Relocating
Relocating - Look Before You Leap!
Almost 1.6 million people move within Canada each year, and over 200,000 make a long-distance move between provinces. Although everyone's reasons for moving vary, a good majority of moves within Canada are work-related.
Most people probably don't realize that over one-third of employment relocations result in failure after three years (according to U.S. statistics), with the employee either quitting or returning home.
This is a staggering failure rate with formidable costs and emotional strain to both employers and employees. But it should not be entirely unexpected. Long distance relocation is one of the most traumatic and stressful events in a person's life.
Compounding the emotional strain of leaving behind family and friends, is the fact that most people underestimate the sheer quantity of tasks involved in transferring an entire household – tasks that become more complicated when you cross a provincial or national border.
Even employees excited about a new position with increased responsibility and career potential can find themselves unable to devote 100% attention to their new job because they are caught up in a seemingly endless cycle of family difficulties, relocation logistics, real estate complications, tax problems, and bureaucratic hassles.
In addition to underestimating the time required to plan and execute a move, many people significantly underestimate the total cost. The most obvious cost is packing and transporting household goods and getting them to the new location. Less obvious are the legal and real estate fees associated with the purchase and sale of a home, land transfer taxes (higher in some provinces than others), government fees for changing licenses, registering vehicles, etc., as well as the cost of house-hunting trips, furniture storage and temporary accommodation – not to mention the time and effort of co-ordinating all these activities! The total cost of a relocation is usually far higher than most people usually budget.
Relocating to a new city to take on a new job can be a great career opportunity and a chance to learn about a new area, or it can be a financial and logistical nightmare making you wish you could just turn back the clock and refuse the opportunity.
Relocating is not as easy as receiving some cash from your employer and going for it – at least not if you want the transfer to be successful. Knowing, in advance, what's involved will help you when negotiating a relocation package.
Things To Consider Before You Relocate
An opportunity presents itself. You can make a great career move, but the new position is 3,000 km away. Your family is supportive, so what should you be thinking about to make this transition as painless as possible?
Far too often the excitement of a new job and a new city is overshadowed by the emotional stresses, financial burdens, and bureaucratic hassles that go with a major relocation. You can significantly reduce the stress and potential frustrations of a long-distance relocation with a little knowledge and advance planning and an awareness that more than the climate is going to be different in your new location.
One of the most common shocks to unprepared movers is the great variation in housing costs across the country. Two hundred thousand dollars can buy you a detached two-storey, four-bedroom executive home in some communities, but only a two-bedroom starter in others. You might sell for more than you bought, but a comparable home in many comparable neighbourhoods could cost you tens of thousands of dollars more – and that's before taxes, real estate commissions and legal fees. On the other hand, you might be very unlucky and get less than you've invested in your home, particularly if your local real estate market is in a downturn.
Taxes are perhaps the area where most people fail to take advantage of potential savings, and fail to fully realize the financial ramifications of a move. Timing can be critical when relocating between jurisdictions with different tax rates, leading to a tax refund if you are lucky or a greater amount of tax owed if you are not. Many relocation expenses are tax deductible, but even in this area there are strict rules and differences regarding what you, as an individual, can claim, and what your employer can write off.
On the personal side, you might be concerned about the family members you leave behind, particularly elderly parents. Your spouse, who may have started out supportive of the relocation, could easily become resentful dealing with the inevitable hassles while you enjoy the challenge of a new job. And it may take months for him or her to find suitable employment in the new community. Children need time to adjust to a new neighbourhood, new friends and new schools, and even the family pet might need special consideration.
To compound matters, each provincial government has its own laws and regulations regarding vehicle inspections and registration, insurance, driver's licenses, land registration, and health care. You will need to set yourself up as a resident of that new province and deal with all the accompanying hassles of an interprovincial move.
How do you overcome all these hurdles to ensure you have a financially well-managed and minimum stress relocation? Each individual case is unique. Understanding the potential pitfalls and regulatory differences and how they will affect you and your family is critical to making the best use of your relocation package – even better would be having this information while you're negotiating a relocation package. Often, however, both the employee and employer underestimate the full relocation costs involved.
Royal LePage Relocation Services can provide you with the professional advice and guidance you need to allow you to focus on your new responsibilities, giving you peace of mind knowing that a thousand odds and ends are being taken care of for you. It is a small investment to get the full value out of your relocation package, providing you with total support from beginning to end.
Relocating can be a very traumatic event and too much is at stake to cut corners and risk failure. Being aware of the hurdles you face and accepting professional advice and guidance can go a long way to reducing stress and saving you a lot of time and money.
Surveys indicate that when employees do not accept transfers it is often because of dual-career families or when the relocation fails it is due to the accompanying spouse being unable to integrate and adapt to the new location.
