With close to 20 years in the mortgage industry and a consultative touch, Nishka makes the entire process smooth and easy.
Do we renovate? Do we buy a vacation home? Do we package up our debt and add it to our mortgage? Using your home equity doesn’t have to be expensive. From re-organizing debts to parents helping their children buy homes, draw upon Nishka’s collective experience from dealing with every possible financing scenario over the past 15 years.
“Nishka has been our mortgage advisor for many years. While we have always valued her experience, excellent customer service, and advice in providing financing solutions, it wasn’t until we started our major renovation that we got to see how extensive her knowledge really is. Not only did Nishka recommend over 10 trades people to us, she also came to our home and shared some of her personal experiences, offering ideas from several of her projects on her past homes. She also drew upon the collective experiences that her clients have been through, some of which are property developers.
Working with someone who is “battle tested” has given my wife and I a huge level of comfort as we take the leap into this massive undertaking!”
– Leonard and Liana Cox – North Vancouver
As a real estate investor you want a mortgage advisor with experience. In addition to structuring mortgage financing deals for over 15 years, Nishka is also an active real estate investor herself. Having bought and sold close to 10 properties in the past 10 years, Nishka understands how real estate in the Vancouver area is an integral part of building wealth. With over 50 lenders at her disposal, Nishka can find the funds to “do the deal” and structure it in a tax efficient manner.
– Robert and Kasia
How exciting! After driving around town, visiting a million open houses over countless Saturday’s, you are ready to make an offer. Or maybe it’s just the opposite! The house that you have always found an excuse to drive by now has a For Sale sign! Suddenly the traffic on the street seems much more than usual; you know you are going to have to go into a multiple offer situation to get this one!
This is where Nishka shines! In either situation you need a mortgage advisor who can act fast to get you an approval with the right lender so you can remove that “subject to financing clause” ASAP!
“Buying a house and securing financing is a very stressful experience, however, through working with Nishka, the process was surprisingly easy. She was extremely helpful in explaining all the details to us. She has years of experience and knowledge in the industry and was creative in helping us achieve our goals. I would, without a doubt utilize her services again in the future and would recommend her to anyone looking into mortgage financing as she is one of the best at what she does!”
– John from New Westminster
You want to explore your options. Perhaps you are tired of making appointments during “Banker’s Hours” or you would like some advice on what type of mortgage best fits with the current rate environment. With access to over 50 lenders Nishka has the ability to find the right mortgage, with the right lender that best fits your needs. Today’s mortgage financing landscape is very different than when you initially set up your mortgage. Let Nishka guide you through the new government legislation and product options.
“Nishka listened to our financial needs and knew exactly how we should proceed to achieve our lifestyle goals. Thank you Nishka – you are amazing in every way!”
– Tracy and Declan Sacre – North Vancovuer
How exciting! Buying your first home is something you will remember for a life time! Let me tell you why First Time Buyers love dealing with Nishka!
Compass™, a program available exclusively from Nishka, allows you to harness her 20 years of experience as an Accredited Mortgage Professional. First Time Buyers that have been through the Compass™ process, on average buy a home 50% sooner and at a 50% to 70% greater purchase price than those First Time Buyers that haven’t gone through the process. With Compass™ you will get the road map and the directions you need to get you moving into your very first home!
– Mike and Sherri
Nishka has been an amazing resource for our first home purchase. She was professional and thorough throughout the process and secured a great rate for us quickly and efficiently. Thanks Nishka!
– Ian and Elisabeth
“As first time home buyers, we didn’t know much about the mortgage process. Nishka made everything simple, was always there to answer questions, and catered to our personal needs in finding the right mortgage for us!”
– Jon and Cassia
“So grateful to have Nishka help us make our dream a reality!!
