Henry report under fire over rumours of indexation return

OPPOSITION to an overhaul of capital gains tax rules intensified yesterday, with tax experts warning that the proposed changes would hurt investors and create havoc for dividend reinvestment plans.

The investment community is awash with talk that the Henry report, being considered by Wayne Swan, has recommended the reintroduction of indexation, a move likely to be greeted with widespread opposition.

KPMG tax partner Matt Hayes said yesterday that reverting to the old regime of indexation, effectively scrapped about 10 years ago, was contrary to the notion of trying to simplify tax return preparation.

He said for dividend reinvestment plans, indexation could be a “compliance nightmare” because investors needed to determine the capital gain based on inflation for every asset. Indexation can also be a headache for property or other non-managed fund investors who cannot rely on an administrator or fund manager to provide exact details of when the asset was bought and sold.

There has also been talk that the review, headed by Treasury secretary Ken Henry, is looking to ditch the 50 per cent capital gains tax discount for assets held for longer than a year for alternative options such as a standard flat rate on capital gains or a longer tenure-of-holding rule.

But Zurich Financial Services Australia acting head of technical services, Dimitri Diamantes, issued a warning that a longer period-of-holding rule represented a significant tax burden for investors who were forced to sell prematurely.

“A client who suffers a personal lifestyle crisis or who, because of economic events, needs to sell down investments, for example for a margin call, will be in a situation where they will have an added tax burden,” Mr Diamantes said.

One view is that the current 12-month holding rule does not encourage long-term investment and a sliding scale should be adopted whereby the capital gains rate reduces the longer an asset is held.

In its submission to the review, the Investment and Financial Services Association said a tiered discount based on years of ownership would be significantly more difficult for collective investment vehicles to administer and for individual investors to comply with.

One industry representative said fund managers were “up in arms” over the suggestion of extending the 12-month holding rule as very few held assets for longer than a year.

But there was also talk yesterday that the review may be looking to scrap the 50 per cent discount altogether as part of a plan to address the distortion in tax rates across the different classes of investments by introducing a standard flat rate.

Tags: Canada, Canada Mortgage and Housing Corporation, CMHC, Community, Housing, Mortgage, program, Tanya Hutchens

The ABC’s of Condominiums – Types, Styles — and How to Choose the One That’s Right For You

There are almost as many types of condos as there are kinds of people who want to live in them. Residential condominiums can range from high- and low-rise apartment buildings to townhouses, duplexes, triplexes, single detached homes, freehold plots or even mixed-use condominiums that include retail or commercial space. They can also feature a wide variety of amenities designed to suit almost any budget or lifestyle.

If you’re in the market for a condo, says Tanya Hutchens, you have to look at this report by Canada Mortgage and Housing Corporation (CMHC), they offer the following tips to help you make sure your new home meets your needs, preferences and price range:

• Be aware of what is, and what is not, included in the purchase price. For instance, are amenities such as pools and parking available? Are finishes within the units included? Are utilities (gas, electricity and water charges) covered in the monthly condominium fees? These questions must be considered when comparing the overall costs of different condominiums.
• Investigate the condo’s set of rules, regulations and by-laws. These can range from restrictions on the number of unit occupants to limits on pets, noise and parking. These rules are designed to ensure that the condominium is properly operated and maintained, that the rights of each owner are protected and that the living environment stays peaceful and harmonious. Make sure to read a copy of them before you make any decisions. This information should be readily available from the seller, property manager, Board of Directors or the condominium’s governing documents.
• Know the unit’s boundaries, which may vary considerably from one condo to another. In some condominiums, the boundaries of your unit could end behind the interior drywall of the dividing walls. In others, it might only go as far as the wall’s centre line. For a freehold or bare or vacant land condo, the individual unit encompasses the entire house, including the exterior walls, roof and even the land surrounding it. Make sure you understand exactly where your unit’s boundaries begin and end, especially if you’re planning to carry out any alterations or renovations.
• Determine whether your condominium includes some “exclusive use common property elements”. These are areas such as balconies, parking spaces, storage lockers, driveways and front or rear lawns. While these spaces are for your exclusive use, there may be restrictions on how and when you can use them. For example, you may not be able to park a boat, RV or commercial vehicle in your assigned parking spot, or there may be restrictions on what you can place on your balcony.

