Two weeks ago I spoke about the "five pillars of tax planning" and about the value of deferring a tax bill to a future year.

The longer the money is in your hands – rather than the taxman's – the longer you can put that money to work earning returns.

Why put off until tomorrow a tax bill that you can put off for 10 years or more?

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If you're a procrastinator by nature, you are going to love the ideas I'm going to share today.

Here are six creative ways to defer a tax bill until a future year.

1. Claim a capital gains reserve

If you sell an asset at a profit, it's possible to spread the capital gain over a period as long as five years if you defer collection of some of the sale proceeds until a future year, or years.

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You can do this by taking back a promissory note instead of cash for all or some of the sale proceeds.

If part of the sale proceeds are still owing at the end of a calendar year, you'll be entitled to a capital gains reserve (a deduction) for part of the taxable capital gain on the sale, although you'll have to include in your income at least 20 per cent of the gain each year.

2. Negotiate a leave of absence or sabbatical

It's possible to defer the tax on up to one third of your salary each year for up to six years through a deferred salary leave plan.

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You won't pay tax on the portion of your salary set aside, although your leave of absence or sabbatical must begin no later than six years after the deferral begins.

Your leave must be at least six months long (three months if your leave is for educational purposes), and you'll have to return to your workplace for a period at least as long as the leave. You'll have to pay tax on the deferred income no later than the seventh year after the deferral begins whether you take the leave or not. These plans are common with public employers such as school boards, but any employer can set this up.

3. Purchase a prescribed annuity

An annuity is simply a promise to pay a certain cash flow each month for a specified period of time.

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A regular annuity works much like a mortgage, but in reverse. That is, the payment you receive monthly is a blend of interest and your principal being paid back to you.

In the early years, most of the payment represents taxable interest income. Not so with a "prescribed" annuity, which pays out a level amount of interest with each payment for the life of the annuity. That is, the interest is spread evenly over the life of the annuity rather than mostly being paid out up front. This results in what amounts to a deferral of tax in the early years of the annuity.

4. Negotiate a notional defined contribution plan

Think of this as a non-registered pension plan. It's a plan on paper only; there are no actual cash contributions made by your employer.

A percentage of your pay each year will be credited to the plan, along with earnings on the amount in the plan, based on some predetermined formula. There are no "contribution" limits, and there's no impact on your RRSP contribution room.

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Benefits will be paid out by the employer at a time specified, at which time the amounts are taxed as regular pension benefits. You'll defer tax on the amounts until you receive the payments.

5. Cascading life insurance

It's possible to defer tax for generations. Here's how: You can purchase a life insurance policy on the life of a child of yours.

You'll name that child (or another child) as the contingent owner of the policy so that when you die, your child becomes the owner. You'll name your grandchildren as beneficiaries.

There's no tax to pay on the transfer of the policy from you to an adult child if a child's life is insured.

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When the policy transfers, all of the accumulated investments inside the policy also pass tax-free to the new owner – your child. There's the deferral: Any gain on those assets would have been taxed at the time of your death if you had left them directly to your child. See my article dated Aug. 4, 2001, at

6. Contribute to your registered plan

Don't forget about contributing to your registered retirement savings plan, registered pension plan, or deferred profit sharing plan – it's the simplest way to defer tax.