The SMART Savings Plan™
A Software Engineer in Toronto shares how the SMART Savings Plan™ empowered him to pay for his dream wedding, buy a house, and create a legacy for his mother
53.53%
Canadians pay some of the highest taxes in the world, with top earners taxed at a rate of 53.53%
Tax Rates for High-Income Canadians
Canadians pay some of the most exorbitant taxes in the world, with top earners taxed at a rate of 53.53%. For the foreseeable future, relief from inflated taxes seems unlikely, as government debt reaches an all-time high and expenditures continue to rise.
Fortunately, the SMART Savings Plan™, an innovative tax-saving solution, empowers high-income Canadians to substantially reduce their tax burden by up to 50%. Starting in the first year of participation, clients of the Plan receive positive cash flow, which comes from tax savings that exceed their investment in each year for the entirety of the Plan’s 10-year term.
The following case study illustrates just how the SMART Savings Plan™ can help.
Meet Mike
Originally from British Columbia, Mike is a 30-year-old software engineer working at Dabble Inc., in Toronto.
Dabble recently promoted Mike. His new annual salary is $250,000, plus a $50,000 discretionary bonus.
Mike also just became engaged to Jennifer, a radiology resident training at a local hospital.
Things are going well for both Mike and Jennifer. They are looking forward to planning their wedding and eager to buy a house. So, Mike meets with his financial advisor to create a cash flow plan.
Mike is in the top tax bracket for his province. He also expects to receive his full discretionary bonus this year. With that, Mike’s accountant projects he will pay $120,605 in annual taxes with no RRSP deduction or $104,969 with a full RRSP deduction.1
Unhappy with how much of his income is going to tax, Mike looks into tax planning opportunities to help lower his tax bill. However, as a salaried employee, who doesn’t have a low-income spouse or a minor child, the opportunities are limited. Besides making the maximum contribution to his RRSP, most of the common tax planning strategies used for high-income households will not work for Mike.
Luckily, Mike’s financial advisor works with EquiGenesis and suggests looking into the SMART Savings Plan™.
1 Using 2022 tax rates.
Mike and the SMART Savings Plan™
Following a review of Mike’s financials, an EquiGenesis representative creates a customized SMART Savings Plan™ term sheet for Mike, outlining his tax and cash flow benefits in an easily digestible format:
Income Tax and Financial Summary
(Abbreviated)
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | Wind Up | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Annual Net Investment* | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 |
| Annual Net Investment* | $15,000 | $21,000 | $27,000 | $27,000 | $27,000 | $27,000 | $24,559 | $16,626 | $5,642 | $150 | $0 |
| Annual Tax Savings | $32,516 | $37,184 | $40,863 | $40,548 | $44,147 | $44,686 | $47,718 | $48,236 | $47,589 | $47,988 | $142,396 |
| Annual Cash Balance for Investor | $17,516 | $16,184 | $13,862 | $13,548 | $17,147 | $17,686 | $23,159 | 31,610 | $41,947 | $47,838 | $142,396 |
| Cumulative Net Investment* | $15,000 | $36,000 | $63,000 | $90,000 | $117,000 | $144,000 | $168,559 | $185,185 | $190,827 | $190,978 | $190,978 |
| Cumulative Tax Savings | $32,516 | $69,700 | $110,563 | $151,111 | $195,259 | $239,945 | $287,663 | $335,000 | $383,488 | $431,477 | $573,873 |
| Cumulative Cash Flow for Investor | $17,516 | $33,700 | $47,563 | $61,111 | $78,259 | $95,945 | $119,104 | $150,714 | $192,661 | $240,499 | $382,895 |
| 117% | 200% |
*Net investment is reduced by cash distributions
Based on the term sheet, Mike and his financial advisor agree on the following to help Mike achieve his tax planning and lifestyle goals:
01
Mike will contribute $15,000 to the SMART Savings Plan™ in 2022. As a result of this investment, he will receive $32,516 in tax savings when he files his 2022 taxes, which is a positive cash flow of $17,516 and a return of 117% in the first year of the Plan’s 10-year term.
02
Mike agrees to make annual contributions to the SMART Savings Plan™ ranging between $15,000 – $27,000 and will receive annual tax savings of $32,516 – $47,988 from his yearly investment. This results in positive annual cash flow ranging from $13,548 – $47,838.
Over the life of the Plan, Mike’s purchase of 15 units in the SMART Savings Plan™ generates a total tax savings of $573,873 with an average annual investment of $19,098, resulting in $382,895 of additional cash flow over 10 years.
How the SMART Savings Plan™ helped Mike and his family accomplish their goals
Thanks to the yearly tax savings earned by investing in the SMART Savings Plan™, Mike and Jennifer are able to:
- Fund their dream wedding and honeymoon
- Pay down their student loan debt
- Save for a down payment on their first home
- Make prepayments on their mortgage after purchasing their house
- Take additional parental leave after the births of their three children
While Mike and Jennifer are pleased with the Plan’s annual benefits, the most meaningful one crystallized at end of the Plan’s 10-year term when, sadly, Mike’s mother passed away following a long battle with a serious illness.
One of the perks of the SMART Savings Plan™ is that it allows participants the option to donate their Plan units to one or more registered Canadian charities at the end of the Plan’s term.
To create a legacy in his mother’s name, Mike chose the donation option on the wind up of the Plan, which enabled him to donate $152,897 to the Princess Margaret Cancer Foundation in honour of his mother.
Through his participation in the SMART Savings Plan™, Mike was able to bring his total tax savings to $573,873 on his cumulative net investment of $190,978, resulting in $382,895 of additional cash flow over 10 years — a 200% cash on cash return.
However, more importantly for Mike, the SMART Savings Plan™ enabled him to remember his mother in a way that was meaningful for him and his family and impactful for their community.
About the SMART Savings Plan™
The SMART Savings Plan™ was launched in 2003 by EquiGenesis Corporation, which has helped over 5,000 Canadian accredited investors lower their annual income tax burden.
With confidence gained from over 30 years of experience in developing tax-saving investment solutions, the SMART Savings Plan™ remains the pre-eminent tax planning solution for high-income Canadians.
This summary of the SMART Savings Plan™ is for information purposes only and does not constitute or purport to constitute an offer to sell nor a solicitation to buy any securities. Securities are only being offered by and pursuant to an offering memorandum (the “Offering Memorandum”) relating to the EquiGenesis 2022 Preferred Investment LP (the “Partnership”) describing the offering of such securities (the “Offering”). Investors must receive and review the Offering Memorandum prior to subscribing for the securities described therein.
This summary is not a complete description of the securities and is in all respects subject to the provisions of the Offering Memorandum describing the Offering, especially those provisions regarding “Risk Factors” and “Forward-Looking Statements”. Prospective investors are encouraged to consult with their own professional tax and financial advisors to determine the appropriateness of an investment in the Smart Savings Plan™ in relation to their own financial objectives.
Participation in the SMART Savings Plan™ is only available to Accredited Investors.
