Events

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Is Eye Care Immune to COVID-induced Employment Challenges?

Human Resources, Managing Others, NextGenOD, Talent Acquisition

Managing people as part of clinical practice has never been easy. Staff management issues have always been near, or at the top of the list of challenges that both independent practice owners and optical retailers face.

“If it wasn’t for the people this job would be easy…”
Anonymous

Enter COVID.
To say that COVID has created employment uncertainty is an understatement. From an array of employment attitudinal studies conducted across a wide swath of different industries, we have a good understanding of how attitudes have changed in the employer/employee relationship as a result of COVID induced employment pressures.

Many employers are bracing for the substantial challenges they currently face and those that will continue to roll over the employment markets as COVID variants oscillate to create waves of uncertainty.

Buoyed by COVID-induced savings buffers and increasing vaccination rates, the YOLO (You Only Live Once) phenomena, first penned by the New York Times this spring, has emerged.

The YOLO mindset, most often attributed to the Millennial generation, has given rise to a tsunami of resignations as individuals pursue long-deferred dreams of new independent ventures and freedom from the grip of their employers.

Resignation Waves, Dominos and New Rules
Tim Brennan, Chief Visionary Officer, FitFirst Technologies, a company offering candidate assessment technologies using Artificial Intelligence (AI), said recent research indicates “40% of the workforce say they are looking to change jobs in the next year. 53% are prepared to change industries if training is provided. You have a wave of good reliable, productive people making personal decisions to change things up.”

Behind the millennials, a wave of younger workers are looking to step up into the vacancies potentially causing a second wave of resignations. “We can see the signs of this already with Help Wanted signs everywhere, some businesses are operating on reduced hours and all wondering where they are going to find the people they need”, opined Brennan.

The Globe & Mail cites Travis O’Rourke, president of recruiting firm Hays Canada, advising that the competition to hire and retain workers is leading to higher wages. “It’s absolutely a war for talent, and workers are winning,” he said.

Ah, but Our Industry is Different.
Of course it is … isn’t it?

A new Canadian Eye Industry Survey is available. Your participation can help answer these questions.

Admittedly, physical site dependent health care services like optometry and optical may be different. To some extent location dependency diminishes the impact. Few jobs in eye care were moved from the practice to the home, and thus workers desiring to continue their current job from home is largely a moot point.

The veterinary industry, however, has not been immune to the challenges of acquiring and retaining personnel. Amid the COVID pet adoption surge, Veterinarians are reportedly having huge challenges with employee retention and filling increasing vacancies.

Employees are “Hunkering Down”
The uncertainty has also created a “sheltering in place” phenomena. “ 80% are concerned about their career growth , 72% say the pandemic has caused them to rethink their skill-sets and 59% have sought out skills training without the support of their employer. If even a portion of these people act on their concerns, they will add to the resignation tsunami and it will extend beyond millennials”, according to Brennan.

Quietly bearing the stress but ready to move: These may be the employees in your current workplace, waiting for opportunity.

Kareem Merali, co-owner of C2020, a Canadian recruiting and training firm focused exclusively on ECPs, is seeing the effects first-hand: “With an influx of jobs available, employees and job seekers have a lot more variety to choose from, not only from within the optical industry but outside of it as well.”

Merali further points out that retention of lower paying positions has become a greater challenge and that government COVID subsidy programs, like CERB, make it more difficult.

“I think owners will need to share a larger piece of the pie than they are used to in order to keep the right talent and stay profitable,” says Merali.

Impact in Corporate Optometry
Maria Sampalis, Founder of Corporate Optometry, a networking resource for Optometrists sub-leasing in corporate environments, is seeing a rise in OD salaries in the US.

Sampalis agrees, “Acquiring good talent in a shortage of available candidates is the number one challenge facing Corporations”.

She is seeing corporations respond to the issue in innovative ways, including forging partnerships with professional schools and even engaging in tuition reimbursement programs.

Training and Support: Keys to Retention
Brennan and Merali agree that keeping staff engaged and motivated is vital to retaining great staff and that training and team building are critical elements.

Practice owners should consider team-building events, mindfullness activities, out of the box training rather than simply throwing money at increased wages. Employers will have to be even more aware of the needs of their employees.

We Need Answers
There are no known studies of the eyecare/optical industry employment trends. “Industry leaders, employers and individuals making career decisions about their future need to better understand the employment dynamics, options and opportunities”, says David Pietrobon, President of VuePoint IDS Inc, and publisher of Eye Care Business Canada. The Canada Eye Care Employment Survey, will help answer these most important questions.

Eye Care Business Canada will be hosting a digital event on November 8^th as part of its “Changing Landscape: Opportunities & Options for Canadian ECPs” series focusing on employment opportunities under the title, “Career Pathfinders: Making Informed Decisions”.

