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T-Series Mutual Funds
“T” is for tax-efficient

Successful investing relies on many factors, including employing tax-efficient strategies. T-Series Funds are mutual funds that are designed to be tax efficient. In fact, the “T” stands for tax and implies they are tax efficient.

If you need a tax-efficient monthly income stream from your investments, without sacrificing the potential for capital gains, T-Series Funds could be for you. Designed for non-registered accounts, T-Series Funds are becoming increasingly popular. They are attractive to investors because they distribute return of capital (ROC), which is not immediately taxable.

When mutual funds make payouts in the form of interest, dividends or capital gains, they are taxed in the same year they are distributed. But the distributions from T-Series Funds are not taxed until your investment capital is depleted. In other words, not until the adjusted cost base (ACB) reaches zero – or the units are sold.

A fund that gives you control over when you incur a tax liability, allowing you to defer taxes, can be beneficial in several ways. You will benefit from higher after-tax income and the compounding effects of a larger investment. Plus, you may also be able to reduce the amount of tax you pay in the future, due to lower marginal tax rates or lower capital-gains inclusion rates.

When considering T-Series Funds, look at payout rates, as they vary. Also look for T-Series Funds that make investment sense: Poor returns will result in smaller monthly distributions. Some funds are designed so that the ROC distribution takes up all or most of the expected return, enabling you to maintain your original investment in the fund.

As an added bonus, T-Series Funds that are part of a corporate class structure allow you to switch between asset classes without triggering a capital gain.

Finding the right investment vehicle for the right investor is part of the art of financial management. The flexibility and convenience of T-Series Funds could be ideal for you.

Important Notice Update

The 2016 Federal Budget told us that exchanging units of one corporate-class fund for another would no longer be tax-deferred, and that the change would take effect Oct. 1, 2016.

However draft legislation says the changes to corporate-class taxation won’t come into force until January 1, 2017.

Corporate Class Funds Lose Tax Advantage

On March 22 in the 2016 Federal Budget, the federal government announced it was eliminating the ability of investors to switch between funds in corporate class investments without paying capital gains tax.

Corporate class funds are generally used by investors who have reached their contribution limits in tax-free savings accounts and registered retirement savings plans. Their appeal is that they represent yet another option for tax-efficient investing.

The tax benefit of corporate class funds is that you can move your money between funds within the same corporate structure without incurring a tax liability. When you finally sell, you will pay capital gains tax, but you can rebalance your holdings at any time while you own them without any tax consequences.

September 2016 deadline (see update)

The new rules go into effect on October 1, 2016. That means owners of corporate class funds have six months to take advantage of the benefits of this investment vehicle and position themselves for the future.

If you own corporate class funds, you should start now to determine what you want your portfolio to look like when the tax deferral benefit ends. For example, you might wish to sell funds that have run up in value and buy funds you believe are undervalued. Then you need to rebalance as required prior to the deadline. By acting before the new rules become law, you'll avoid the need to rebalance later and you'll minimize the tax repercussions.

Beyond rebalancing your portfolio before the deadline, there are no apparent ways to escape the tax consequences of switching funds within a mutual fund corporation.

Here's where we can help!

We work with you to develop a comprehensive financial plan designed to help you reach your goals. Then we help you decide on the best options for investing and building your portfolio.
Related Information
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Mutual Funds
T-Series Mutual Funds may be suitable for:
  • Investors looking for flexible income options
  • Investors who are seeking tax effiecent income outside of thier registered portfolio
  • Investors who are looking to defer the taxable income on thier unregistered portfolio
  • Seniors who want to receive income from their investments while preserving their Old Age Security (OAS)/Guaranteed Income Supplement (GIS).
Planning Calculators


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