Doctors say capital gains tax changes will jeopardize their retirement. Is that true?
The Canadian Medical Association asserts the Liberals' proposed changes to capital gains taxation will put doctors' retirement savings in jeopardy, but some financial experts insist incorporated professionals are not as doomed as they say they are.
Prime Minister Justin Trudeau's government presented a federal budget last week that proposes making two-thirds rather than one-half of capital gains - or profit made on the sale of assets - taxable.
The increase in the so-called inclusion rate would apply to capital gains above $250,000 for individuals, and all capital gains realized by corporations.
Since doctors typically incorporate their medical practices and invest for retirement inside their corporations, the association points out its members will now face a higher inclusion rate on all capital gains they earn, including on retirement investments.
It remains unclear, however, just how much of an impact Canadian physicians are facing.
Jean-Pierre Laporte, CEO of Integris Pension Management Corp., argues physicians can fully shield their retirement savings from capital gains taxation.
Laporte says incorporated professionals like doctors can sell off investments and open a registered pension plan. Contributions to the plan would be tax deductible, which means the individual would not pay any tax on the capital gains they earn.
“If a medical professional corporation is concerned about increasing corporate taxes because of this change to the budget, a solution that's been around for years ... is to have the corporation set up a registered pension plan,” Laporte said.
Physicians would still have to pay income taxes on the money they receive in the form of a pension, as is the case with other Canadians who have a pension.
There are also limits on how much someone can contribute to a pension plan, which means physicians will still end up paying more taxes on personal investments.
“Eventually, they will be impacted by these measures. But nowhere near to the extent that is made out in the news,” Laporte said.
Nicole Ewing, director of tax and estate planning at TD Wealth, says whether opening a pension plan makes sense depends on an individual's circumstances.
“It's not a one-time decision. There are ongoing compliance and administrative requirements. And there are restrictions on how you can get out of that in the future. So, making sure that you go into something like that with eyes wide open is really important to understand,” Ewing said.
As to how much the new capital gains tax rules will affect doctors, Ewing said it's too soon to tell.
“I think that it's premature at this stage to make any conclusions about what the impact would be,” Ewing said.
In a statement, the Canadian Medical Association echoed Ewing's comments, noting that opening a pension plan may make sense for some people.
“While certain individuals may benefit from an (individual pension plan), there are numerous variables to consider,” the CMA said, noting there are limitations to contributions that can be made.
The Liberal government has argued that the proposed changes to capital gains taxation are about fairness and levelling the playing field between those who earn their income via capital gains versus other sources, such as employment.
Physicians who incorporate their practices have historically benefited from lower tax rates that made it easier to save money in the first place.
Experts who help manage their financial affairs say many doctors take full advantage of registered retirement savings plans and tax-free savings accounts, which are not affected by capital gains taxation.
They also note that by incorporating their practices, they benefit from a lower tax rate - in Ontario, that's just 12 per cent on the first $500,000 of taxable income.
Trudeau and Finance Minister Chrystia Freeland have dismissed the doctors' plea to reconsider the capital gains tax changes, arguing the revenue the tax change generates is needed to fund things like housing and health care for all.
“I think Canada's health-care professionals recognize, maybe more than anyone else, how important these investments are,” Freeland said Tuesday.
“They are massive and I think it's entirely appropriate, it's really fair to ask those who are doing the best in our society to pay a little bit more to fund them.”
The government estimates only 0.13 per cent of Canadians in any given year will have to pay more in capital gains taxes as a result of the changes.
The federal government expects the increase to the inclusion rate to generate $19.4 billion in revenue over five years.
This report by The Canadian Press was first published April 25, 2024.
- The Canadian Medical Association funds a fellowship that supports journalism positions at The Canadian Press. CP is wholly responsible for the editorial content created under the initiative.
IN DEPTH
Budget 2024 prioritizes housing while taxing highest earners, deficit projected at $39.8B
In an effort to level the playing field for young people, in the 2024 federal budget, the government is targeting Canada's highest earners with new taxes in order to help offset billions in new spending to enhance the country's housing supply and social supports.
'One of the greatest': Former prime minister Brian Mulroney commemorated at state funeral
Prominent Canadians, political leaders, and family members remembered former prime minister and Progressive Conservative titan Brian Mulroney as an ambitious and compassionate nation-builder at his state funeral on Saturday.
'Democracy requires constant vigilance' Trudeau testifies at inquiry into foreign election interference in Canada
Prime Minister Justin Trudeau testified Wednesday before the national public inquiry into foreign interference in Canada's electoral processes, following a day of testimony from top cabinet ministers about allegations of meddling in the 2019 and 2021 federal elections. Recap all the prime minister had to say.
As Poilievre sides with Smith on trans restrictions, former Conservative candidate says he's 'playing with fire'
Siding with Alberta Premier Danielle Smith on her proposed restrictions on transgender youth, Conservative Leader Pierre Poilievre confirmed Wednesday that he is against trans and non-binary minors using puberty blockers.
Supports for passengers, farmers, artists: 7 bills from MPs and Senators to watch in 2024
When parliamentarians return to Ottawa in a few weeks to kick off the 2024 sitting, there are a few bills from MPs and senators that will be worth keeping an eye on, from a 'gutted' proposal to offer a carbon tax break to farmers, to an initiative aimed at improving Canada's DNA data bank.