Eyeployment.com, a premier sponsor of this event has launched an online survey to measure the attitudes of both employers and employees regarding the current eye care employment situation. Tim Brennan will provide an overview of the employment situation and share the results of the survey with attendees.

Respondents to the survey will receive a summary report of the research findings and a complimentary invitation to the November webinar where the results will be shared

The online survey is available now at: CLICK HERE TO TAKE SURVEY 4-5 mins.

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Have you Considered a Sublease?

Career Options, NextGenOD, Sponsors

Sublease and associate opportunities available.

At Bailey Nelson, we believe in eyecare without trade-offs. Since launching in Canada 3.5 years ago, we’ve grown to 28 stores across Canada and will expand to more than 50 locations over the next 3 years.

We have sublease opportunities available for Optometrists who are passionate about eyecare and are driven to succeed. We also have part-time and associate positions available.

Optometrists who sublease with us with us can feel good about their patients coming into a warm and welcoming environment, staffed with friendly, down-to-earth people, who sell high quality glasses at fair prices.

When you work with Bailey Nelson, you get:

Financial benefits without the risks and headaches of private practice.
Keep 100% of the exam fees and spend your time focusing on your patients with little financial risk. Our team takes care of filling the appointment books (marketing), reception and pre-testing.

Incredible growth potential
Historically, fee revenue for Bailey Nelson optometrists grows between 25%- 30% per year.

The support you need to succeed
Your sublease is all-inclusive (optometry & pre-test equipment, online booking system, EMR, retinal camera, and staff support).

We’re actively recruiting for cities in B.C. (Kelowna, Vancouver and the Lower Mainland) and Ontario, and are expanding across the country.

If you like the idea of delivering excellent patient care, building your career, having a support network around you in a growing business then come and join us at Bailey Nelson.

For a confidential, no-obligation discussion contact me on +1 (236) 412-9911 or at laurie.lesser@baileynelson.com

Laurie Lesser, O.D
Eyecare Director Bailey Nelson Canada /UK

Quick Profile Information on Bailey Nelson.

This post is sponsored by Bailey Nelson Canada.

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Marginal vs. Average Tax Rate – Say What?

Finance|Wealth, Resources, Tax & Legal Matters

Roxanne Arnal, Optometrist and Certified Financial Planner© has made her article available in audio format.

Click the play button below to listen.

Dr. Roxanne Arnal, CFP^®

The Canadian Tax system is one of the most complicated in the world, so it’s no surprise that several tax terms used may feel unfamiliar and confusing to you.

We’ll start with some of the basics of personal taxation, more specifically tax rates. Personal tax rates in Canada are banded which means you will pay a different percentage of tax on different amounts of your income dollars. Let’s break it down –

Federal Marginal Tax Rates (Federal MTR)

At the time of writing, the federal tax rate on your first $49,020 of taxable income is 15% which means for every $1 of income you earn, you pay 15 cents in federal tax (excluding deductions but we’ll get there!). Band two (income between $49,021-$98,040) increases to 20.5% tax rate which means you will pay an extra 5.5 cents per dollar earned in tax! At the highest level of federal tax every dollar amount earned over $216,512 is taxed at 33%.

Provincial Marginal Tax Rate (Provincial MTR)

This works much the same as the federal MTR, but many provinces and territories in Canada use different income cut offs. For example, if you earned $100,000 depending on your province this would place you in the 11.16% MTR for Ontario, the 10.00% MTR for Alberta, and a whopping 17.5% MRT for Nova Scotia. Curious based on your existing income level? Here’s a super handy chart (LINK MACKENZIE Form)

Combined Marginal Tax Rate (Combined MTR)

Based on the above example, if you earn $100,000 while living in Ontario, your combined marginal tax rate would be 37.16%.

Average Tax Rate (ATR)

This describes the overall average amount of tax you pay. Because of banding and in recognition that higher dollars are subject to higher amounts of taxation, your average tax rate will be less than your MTR. What’s your ATR on $100,000 of earned income? Hold tight, we’re getting there.

Deductions

To make this just a little more confusing, there is also a myriad of tax credits and deductions. These too can be very different federally, and by each province. The basic personal exemption that applies to nearly every tax paying Canadian, for 2021, means you won’t pay any federal tax on the first $13,808 you earn and you won’t pay Ontario provincial tax on the first $10,880. But remember, I said “nearly”. There are exceptions to most of the rules. Federally, the basic personal exemption is subject to a gradual reduction for those earning over $151,978, until it reaches only $12,421 at an income level of $216,511. And then there are different rules provincially. See what I mean by complicated!