I can’t speak highly enough to explain how much Nishka has helped us through the process of buying our first home. She not only helped us secure a great mortgage product with one of the best rates, but in my mind she also went way outside her job description to make the entire process comfortable for us by having such a wealth of knowledge in all areas of the home buying process. I walked into her office just to explore what it would take to get ourselves into a position where we could buy our own home and with an amazing suggestion on how we could invest in RRSP’s to maximize our tax refund and then utilize our first time home buyers program we actually turned just and idea into me sitting here now in our beautiful home writing about the experience all within 6 months. There were a lot of unknowns and really big sometimes scary decisions to be made along the way when buying our house and what I loved about working with Nishka is that she was always available to return my calls. When we were hunting for houses I think I had to call her 3 times in a row to ask different questions and not once did she ever make me feel as though I was being a bother and she always had a way of leaving me feel very comfortable and confident in what I was doing. Nishka went way above my expectations and I am so grateful to have met such a great person and I will definitely be continuing our journey with her when our mortgage term comes time for renewal. If anyone is considering buying a home or is looking to find a great mortgage I highly recommend you see Nishka to discuss your options she has made our dream come true and I really know she would be helpful to anyone who is going through the process.”
– Sarah & Jay
Very happy new homeowners!!!
As first time home-buyers, my husband and I were referred to Nishka to help us secure a mortgage. Nishka was incredibly patient, meeting with us in person to answer all of our questions and coach us through the process. She also made sure to keep in touch regularly throughout our experience so we were aware of where things were at and what was required of us. Even when faced with unique challenges, Nishka went above and beyond in gathering additional information and providing guidance to us on how to navigate our situation. Overall, the knowledge she shared with us and her drive to get us set up with the best mortgage possible reduced our stress and made the entire process easy and straightforward. We would recommend Nishka to other first time home-buyers in a heart beat!
-Amy and Shaun
A Mortgage Finance Blog filled with insights on real estate!
On July 18, 2017, the Canadian government released a consultation paper and draft legislation that proposed significant changes to small business tax rules. Following a public consultation period that ended on October 2, 2017, the government revised its thinking and in some cases withdrew the proposals. What is left are planned reductions in the small business tax rate, but significant limitations on the generation of what’s known as passive income. These restrictions are of particular concern to small business corporation owners who are also key First National commercial borrowers. To help our clients understand the implications, we sought the perspectives of Jonathan Newton, CPA, CA, a Tax Partner at KPMG LLP. Jonathan has almost two decades of experience as an advisor to companies throughout the real estate sector, including REITs, public corporations, real estate private equity funds and private entrepreneurial real estate enterprises. What follows is an edited transcript of our interview with Mr. Newton.
Jonathan, can you set the stage for what the government is proposing?
The Department of Finance originally made four proposals. Two of the four were subsequently withdrawn in the middle of October and these included curbing the conversion of tax-free gains currently available on qualified property, and curbing the conversion of income into capital gains. One proposal to restrict tax planning as it relates to income splitting, which has been colloquially referred to as income sprinkling, remains. And the final, which is a limitation on the generation of passive income earned inside a private corporation, has been modified.
These were originally far-reaching proposals.
In their original form, they were the most far-reaching in my 18-year career. Some commentators described them as the most significant upheaval of the Tax Act since the late 1960s. And as far as implications, there were scenarios whereby a 90% tax rate could apply. Truth be told, I’ve never seen as much concern expressed by my clients. People were really taken aback and wondering how they could survive such significant tax hikes and what the rule changes might do to the broader economy and to the entrepreneurial class of taxpayers, including the next generation of entrepreneurs who might not have these tax planning strategies in place for support. It is not surprising that the government reworked the proposals.
So we are left with two proposals. Can you describe the implications of income-splitting prohibitions?
Income splitting allows business owners to share their income with lower or non-earning family members by paying them dividends, even if they don’t work for the company, as means of lowering the family’s overall tax burden. The government proposal suggests it will apply a reasonableness test to determine if an owner’s spouse or children actually contribute to the business and whether the level of compensation is justified. These proposals also expand the application of what’s known as the Tax on Split Income or TOSI to include income from certain debt obligations, capital gains from the sale of shares in which the income is subject to the TOSI and compound income on property that is the proceeds from income previously subject to the TOSI rules or the income attribution rules.
And what about the passive income proposal?
Based on the conversations that I’m having, this is the most worrisome to owners of private corporations that operate businesses. Passive investment refers to income derived within a corporation from a portfolio of investments, as opposed to active income earned from operating the business itself. The Department of Finance says that some individuals unfairly benefit from retaining passive investments in their corporations because those investments are funded by income that was taxed at the much-lower corporate rate rather than at the much higher personal rate.
