How long has TMAX been available to Canadians?
M-Link Mortgage Corporation was founded in 2004 as a mortgage brokerage and subsequently also became a private lender through it’s Mortgage Investment Corporations (MICs). M-Link’s initial financial planning strategy was the Tax Deductible Mortgage Plan (TDMP) aka the Smith Manoeuver. When Tax-Free Savings Accounts were created by the Federal Government in 2009, TMAX was launched in 2014 as the advanced evolution of TDMP, combining the needs of Canadian homeowners to further grow their retirement assets while simultaneously decreasing their tax burdens.
Who is TMAX for and what does a typical client look like?
Ideal candidates for TMAX meet the following criteria:
- Have $1,000,000+ in their retirement and/or corporate accounts
- Own Canadian property of the same or greater value
- Accredited Investor
- High income tax bracket
- Concerned about the future tax burden on withdrawals from their retirement and/or corporate accounts
- May access but do not require money from these accounts for personal cash flows within the next decade
How long does the TMAX plan take?
Typically, 8-15 years.
Is there a cost to TMAX?
For the most qualified client, there is a one-time 2% set-up fee charged up-front and a 1.45% total ongoing management fee that progresses to 2.95% for less qualified clients – all of which are tax deductible. Ultimately, this amounts to approximately 10-30% of the overall tax reduction benefits provided by TMAX.
Do I have to put all of my retirement investment assets into my TMAX plan?
Not at all. You can have multiple RRSPs. With the help of your trusted advisor, we simply create a special purpose RRIF, meant only for TMAX, and only for the amounts you designate towards the plan. Note: regardless of whether or not you have met the age threshold for government required conversion, we convert your RRSP into a RRIF for the purposes of tax-efficiently managing your TMAX plan.
Can I use other retirement assets such as my LIRA or Locked-in RRSP?
Absolutely! TMAX is ideal for Canadians with assets in any combination of RRSPs, RRIFs, LIRAs, Locked-In RSPs, IPPs, Corporate Bank or Investment Accounts.
Will my assets remain liquid and can I unwind TMAX at any time?
After the initial year, you may pay out the fully open TMAX mortgage loan by simply liquidating your investment assets that are utilized within the plan, at whatever cost may be incurred for the selling of your investments.
How is TMAX regulated?
M-Link Mortgage Corporation is a licensed mortgage brokerage based in the province of Ontario, regulated by the Financial Services Regulatory Authority (FSRA), and also licensed in British Columbia, Alberta, Saskatchewan, Manitoba and Quebec, while our Mortgage Investment Corporations are regulated by the Ontario Securities Commission.
What are the risks of TMAX?
The main risks to TMAX as we see it are:
- Mortgage Investment Corporation (MIC) investment risk
- The Canada Revenue Agency disallows deductions on interest accrued for the purposes of investment
- The Government of Canada changes the rules around TFSAs
What is a Mortgage Investment Corporation (MIC) and why are the TMAX specific MICs required?
A Mortgage Investment Corporation (MIC) is an investment and lending company designed specifically for mortgage lending (primarily residential) in Canada. Owning shares in a MIC enables you to invest in a company which manages a diversified and secured pool of mortgages. Shares of a MIC are qualified investments under the Income Tax Act (Canada) for RRSPs, RRIFs, LIRAs, LRSPs, TFSAs and Corporate Accounts. Mortgage Investment Corporations are generally provincially registered and licensed, with the management of the mortgage fund under the direction of provincially licensed mortgage brokers.
As shares of MICs are direct capital to funding pools of mortgages, all interest generated from the mortgages must be directly passed onto shareholders quarterly.
M-Link’s two MICs are specifically designed to accommodate the needs of TMAX clients as follows:
M-Link’s MICs offer 3 different classes of shares with different dividend rates of return that reflect the waterfall risk of each class of share. Primarily, Class 1 shares offering a 3% dividend are held in TMAX clients’ special purpose RRIFs, while Class 3 shares offering a 15% dividend are held in TMAX client’s special purpose TFSAs.
Most of our clients use the RRIF income provided by TMAX to directly pay for their TMAX mortgages, so there is extremely low risk for default. Plus, any defaulters are also MIC shareholders.
Is TMAX approved by the CRA?
TMAX was created and continues to be designed around multiple tax and legal opinions provided for us; one from a major Canadian accounting firm’s Ottawa based tax department as well as several prominent, Toronto based legal firms.
Over the last 15 years, M-Link has overseen more than 12,000 tax returns for clients in the TDMP and TMAX programs.
We view CRA risk within TMAX to be specific to the individual tax payor making an error in the filing of their tax returns or failing to provide the appropriate documentation in support of a Carrying Charge when requested by CRA.
We continue to strongly recommend that clients use a qualified tax accountant to file their tax returns.