An Ontario Example

For illustrative purposes, we are going to assume you earn $100,000 of employment income in Ontario. This table illustrates the actual tax rates from both the federal and Ontario Governments and total tax dollars that apply to each band.

At $100,000 of income, your combined MTR is 37.16% while your average tax rate is 22.8%, or $22,798/$100,000.

A Few Other Notes

There are a large number of federal and provincial tax credits and personal deductions that may apply to you and I encourage you to become at least somewhat familiar with them. Some of the more common ones include: childcare expenses, RRSP deductions, disability tax credits, professional dues deductions, moving expenses, charitable donations, the list goes on and on. You can find these easily on government websites and are not included in our above example.

Why Does it Matter

Knowing your MTR is key to understanding how best to strategize your investments (for example your TFSA, RRSP and non-registered savings contributions), amongst other financial planning components to help support your overall wealth creation and minimize taxation. MTR is used to describe how much income tax you are going to pay on your next dollar of taxable income.

Understanding your ATR will help you plan your cash flow. As per the above example, after income taxes, you have $77,201.35 to spend on your debt repayment, housing, savings, expenses and entertainment.

Have more questions than answers? Educating you is just one piece of being your personal CFO that I offer. Call or email today to start your plan.

Federal Link: All deductions, credits, and expenses – Personal income tax – Canada.ca

ROXANNE ARNAL,

Optometrist and Certified Financial Planner

Roxanne splits EWO podcast hosting duties with Dr. Glen Chiasson.

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Zero to Five Pathfinder: Spotlight Yehia Jadayel, OD

NextGenOD, PathFinders

NewOptometrist.ca puts the spotlight on Zero to Five Pathfinders

By Jaclyn Chang, OD

Dr. Yehia Jadayel talks about his journey to becoming an optometrist, his current work situation, and a bit about himself!

Jaclyn: Can you tell our audience about your background and why you went into optometry?

Yehia: In high school, I thought about going into engineering but my family’s full of engineers, so I wanted to try something different. Since I was pretty good at science, I looked at going into the healthcare field.

I went to the University of Ottawa for Biomedical Sciences. I didn’t know I wanted to be an optometrist until my second or third year of university, because I was originally interested in med school and was just looking at my options in general. I also looked into other healthcare professions, but there wasn’t anything else that really excited me.

Optometry is cool because it combines physics (optics) with healthcare and there’s also a business aspect. I talked with a few people, did some research, and decided to apply for optometry school. It was kind of late into my third year and there was a deadline to apply.

Reading week was coming up and I planned on finding an optometrist to shadow during that week. Then, I ended up getting really sick and wasn’t able to shadow anyone.

While I was back in school after reading week, I must have gone to so many different clinics. Some of them agreed to let me shadow and then cancelled the day of. I was turned down so many times and I was running out of time. I really needed a letter of recommendation as well.

My grandfather’s optometrist, Dr. Fred Campbell, gave me my last chance. I showed up at his office really late at night. It was still open and I told him I was an undergraduate student looking to apply for optometry and really needed to shadow. He agreed instantly and even let me pick the date to come in.

Dr. Campbell helped me out a lot and made things easy for me. I think it’s funny how that worked out because if it wasn’t for that, I would have run out of time. I applied to Waterloo Optometry, and I got in.

I’m glad it worked out because being an optometrist is a great job and I enjoy it. I’m very patient care-centered, so I like doing my very best for patients.

Jaclyn: I know that you worked in New Brunswick right after graduation and recently moved back to Ottawa. How did the job search in Ottawa go?

Yehia: There were a lot of positions available. I interviewed at four locations really quickly. I had already been talking to a few locations when I was in New Brunswick, getting ready to come back to Ontario. When I got back to Ottawa, I sent my job application to a few more clinics and they got back to me quickly as well.

I talked to and saw a few locations. I was mostly offered fill‑in days. There was only one location that wanted full-time and it was still between two opticals. The interviews went well – I think as an optometrist you’re interviewing them as much as they’re interviewing you.

When I was looking for a job, I didn’t have anything particular in mind, so I was able to keep my options open and see what private practice vs. opticals had to offer. For that reason, it was relatively easy and people were eager to fill their days.

Jaclyn: Where are you working now and how are you liking it?

Yehia: I’m working in two locations right now. They’re both opticals and there’s a few differences compared to when I was working in the full scope practice in New Brunswick, but I’m enjoying it.

I knew if I worked in an optical, I’d potentially have less equipment. I’m missing Optomaps and OCT, so there isn’t as much testing and analysis. The patients here in Ottawa are also a bit healthier on average; there was an older demographic where I worked in New Brunswick.

Jaclyn: Let’s talk a little bit more about you. What do you do in your free time?