Can you explain how passive investments are currently treated for tax purposes?
Sure and I’ll use an Ontario taxpayer as an example. In this province, the highest marginal tax rate for individuals is 53.53%, while the corporate tax rate is either 15% on business income up to $500,000, if the small business deduction applies, or 26.5% above that amount. As a result, if a business owner keeps surplus earnings inside their corporations for investment, more after-tax dollars are available for investment than if the funds were first paid out to an individual, fully taxed and then invested. The government doesn’t think it’s fair for a business owner to be able to start with a bigger initial investment portfolio than someone who earns employment income, even though there will be a reconciliation at the end when the investment is withdrawn and taxes are paid by the recipient at their personal marginal rate. So under the government’s revised proposal introduced in mid-October, they are planning to increase tax on private corporation’s passive income earned in excess of $50,000 per year from investments that were funded by income taxed only at the lower corporate rate.
It’s an arbitrary amount allowed by the government to permit business owners to accumulate investments in their corporation. Finance notes that $50,000 is how much income would be generated by a $1 million portfolio earning 5% per annum, so this gives you a sense of what amount of investments they consider to be reasonable for private corporations to accumulate from their business earnings.
What are the implications of this proposal?
They are negative. Suppose for example that a business generates $2 million of income. After paying 26.5% corporate tax on that income, the owner would be left with $1,470,000 for a passive investment portfolio. Let’s say that money is invested in a bond that pays a 5% annual interest rate, which generates $73,500 of interest income per year. The first $50,000 of income earned is taxed at the existing rates on passive income. Every dollar above that amount would be taxed at an effective rate of 73%. This proposed rule, in effect, puts a relatively modest cap on how much a business can hold in passive investments. The concern for many small business owners is that they need to save and invest much more than a few million dollars for purposes such as funding retirement or as a rainy-day fund in case of business stress, or as a nest egg to pay for a future business asset or expansion. While the government has said it would be willing to make exceptions to this amount under certain circumstances, it is not clear how it will decide when a business can exceed this amount of passively earned income.
What would happen to a business owner earning more than $50,000 annually from their passive investments?
Depending on the type of investment income, that excess income would be taxed at punitive rates of 60% to 73%, compared to approximately 50% under the current rules. This reflects the government’s view that business owners should be motivated to fully distribute most of their earnings to shareholders, and that those shareholders should pay an additional level of tax as individuals on the receipt of the income, with no deferral such that the after-tax amount they have to invest would be comparable to what they would’ve had, had they earned that money as an employee. This is a fundamental change to our tax system and, in talking to my clients, it’s viewed as demotivating. Remember that many business owners use passive investing to make up for not having access to a company-sponsored pension plan or unemployment insurance. A pension paying $50,000 per year isn’t that much relative to the pension payments received by some Canadians with defined benefit pension plans.
Why is tackling passive income the most worrisome for First National’s commercial clients?
Let me put it in this context. Many of my clients are small real estate companies that earn income from speculative real estate ventures such as developing single family homes, condos or apartments. The active income they earn from those ventures is taxed in Ontario at 26.5%. As a result of their success, these clients find themselves with surplus income. For risk management reasons or to create a more stable flow of income for their families or for retirement, they don’t want to constantly reinvest all those funds in their active business which is speculative real estate. They want to diversify. As a result, they purchase passive real estate investments like rental properties or stock and bond portfolios inside their companies. The concern is that under proposed changes, the income from those investments will be subject to this punitive rate of 60% to 73% on every dollar of passively earned income above $50,000 in a given year.
How would a real estate company that makes an investment in an income-producing property possibly get caught up by this change to passive income taxation?
Rental income would seemingly be subject to the higher rate unless it is considered active income. It comes down to what’s known as the 6-person test. When a real estate company earns rental income, by default the tax rules define that as passive income. However, there is an exception. If the company earning that rental income employed, during the year, more than five full-time employees whose work pertained to the generation of the rental income, then the rents received are deemed to be active income. The problem is that a small business owner would have to accumulate a pretty large real estate portfolio to justify having more than five full-time employees engaged in generating rental income. So you can see that many owners would be easily caught up in this passive income scenario.