Opinion
opinion Don Martin: Gusher of Liberal spending won't put out the fire in this dumpster
A Hail Mary rehash of the greatest hits from the Trudeau government’s three-week travelling pony-show, the 2024 federal budget takes aim at reversing the party’s popularity plunge in the under-40 set, writes political columnist Don Martin. But will it work before the next election?
opinion Don Martin: The doctor Trudeau dumped has a prescription for better health care
Political columnist Don Martin sat down with former federal health minister Jane Philpott, who's on a crusade to help fix Canada's broken health care system, and who declined to take any shots at the prime minister who dumped her from caucus.
opinion Don Martin: Trudeau's seeking shelter from the housing storm he helped create
While Justin Trudeau's recent housing announcements are generally drawing praise from experts, political columnist Don Martin argues there shouldn’t be any standing ovations for a prime minister who helped caused the problem in the first place.
opinion Don Martin: Poilievre has the field to himself as he races across the country to big crowds
It came to pass on Thursday evening that the confidentially predictable failure of the Official Opposition non-confidence motion went down with 204 Liberal, BQ and NDP nays to 116 Conservative yeas. But forcing Canada into a federal election campaign was never the point.
opinion Don Martin: How a beer break may have doomed the carbon tax hike
When the Liberal government chopped a planned beer excise tax hike to two per cent from 4.5 per cent and froze future increases until after the next election, says political columnist Don Martin, it almost guaranteed a similar carbon tax move in the offing.
CTVNews.ca Top Stories
Canada to launch 'national action plan' to fight auto theft
The federal government is launching what it calls its 'national action plan' to combat auto thefts, which will include stronger penalties for thieves, and increased information sharing between police agencies, government officials and border enforcement.
U.S. Supreme Court rejects appeal from former Guantanamo detainee Omar Khadr
The U.S. Supreme Court on Monday rejected an appeal by a Canadian-born former Guantanamo detainee who was seeking to wipe away his war crimes convictions, including for killing a U.S. soldier in Afghanistan.
What is BORG drinking, and why is it a dangerous trend? An expert explains
If you've been to a party lately and haven't seen someone drinking a BORG, you're likely not partying with college students.
Iran's president and foreign minister die in helicopter crash at moment of high tensions in Mideast
Iranian President Ebrahim Raisi and the country's foreign minister were found dead Monday hours after their helicopter crashed in fog, leaving the Islamic Republic without two key leaders as extraordinary tensions grip the wider Middle East.
Michael Cohen says he stole from Trump's company as defence presses key hush money trial witness
Former Donald Trump attorney Michael Cohen admitted Monday to jurors in the Republican's hush money trial that he stole tens of thousands of dollars from Trump's company as defence lawyers seized on the star witness' misdeeds to attack his credibility.
The world's best airline is paying staff a bonus of 8 months' salary
Singapore Airlines will reward its employees with a bonus worth nearly eight months of salary, a person familiar with the matter told CNN on Friday.
Woman, 35, in critical condition after her truck collided with a Via Rail train near Montreal
A 35-year-old woman is in critical condition after the pick-up truck she was driving was struck by a Via Rail passenger train Monday morning in Quebec's Monteregie region.
Investors watching posts from 'Crypto King' in the wake of fraud, money laundering charges
Former investors of the self-styled “Crypto King” say they are watching his social media accounts and worried his displays of wealth are signs he’s spending their money, even now, as another large expense tied to Aiden Pleterski has triggered a previously unreported lawsuit.
Almost 2 months after it destroyed Baltimore's Key Bridge, the Dali cargo ship has been moved
The cargo ship Dali is being moved from the site of its catastrophic collision with the Francis Scott Key Bridge in a crucial step toward fully reopening the busy Port of Baltimore.
Local Spotlight
VIDEO Born without front legs, this dog has been inspiring the world for 3 years: Dresden farm owner
A sanctuary dedicated to animals with disabilities is celebrating the third birthday of one of its most popular residents.
7-year-old Pokémon prodigy heading to Hawaii for world championship tournament
Catching 'em all with impressive speed, a 7-year-old boy from Windsor, Ont. who only started his competitive Pokémon journey seven months ago has already levelled up to compete at a world championship level.
From DVDs to rehearsals: Halifax theatre company transforms Video Difference building into arts hub
2b Theatre recently moved into the old Video Difference building, seeking to transform it into an artistic hub, meeting space, and temporary housing unit for visiting performers in Halifax.
'Another pair of eyes watching over me:' How a B.C. woman's service dog saved her from drowning
A B.C. woman says her service dog pulled her from a lake moments before she had a seizure, saving her life.
Starbucks fan on decades-long journey to visit every store in the world
A Starbucks fan — whose name is Winter — is visiting Canada on a purposeful journey that began with a random idea at one of the coffee chain's stores in Texas.
'Sacred work': Sask. First Nation learning how to conduct its own underground searches
Members of Piapot First Nation, students from the University of Winnipeg and various other professionals are learning new techniques that will hopefully be used for ground searches of potential unmarked grave sites in the future.
'It could mean a cure': Cautious optimism for groundbreaking ALS research at Western
ALS patient Mathew Brown said he’s hopeful for future ALS patients after news this week of research at Western University of a potential cure for ALS.
B.C. musician's song catches attention of Canucks
When Adam Kirschner wrote 'Slap Shot,' he never imagined the song would be embraced by his favourite team.
'We're on standby': Team ready to help entangled right whale in Gulf of St. Lawrence
A team is ready to help an entangled North Atlantic right whale in the Gulf of St. Lawrence.