Preserving capital is a rallying cry when thinking about our retirement years. We’ve done well but the shift into retirement means a bit more focus on the expense side.
I’m not concerned about the expenses we can control. I am more concerned about the expenses that we do not control. And most of those expenses are influenced by government either in the form of taxes or monetary policy.
With monetary policy, the Bank of Canada loves to devalue the Canadian currency when the economy is bumpy although some pundits like to draw a close linkage between the value of CAD and the price of oil.
With the recent battle over trade with the U.S., CAD has fallen.
Since February, CAD has gone from a high of .82 against the USD to a low of .75.
With various fees, it means that $1,000 CAD gets us about 715 USD. We lose about 28 percent due to currency valuation compared to parity. Thankfully, costs and taxes are somewhat lower in the U.S. however, whenever CAD falls below about .88, we pay a premium.
We will be paying more in real terms for our trip south. Those currency expenses I cannot control.
I came across this article in Australia. The Queensland government is putting a two-percent tax on vehicles worth more than $100,000 and weighing less than 4.5 tonnes. This impacts people who might want to purchase mid-range motorhomes in retirement.
In British Columbia, Canada, we have such a luxury tax on vehicles. Being Canadians, though, we like bigger taxes then those issued by the Queensland government. We get them to kick in at a lower price — $55k is a luxury car in British Columbia — and make them really bite when the price of the vehicle gets up there. $125k will net an 8% luxury tax. $150k will net a 13% luxury tax. Ouch!
From the British Columbia government:
Luxury surtax applies to passenger vehicles when the value for tax exceeds:
$55,000 to $55,999.99 — 7% PST plus 1% Luxury tax
$56,000 to $56,999.99 — 7% PST plus 2% Luxury tax
$57,000 to $124,999.99 — 7% PST plus 3% Luxury tax
$125,000 to $149,999.99 — 7% PST plus 8% Luxury tax (effective April 1, 2018)
$150,000 and over — 7% PST plus 13% Luxury Tax (effective April 1, 2018)
Reading the tax material further, I find that seniors wishing to purchase an RV in retirement in British Columbia will not be impacted by this luxury surtax:
For tax purposes, a passenger vehicle is defined as a motor vehicle designed primarily as a means of transport for individuals. For example, trucks and vans larger than three-quarter ton, camperized vans, motor homes, buses and motorcycles with engines of 250 cc or less are not passenger vehicles.
In Ontario, the province where I live, the NDP party, running on a platform that included high taxes, wanted to introduce a similar vehicle luxury tax to British Columbia. They did not indicate a percentage, only that, if elected, they would put a surcharge on all vehicles over $100,000. I suspect that all vehicles would also include RVs.
Fortunately, the NDP was not elected. Voters in Ontario were tired of 15 plus years of tax and spend government.
Taxes. Another expense that I cannot control.
Taxes and monetary policy will, no doubt, continue to impact our finances during our retirement years.
A 13% luxury tax on our motorcoach would have been a significant financial challenge. Bad enough that we had to battle with the dealer on hedging our currency risk — we had our coach custom built and CAD was volatile during the 9 months from when we placed our order until we received our motorhome.
We were able to fix the price on order as opposed to on delivery.
CAD did fall further during that time so we wound up not losing money due to currency fluctuation.