Hasn’t this 6-person test always been in place?
It’s been in place for some time but consider what happens currently versus what’s being proposed. If passive rental income is earned inside a corporation, it is currently taxed at 50%. However, that 50% consists of a 20% and a 30% component. 20% is a permanent tax that the company pays and never gets back. 30% is a refundable tax that means when profits are distributed up to the shareholder in the form of a taxable dividend, the shareholder pays tax on the dividend but at the same time, the company gets a refund on some of the tax it pays which is intended to generally offset the tax paid by the shareholder. Accordingly, you can basically move money up from the company to the shareholder without a significant additional layer of tax. In the proposed new regime, the concern is that investment income over $50,000 will be taxed at rates of 6-% – 73% with no refundable component.
When will these changes be implemented?
The government has indicated that they will include enabling legislation in their 2018 fiscal budget. Typically those budgets are introduced in Parliament in February or March. So while it is anyone’s guess as to when the changes will come into effect, some commentators think they will be effective on the date of the budget, some believe they will be deferred until January 1, 2019 and another school of thought is that they will be retroactive to January 1, 2018. Regardless it looks like they are coming.
Hasn’t the government also indicated that the proposed changes to passive income generation will not affect current passive investment portfolios?
That’s correct. Monies passively invested now will be grandfathered and therefore not subject to this $50,000 annual income generation cap.
Does that provide a window of opportunity should a First National client wish to increase the size of their passive investment portfolio now?
Absolutely. Knowing that there has been an assurance that taxes on existing passive investments won’t be changed, it may provide an opportunity for business owners to increase the size of their basket of passive investments prior to passage of the enabling legislation. One idea may be to liberate cash right away that can be used to make additional investments. There are probably various ways people can do that, but one thing I have discussed with members of First National’s commercial team is that real estate owners could refinance existing passive real estate holdings. This scenario is appealing in situations where the existing property or properties have increased in value, providing the means to take some equity off the table that can be used to purchase additional investments. The tax rules are also generally favourable for using debt to finance investments because interest on the loan is tax deductible where the borrowed funds are used for an income-earning purpose.
Are you advising real estate clients to do that?
It’s important to acknowledge the fact that this is a proposed change only. We aren’t dealing with an actual rule. So while it looks highly likely that the change is coming, we can’t give any degree of comfort that a refinancing strategy like this is appropriate. On the other hand, we do have very black-and-white statements from the Finance Minister saying he won’t increase tax on existing passive investments and that the rules (which don’t yet exist) would apply on go-forward basis. And there has been no suggestion that they might apply a higher tax rate to debt-financed investments. Bottom line, it’s a strategy worth considering.
If a First National borrower is interested in a refinancing strategy, what would you suggest?
There are a number of things that need to be considered including things that don’t have tax implications. First, taking debt to make investments introduces risk, so that needs to be assessed. Second, refinancing takes time as it involves seeking arrangements with your lender who will need to do appropriate due diligence to approve a new loan. So I would suggest that if this is something that a First National client wants to pursue, they start looking into it immediately to leave time to work with their accountants, lenders and investment advisors to assess the pros and cons. And the pros and cons will depend on a number of factors such as the age of the taxpayer, rate of interest on a refinanced loan, and the opportunity for investment income to be earned. There’s a lot to be thought about and analyzed but in general, it’s an interesting scenario given possible tax implications.
So even though it’s not clear whether this new tax will be enacted, it’s not advisable to wait to find out?
Let me answer this way. It will take time to figure out how to put yourself in the best possible position. If you wait until final legislation is passed, and that legislation is effective on the date of the budget in early March 2018, it will be too late. In my view, it’s important to determine the right course of action now so that if you choose to do a refinancing, you have time to work with your lender to achieve a refinancing approval. Really what’s most important to this passive income strategy is the date at which the rules take effect. Whether it’s in three months or 12 months, it’s time to get started on advance planning.
Are you also consulting with clients about what to do after these proposals come into place?