Establishing a new life in a new city is a big job. There are the tasks of setting up a new household, finding local dentists, doctors, lawyers and schools, and also helping children adjust to new schools. In addition, it is necessary to finalize the purchase of a home, apply for health care, arrange for inspection, registering and insuring of vehicles, obtain house insurance and change the home address with credit card companies, banks, government agencies, etc.
While you, the transferred employee, might be very busy and excited about your work and new colleagues, your spouse may be struggling with taking care of all these details.
In addition to holding down the fort, your spouse might also be starting a job search – an activity that requires a lot of energy.
If your spouse has a career, how will relocation affect it? Does your employer's relocation policy provide assistance with spousal career counselling and job-finding?
Networking through professional associations can be an effective way to find suitable employment. During your house-hunting trip to the new location, your spouse might also be able to find some time to research potential employers.
Many communities have welcome committees. Newcomers are introduced to others in the neighbourhood and group get togethers, trips, etc. are often arranged. Joining clubs or groups that share a similar interest or hobby can also be an effective way to meet new people.If your spouse is not able to settle into the new community, find supportive friends or satisfying employment, it can lead to considerable strain on the family and, perhaps, a strong desire to return to the old location.
Relocating With An Elderly Parent Or Relative
One of the most difficult challenges many transferring families face is deciding how to deal with an elderly parent or dependent adult relative for whom they provide some degree of care. Increasingly, family units can include a parent living with the family or a parent living in separate accommodation who relies on the family. To encourage an employee to accept a transfer, it may be necessary for the employer to assist with moving the parents or senior relative. Moving a parent or senior relative can mean uprooting longstanding ties to a community and removing them from the security of familiar surroundings and old friends. Often the choice must be made to transfer without the parent or relative, which may mean finding a suitable elder care facility. Either of these choices is emotionally, and potentially financially, disruptive to all members of the family.
If the decision has been reached to relocate the senior family member, the process involves more than finding a suitable home. A careful assessment of his/her needs is integral to a successful move. Health care, mobility, transportation and social needs must be assessed. In some cases, the senior relative will be moving out of his/her own home and into another in the new location. This means finding two homes that fit.
Depending on the cost-of-living at the destination, the cost of senior care facilities may be significantly higher. Also, more time and a separate trip to find and assess appropriate facilities may be required. Increased moving costs can occur since there could be additional pick-ups and more household goods to transport.
Despite the complexities of this type of situation, the needs of seniors differ
less than you might expect from the average person. Active people of all ages
will expect to find social outlets for their interests. In fact, as the population
ages, resources for seniors abound. Community centres, care facilities, religion-affiliated
and non-sectarian groups all cater to the needs of today's senior. Proximity
to resources, including health centres and retail shopping, is important relative
to the mobility of the senior. Access to public transportation or assisted transport
may play an important role, while, for others, easy access by car is paramount.
Children come in all different types and dispositions. Some are adventurous, fearing little, while others stick close to home, craving stability and security. Because children are all different, change, like a relocation, may evoke surprising emotional responses. The adventurous ones may suddenly become fearful because they are losing the thing that allowed them the freedom to explore – the security of ‘home', and the timid ones may become violently opposed to the change.
Parents need to do more than simply reassure their children that everything will work out fine. While reassurances are important and necessary, it is also important and necessary to acknowledge and anticipate the child's fears. Everyone, young and old, experiences temporary emotional anxiety when being uprooted from familiar surroundings. For children, it's rather like being an alien from another planet. They may lack the social skills that would ease their assimilation into their new world.
An opportunity to introduce the child to his/her new environment before the move itself could go a long way to easing the fear of the unknown, as the child discovers that his/her future home has as many wonderful and exciting possibilities as the old one.
The following suggestions provide some guidance in dealing with kids on the move:
- Explain in simple terms why the move is necessary. Make it short and positive, without overselling – children often know when a parent is masking negative feelings.
- As the child becomes used to the idea of moving, begin feeding them information about their new home and what they might expect to find there.
- Encourage open communication and let children talk about their feelings, reassuring them that their feelings are natural.
- Attachments are strong, even at a young age, and it may take some time for the child to let go. Work through the problem without blaming either the child or yourself.
- Involve the child in the move. Ask for opinions and suggestions. The child's point of view may provide insight into his/her true feelings.
Offering children an active role in the moving process engages their interest and improves the chances that they will be "on side" when the day comes. Their active participation in the event will provide continuity which, in turn, will ease the adjustment phase.
