| |
Year1 |
Year2 |
Year3 |
Year4 |
Avg |
| Twice annual dental check-ups for 4 people |
$800 |
$800 |
$800 |
$800 |
$800 |
| Occasionally dental filling required |
100 |
|
|
100 |
50 |
| Three of them wear glasses, so one pair every other year |
|
250 |
|
250 |
125 |
| No one is using monthly prescriptions, but occasional antibiotics |
200 |
140 |
190 |
70 |
150 |
| Out of Country Medical Insurance premium for trips |
50 |
50 |
90 |
50 |
60 |
| Jack needed speech therapy in year 1 |
400 |
|
|
|
100 |
| Jill needs braces starting year 4 |
|
|
|
1600 |
400 |
| (1)Total Medical Expenses |
1550 |
1240 |
1080 |
2870 |
1685 |
| |
| (2)Company pays to
Bene-D-Duct |
2100 |
1600 |
1400 |
3560 |
2165 |
| (3)Less Ontario's Retail Sales Tax |
=8%x(4) |
156 |
119 |
104 |
264 |
160 |
| (4)Net Contribution paid to
Bene-D-Duct |
=(2)-(3) |
1944 |
1481 |
1296 |
3296 |
2005 |
| |
|
(5)Service Plan 5 Fees |
=12x$5.75 |
69 |
69 |
69 |
69 |
69 |
|
(6)Initial Fee ($75 First Year Only) |
75 |
|
|
|
19 |
|
(7)Percentage Fee @10% |
=10%x(4) |
194 |
148 |
130 |
330 |
200 |
| (8)Total fees Deducted by
Bene-D-Duct |
=(5)+(6)+(7) |
338 |
217 |
199 |
399 |
288 |
| (9)GST on Fees Only |
=7%x(8) |
24 |
15 |
14 |
28 |
20 |
| (10)Total Deducted For Fees and GST |
=(8)+(9) |
362 |
232 |
213 |
427 |
308 |
| |
| (11)Accumulation Account Balance at Start of Year (Carried Forward) |
0 |
32 |
41 |
44 |
|
| (12)Contributions After Taxes and Fees |
=(4)-(10) |
1582 |
1249 |
1083 |
2869 |
1696 |
| (13)Less Benefit Reimbursement Cheques |
=(1) |
(1550) |
(1240) |
(1080) |
(2870) |
(1685) |
| (14)Accumulation Account Balance At Year End |
=(11)+(12)+(13) |
32 |
41 |
44 |
43 |
|
| |
| The cost to the company in Ontario is on row
(2)
and is fully deductible to the company. If the company was located in any province other than Quebec and Ontario the cost to
the company need only be those shown on row
(4)
since no provincial sales tax is payable. |
| |
| Joe receives Benefit Reimbursement Cheques as shown on row
(13)
and does not include them as taxable income since they are received under a Private Health Services Plan established by the company.
|
| |
| (15)Ratio of Benefits to Cost |
| (a) in Ontario |
=(13)/(2) |
74% |
78% |
77% |
81% |
78% |
| (b) provinces other than Ontario, Quebec |
=(13)/(4) |
80% |
84% |
83% |
87% |
84% |
| |
| The following chart shows the gross salary that would need to be
paid to the consultant in order to generate the same amount of net salary to pay for the
Medical/Dental benefit. It assumes federal and Ontario's provincial
tax rates for 2002. |
| (16)Gross Salary Required |
|
3000 |
2400 |
2100 |
5000 |
3125 |
| (17)2002 Personal Income Taxes |
| (a) Federal Tax |
=26%x(16) |
780 |
624 |
546 |
1300 |
813 |
| (b) Ontario Tax |
=11.16%x(16) |
335 |
268 |
234 |
558 |
349 |
| (c) Ontario Surtax |
=56%x(17b) |
187 |
150 |
132 |
312 |
195 |
| (d) Medical Tax Credit Federal |
={(1)-$1,728}x16% |
0 |
0 |
0 |
(183) |
(46) |
| (e) Medical Tax Credit Ontario |
={(1)-$1,740}x9.44% |
0 |
0 |
0 |
(107) |
(27) |
| (f) Total Personal Income Tax |
=(a)+(b)+(c)+(d)+(e) |
1302 |
1042 |
912 |
1880 |
1284 |
| |
| (18)Decrease in Canada Child Tax Benefit |
=5%x(16) |
150 |
120 |
105 |
250 |
156 |
| (19)Net Salary |
=(16)-(17f)-(18) |
1548 |
1238 |
1083 |
2870 |
1685 |
| (20)Ratio of Net Salary to Gross Salary |
=(19)/(16) |
52% |
52% |
52% |
57% |
54% |
| |
| Note: The Net Salary row
(19)
is virtually equal to the Benefit Reimbursements on row
(13)
and row
(1)
, proving that the Gross Salary required to match the value of a
Self Directed Benefit Plan
(see row 16)
is indeed accurate.
|
| Small Business Inc. can either set up a
Self Directed Benefit Plan
to reimburse its employee(s) the cost of the Medical/Dental benefits,
or it can pay additional salary to the employee(s) so that he has enough money to pay the benefits out
of his own pocket (after income tax and clawbacks from government support programs).
In this Case Study the company saves on average $960 per year if it sets up a
Self Directed Benefit Plan
as seen below.
|
| |
| (21)Company Savings |
=(16)-(2) |
900 |
800 |
700 |
1440 |
960 |
Tax Savings