Yes, given my profession I’m having a lot of conversations with various people, including of course clients, about the changes. People are contemplating everything from moving out of Canada, which has significant tax implications, looking for investments that generate active income or exploring unwinding their corporations. The modifications the government has made by removing two of the original proposals and slightly softening the passive income rule may have ameliorated some of the concerns that spawned these more drastic ideas, but there is definitely planning that must be done now to avoid triggering punitive tax rates for those with passive investment portfolios.
My personal opinion when all four proposals came out was that they were too far reaching, and could be detrimental to the Canadian economy. But the modifications made since have reduced some of the sting for my clients, including the planned reduction to the small business tax rate on income below $500,000. Nevertheless, the proposed changes that are left are serious in nature and it is advisable to plan and to consider your options.
Jonathan Newton can be reached at firstname.lastname@example.org. To discuss refinancing options, contact your First National representative or for the full text of the Department of Canada’s proposals, visithttps://www.fin.gc.ca/activty/consult/tppc-pfsp-eng.pdf.
Since 1995 Nishka has been providing financing solutions for North Vancouver, Vancouver and the Tri-City areas. In that time she has come to understand one simple thing; owning real estate is a key ingredient to creating wealth. “I’ve had the opportunity to meet and interview some very successful people. The common thread between them was that they all actively used real estate to build their net worth.” With this in mind, Nishka is an active advocate in helping clients on their journey in either starting or building on their real estate portfolio. It’s not all about building wealth though. ” Living in Vancouver is a lifestyle choice. We choose a community that we feel our family will be able to connect with. Having lived in North Vancouver for close to 20 years; I am able to provide insight into the various communities and their idiosyncrasies.” When we asked Nishka what does she love about her role as a Mortgage Advisor: ” Helping people. It’s as simple as that. When I meet people they are often at the cross roads of some pretty big decisions. Providing insight from my collective experience and guiding them through the process to the solution is challenging and also exciting.”
“My wife and I were facing the exciting, but also somewhat horrifying task of purchasing our first apartment. As first time buyers, we really didn’t know a whole lot of the ins and outs of a home purchase and about all the different types of mortgages and lenders. Nishka made this whole process easy and as stress free as it could possibly have been. We were referred to her by a coworker and from day one she was absolutely wonderful. She is calm, patient, informative, extremely professional, and very easy to get ahold of if you have questions or concerns. We would highly recommend Nishka to anyone looking for a mortgage.”
– Mike and Sherri
“As first time home-buyers, my husband and I were referred to Nishka to help us secure a mortgage. Nishka was incredibly patient, meeting with us in person to answer all of our questions and coach us through the process. She also made sure to keep in touch regularly throughout our experience so we were aware of where things were at and what was required of us. Even when faced with unique challenges, Nishka went above and beyond in gathering additional information and providing guidance to us on how to navigate our situation. Overall, the knowledge she shared with us and her drive to get us set up with the best mortgage possible reduced our stress and made the entire process easy and straightforward. We would recommend Nishka to other first time home-buyers in a heart beat!”
– Amy and Shaun
“So grateful to have Nishka help us make our dream a reality!!
– Sarah & Jay
Very happy new homeowners!!!
– Robert and Kasia
“My family and I HIGHLY recommend Nishka Riley. We’ve used her expertise more then once. She, every single time, succeeded where others repeatedly kept failing. She is a Life Saver and Happiness Maker… Thank you Nishka for who you are and for helping others be where they want to be.”
– Kamal Derkaoui csc
– Ian and Elisabeth
“Nishka has been a pleasure to work with. She is a warm and sincere person and also has great vision and knowledge.”
– Juliette Schmerler
“I’ve known Nishka for several years and have found her to consistently be a knowledgeable expert in the field of mortgage financing. I would highly recommend her services to anyone requiring mortgage advice or insight related to financing a real estate transaction, either for personal use or investment purposes.”
– Gord Trembath
The service that Nishka provided was exceptional. Not only did she find me a great mortgage but also gave me some common sense solutions for future investments. I would highly recommend Nishka to my friends and family, and look forward to working with her in the future.
– Mark Walker
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