Children of different ages have different needs when it comes to moving. Very young children usually have no strong roots outside the home and, consequently, have fewer concerns. But, a move can still evoke a regressive response, such as bed-wetting or thumb-sucking. Let young children pack some of their own precious possessions, assuring them that they will miraculously re-appear, safe and secure in the new destination. If possible, have security toys, those with strong emotional attachments, travel with the child.
For school-age children and teenagers, a move is incredibly disruptive. For many children, their identity as an individual is tied to their position in their peer group. Anger is a perfectly natural response.
Fortunately, with older children it is often possible to work through this with reasoned, rational communication. Acknowledge the problem and provide every assistance in making the break with as little trauma as possible. Provide children every opportunity to say good-bye to their friends. And arm them with information on the exciting opportunities that await them in their new home.
Once the move is complete, recognize that everyone in the family is actively
adjusting. Share your feelings and create your own little family support group.
Cling to the old family habits and rituals that give a sense of time, place
and security.
Taxes vary widely in amount and application across Canada, and a long-distance relocation that takes you to a new province or out of the country could result in some unexpected taxes.
Income Taxes:
Provincial income tax rates range from a high of 69% to a low of 40.5% of the federal tax rate. In an effort to tailor and stabilize provincial revenues, some provinces are in the process of de-coupling provincial income tax rates from the federal rate. The sheer quantity of surtaxes and exemptions used by each province to determine taxable income makes a straight comparison of tax rates difficult.
If you are a Canadian, relocating within Canada, the amount of income tax you will pay is determined by your province of residence on December 31st. It is to this province that you will owe your personal income tax for the entire year. If you are relocating from a lower tax jurisdiction to a higher tax jurisdiction, be prepared to pay the extra tax owing in a lump sum the following April. Conversely, you could end up with a pleasant refund if you have been paying tax in a higher tax jurisdiction for most of the year.
For some people, the difference in the amount of tax payable can be significant, and, if transferring to a lower tax jurisdiction, it might be worth timing your relocation to be residing in the new location on or before December 31st, regardless of where you lived throughout the year.
Canada Customs and Revenue Agency, formerly Revenue Canada, considers some relocation costs, if paid or reimbursed by the employer, to be a taxable benefit or income, i.e., reimbursement for bridging loan interest, loss in excess of $15,000.00, etc.
Should you be relocating to another country, the tax rules of that country may apply. For example, if you are transferring to the United States of America, it is likely the U.S.A. Internal Revenue Service (IRS) rules will apply. The IRS considers most relocation costs reimbursed or paid by the employer (real estate commission, sale-closing legal fees, etc.) to be taxable as income. IRS rules may apply even though you are a Canadian and the employer reimbursements were for costs to sell a property located in Canada. Following an amended value format can protect some employer relocation cost reimbursements from being taxed as income.
Also, once you leave Canada with your family and possessions, Canada Customs and Revenue Agency considers you a non-resident. If you become a non-resident and have not disposed of your principal residence, on subsequent sale, the attorney acting for the purchaser is obligated to withhold non-resident tax of up to 33% of the sale price. This can be avoided if a non-resident waiver is received or you close a sale on your property prior to your leaving Canada.
If you lease out a property located in Canada and collect rental income from a tenant while you are away on temporary transfer, Canada Customs and Revenue Agency requires the rental income be reported, and if you are transferred outside of Canada, non-resident tax to be paid on the income earned.
Canadian Provincial Sales Taxes:
Provincial sales taxes vary significantly from coast to coast, from zero in Alberta to 8% in Ontario and the Atlantic provinces. If you have any major purchases planned, you might consider making them in the lowest tax jurisdiction.
Canadian Provincial Land Transfer/Property Purchase Taxes:
The governments of Nova Scotia, New Brunswick, Quebec, Ontario and British Columbia levy a tax to transfer real property (i.e., a land transfer tax or property purchase tax) on all home purchases. This tax is usually paid by the buyer. Land transfer/property purchase taxes can add as little as a few hundred or as much as several thousand dollars to the cost of your home.
Canadian Goods and Service Tax (GST):
If you purchase new construction in Canada, GST of 7% on the total cost of the property (base price plus upgrades) will apply.
Canadian Tax Deductible Expense:
Canada Customs and Revenue Agency allows you to deduct some of the costs you will incur when you relocate within Canada to accept a new job. If you are receiving reimbursement or a relocation allowance from your employer, there are complicated rules regarding what you and what your employer can deduct or reimburse. In order to determine the best way to plan your relocation and maximize the tax benefits, consulting a relocation and a tax specialist could lead to substantial savings.
Although it may be impossible to avoid all the taxes associated with relocating, being aware of them will allow you to plan your finances properly and estimate the cost of your relocation accurately.
Information courtesy of the Victoria Real Estate Board