It’s Now or Never

Perhaps “Never” is a bit strong, however I am reminded of the flood story.  A devote man is trapped on the roof of his house during a flood – I know you’ve heard this one, but in case you haven’t . . .  Being a good man, he prays to God to save him and he has total faith that God will save him.  After a while someone comes along in a row boat and asks the man if he wants help.  Knowing that God is going to save him he politely tells the person in the row boat, “thank you but I’m OK” and the person in the row boat rows away.  Sometime later someone comes along in a motor boat asks the same question, and gets the same answer.  All along, the man on the roof knows that God will come and save him.  A little while later a helicopter comes along and offers to save the man who, still holding to his faith, politely refuses a ride in the helicopter.  Of course, the water continues to rise and the man eventually drowns.  Being a goodly man, he gets to heaven where he meets God and expresses his disappointment that God didn’t save him.  God looks a little puzzled and responds, “Really? I sent you a row boat, a motor boat and finally a helicopter, what more could you want?”

Right now, you are the man on the roof, and the “flood” is a combination of interest rates and the “Tax Man.”  The combination of the proposed increase in tax rates and benefits for professionals, along with the raising interest rates, absolutely mean that you will have less disposable income in six months to a year than you do now.  Recent professional tax seminars have suggested that the proposed combined tax rate of investments inside a DPC will rise to 65%.  In addition to this, some dentists will lose millions of dollars’ worth of capital gains exemptions.  Of course many dentists, depending on how they are structured, will not be so dramatically effected however, there will be a subtle but significant repercussion for all dentists.

Sitting on the sidelines, observing all of this, are the banks.  Many would suggest that the bank’s cheap and easy money are the primary reasons for the sky-high prices on dental practices in Canada, particularly Ontario.  Based on very recent discussions with several of the leading “dental” banks, it is apparent that the diminishing disposable incomes of their dental clients is of great concern to them, and rightly so.  Over the last several years there are a large number of dentists, who have over paid for their practices and are financially stressed every month.  As disposable incomes drop, some of these dentists will default on their bank loans which will have a cascading effect.  Faced with increasing loan defaults, the already cautious banks will of course both tighten up their lending policies (something we are already seeing) and increase their rates.  Harder to get, and more expensive money, will have a negative effect on practice values.  As values fall, dentists with little equity in their practices to start will be under water, further dampening (NPI) the dental practice market place overall and suppress prices across the country.

Now to the point of the story – you have potentially been given a lifeline – a little bit of time.  Interest rates are starting to go up and will likely continue to do so at a measured rate.  What is likely to happen fast and soon are the changes to the Income Tax Act.  It is not entirely clear when these changes will take place, but most tax experts are suggesting the beginning of 2018.  If you have been thinking that selling your practice is something that you will be doing in the two to three years, the next several months are your lifeline.  To be safe, you need to act now and get your practice sold before the end of 2017.  This means getting an up-to-date appraisal and getting your practice on the market as soon as possible.

Currently we are seeing many clients who have been in a planning/holding stage, stepping up their timeline to get their practices on the market.  If you have questions about how these changes may affect you please call us toll free at 866-853-5344 or by email at  We have set aside some extra time to assist all of our current and future clients to meet the upcoming deadlines.