For more information or a free copy of the Condominium Buyers’ Guide or other fact sheets on owning, maintaining or renovating your home, call CMHC at 1-800-668-2642. For more than 60 years, Canada Mortgage and Housing Corporation (CMHC) has been Canada’s national housing agency and a source of objective, reliable housing expertise. This CMHC report was reviewed by Tanya Hutchens.

Tags: Canada, CMHC, condo, condominium, Home, Housing, information, land, Mortgage, parking, price, property, Tanya Hutchens

Seniors Remain Independent through Home Adaptations

As we age, we look forward to living independently in the place we’ve come to call home. However, many homes are not well designed to meet our changing needs as we get older. This is why, for more than a decade, the Canada Mortgage and Housing Corporation (CMHC) has been working to help seniors who meet certain criteria pay for minor home adaptations. This is done through a program called HASI, or Home Adaptations for Seniors’ Independence.

These home adaptations are minor enough that they do not dramatically change the environment of the home. They could be as simple as changing the knob on the front door to a home.

Harry, a retiree and grandfather, has been living in the same home in Halifax for 40 years. At one time, the heavy knob on the front door to his home was stylish and he turned it with ease. In recent years, however, because of his arthritis, he gets frustrated as he tries to turn the knob. The replacement of the old knob with a new lever door handle makes this task much easier and less frustrating.

Door handles represent just one example of the home adaptations HASI can make possible. Other typical adaptations include: installation of a small ramp to the front door; handrails in corridors; walk-in showers with grab bars; bathtub grab bars and seats; and easy-to-reach storage areas in the kitchen. Between 1996 and 2005, HASI assisted more than 25,000 households.

Who is eligible for HASI? Homeowners and landlords alike may qualify for assistance as long as the occupant of the dwelling where the adaptations will be made meets certain criteria such as: being 65 years of age or older; experiencing difficulty with normal daily activities brought on by aging; and living in a permanent residence. The occupant must also have a total income below a certain amount, based on where he/she lives in Canada.

Those who qualify for assistance through HASI can receive help in the form of a forgivable loan of up to $3,500. The loan does not have to be repaid, as long as the homeowner agrees to occupy the unit for the six month loan forgiveness period. In cases where the adaptation work is being done on a rental unit, the landlord must agree that rents will not go up as a result of these changes.

Through their Residential Rehabilitation Assistance Program (RRAP), says Tanya Hutchens, the CMHC also offers ways to help people who want to convert space in existing dwellings to create secondary suites or garden suites for low-income seniors.

For more information about HASI, RRAP or other CMHC programs, call 1-800 668-2642. For more than 60 years, Canada Mortgage and Housing Corporation (CMHC) has been Canada’s national housing agency and a source of objective, reliable housing expertise.  This CMHC report was reviewed by Tanya Hutchens.

Tags: Adaptations, assistance, Canada, Canada Mortgage and Housing Corporation, CMHC, Corporation, HASI, Home, Housing, knob, loan, Mortgage, occupant, program, Seniors

Looking to Buy a Home? Is Homeownership Right for You?

Lets think, says Tanya Hutchens, you’ve weighed your options, and now you want to buy a home. Purchasing a home is one of the biggest investments you’ll ever make. So before you make an offer, make sure you’re ready to take on all the financial and emotional responsibilities that come with owning a home of your own.  To help you make an informed decision, Canada Mortgage and Housing Corporation (CMHC) suggests you ask yourself the following questions before you begin your search for the perfect home:

• Are you financially ready to buy a house?
• How much will your home actually cost?
• What kind of mortgage is right for you?

For more information on buying a home call CMHC at 1-800-668-2642. For more than 60 years, notes Tanya Hutchens, Canada Mortgage and Housing Corporation (CMHC) has been Canada’s national housing agency and a source of objective, reliable housing expertise. This CMHC report was reviewed by Tanya Hutchens.

Tags: Canada, CMHC, Corporation, Homeownership, Housing, Mortgage, Ontario, Purchasing, Tanya Hutchens