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   holistic planning
 “They should just enjoy
themselves. Not every decision
makes entire financial sense.
They can request that their principal residence not be considered a business property. If the family makes this election under subsection 45(2) of the Income Tax Act, they still have to report their net rental income. However, they can claim any capital cost allowance on the property.
While this election is in effect, they can designate their property as their principal residence up to four years, even if they don’t use the property as their principal resi- dence. But they have to be residents of Canada for tax purposes, and they can’t designate any other property as their principal residence.
Should Wilson work?
MK: Income tax in Canada is imposed on worldwide income, so he has to report any income earned during the year. However, there’s a treaty between Argentina and Canada. If Wilson pays any income tax in Argentina, he may get the foreign tax credit in Canada, so he’s not paying tax in both countries.
But working in Argentina might put him in a situation where they might not be considered residents of Canada, because it would definitely link him more to Argentina than Canada.
Resident status is not defined in the Canadian Income Tax Act. It’s based on facts, and the courts look at it case by case. If they’re not residents, then all the tax planning
we’re talking about would basically backfire. Their RRSP contribution would probably become taxable at the high- est rate, and they won’t be able to use the election on the principal residence. I would be worried about that.
DH: If Wilson doesn’t work in Argentina, he can leverage his existing network online for future business plans or job opportunities. He could consider continuing educa- tion, maybe going to school part time. It might cost a little bit extra, but improving his skillset over the course of the year could be another option.
JM: He’s also got the opportunity in Argentina to learn Spanish. When he comes back to Canada, that could be of great value.
Insurance considerations
JM: They should look into health insurance, and whether they need supplemental insurance. It depends on what type of insurance Natalia is getting from her employer while she’s in Argentina.
And they should check with their provider to make sure they have proper insurance to drive abroad. If there’s an accident in Argentina, they must have proper coverage.
Finally, if they’re renting out their home in Canada, they’d want to get rented dwelling insurance, which covers off a number of risks associated with renting your principal residence.
DH: With Natalia being the primary income earner, and Wilson having no immediate plans to return to work, she should have disability insurance, whether that’s through the college or supplemental insurance. It’s a big problem for the family if something happens to Natalia, especially with the ongoing debt payments they have to make.
Planning for the move
JM: A big element of what they’ll face is their cash management while they’re in Argentina. I wouldn’t classify Argentina as the most stable of economies, so there’s some currency risk. Natalia would want that sorted out in her contract, in terms of what currency she’s being paid in. She’ll want to establish a local bank account, but also want multiple avenues for addressing access to capital. She’ll want to keep the majority of capital that isn’t required for day-to-day living purposes back in Canada, and have easy access to those funds.
Finally, they should just enjoy themselves. Not every decision makes entire financial sense. Above all the numbers, they’re there to experience a new culture. AE
  all the
there to
a new
JUNE 2020

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