Yehia: Well, that’s changed a lot during COVID. I like hanging out with family and playing video games or outside.

There was a lot of good fishing where I was in New Brunswick. I used to love fishing all the time. Sometimes the doctors would also take me out snowmobiling with them, so that was a lot of fun.

Jaclyn: What’s your favorite movie?

Yehia: Independence Day is one of my favorite movies. And the Batman movies, the recent ones with Christian Bale. I also really like documentaries.

Jaclyn: What’s your favorite food?

Yehia: Miramichi was the small town I worked in in New Brunswick, so we didn’t have a huge variety of cuisine – it was a lot of pizza, burgers, and hotdogs. Whenever I went back to Ottawa, I needed to go to three places: a shawarma place, a sushi place and Popeye’s Fried Chicken. Those are my favorite. Plus, mom’s cooking right now.

Jaclyn: When was the last time you laughed?

Yehia: [Laughter] Right now. Talking to you.

Jaclyn: What would you do if you won ten million dollars?

Yehia: I’d buy a really nice house. I’d buy my mom something really nice. Then I’d save or invest the rest and think about what I want as I get older.

Jaclyn: If you had a time machine, what year would you travel to and why?

Yehia: I love history. I want to go back to multiple periods in time and see how things were back
in the day. There’s only so much you can learn from documentaries and reading about
history, so it would be amazing to actually be there.

If I could travel forward in time, I would like to see how far technology is going to take us in the future.

Jaclyn: Thanks so much for your time Yehia – it was great to learn more about you!

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Salary or Dividends?

Finance|Wealth, Resources, Tax & Legal Matters

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Dr. Roxanne Arnal, CFP^®

The age-old question for corporation owners. Do I take salary or dividends?

First off, congratulations – you are earning enough money in your corporation to pay yourself! If you started your business cold, this is a day to celebrate. If you are fortunate enough to have sufficient profits to support your lifestyle, you are now asking one of the most common tax questions.

And the answer…it depends.

RRSP Contribution Room

The tax deferral benefit of a Registered Retirement Savings Plan is greatest when you expect to be in a lower tax bracket in retirement than the one you are currently in. This isn’t an easy calculation, because you also have to remember that retirement income is not all taxable, and actually, some forms of retirement income can have a greater negative effect than others [think Old Age Security (OAS) Clawback]. And, we really don’t know what the tax rates will be like in the future.

In order to deposit to an RRSP and defer taxation, you need to create RRSP contribution room. RRSP contribution room is created through earned income. Dividends and capital gain sources of revenue are NOT earned income and therefore do not create RRSP contribution room.

There is also an annual cap on the amount of new contribution room you can create in any one year. For 2021, this cap is $27,830, which corresponds to earned income of $154,611.

If you take dividends however, you will not create any RRSP contribution room. And, for good tax and retirement planning, I don’t recommend an all or nothing strategy for any client.

CPP Contributions

The Canada Pension Plan forms part of the basic framework of the Canadian retiree social system. It is designed, along with OAS, to provide Seniors with a base living allowance. I typically use this base as the safety net for my retirees. Everyone, even my super high net worth clients, like having a safety net.

CPP won’t likely make up a large part of your retirement income, but the program also has disability benefits that kick in for those that suffer severe and long-term disabilities preventing gainful employment. An additional top up to your personal income replacement plan.

Salaried income is subject to CPP contributions. For self-employed individuals, you are essentially paying both the employer and employee portions. For 2021, this rate is 5.45% for each side, for a total of 9.9%. I know this sounds like a nearly 10% additional tax hit, but there is a cap on this amount. For salary earned above $61,600, no further CPP contributions are required. Hence, for a salary at the RRSP contribution maximum, CPP accounts for just over 4%.

Ideal Split

In all reality, most clients benefit from a split between salary and dividend income from their corporations. Finding the right balance between excess lifestyle withdrawals for additional investing vs corporate investing needs to be reviewed on an ongoing basis.

Where lifestyle needs exceed the after-tax income created from an RRSP contribution maximum, $154,611, then I always recommend you pull the excess as dividends.

Let’s look at an example

Say you need $10,000 a month of spendable cash to cover off your mortgage, student loan payments, property taxes, utilities, groceries, and a little fun.

In Summary

There are several factors to consider on a salary or dividend split for those owning professional corporations. Part of it involves a conversation around your goals and retirement dreams. As a family CFO, I review all aspects of these decisions with my clients and work toward creating plans that meet your desires today and your dreams tomorrow.

This article should not be construed as personal financial advice.

ROXANNE ARNAL,

Optometrist and Certified Financial Planner

Roxanne splits EWO podcast hosting duties with Dr. Glen Chiasson.

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