Author Topic: Canadians, TFSA changes, taxes, & clawback.  (Read 3767 times)

K-ice

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Canadians, TFSA changes, taxes, & clawback.
« on: October 03, 2015, 11:36:16 AM »
Hi Fellow Canadians.

Any comments on this:

http://www.financialpost.com/m/wp/blog.html?b=business.financialpost.com//personal-finance/tfsa/if-you-like-the-tfsa-now-the-ndps-uncertain-plans-may-give-you-pause

I would hate for my deligent savings today to be punished tomorrow.

But then in the future, if I have enough, & a 1M+ net worth, why would I still need a government handout?

nobodyspecial

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Re: Canadians, TFSA changes, taxes, & clawback.
« Reply #1 on: October 03, 2015, 12:51:46 PM »
The other two are unlikely to roll back the increase - even if they did, so what, the increase only appeared as an electioneering from the current bunch. Since they  also cancelled the inflation linking it will all round out in the end.

I'm not sure that there are many millionaires funneling their money through TFSAs to count it as zero income and get GIS. It makes a nice sound bite - like universal child benefits being given to millionaires. Imagine them standing up on a platform of millionaires using  public libraries for free like everyone else.

If you have $MM in assets there are a lot more ways you can avoid tax than being able to put an extra $5k in a tfsa
 

daverobev

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Re: Canadians, TFSA changes, taxes, & clawback.
« Reply #2 on: October 04, 2015, 07:20:32 AM »
Well, I don't really see you should be getting GIS if you have a million in a TFSA OR a mil in your home. OAS less so, but still somewhat. CPP of course no impact.

There needs to be some kind of asset test/means test for the TFSA, at least by the time I get to OAS age - which is ~30 years, even at 5.5k a year it should have become $300k invested in that time, probably more. At $10k, it'll be much much more.

Now of course the counter is always that you're penalising people who save/invest vs those who spend it all, but whatever, I'm a big boy, I'm going to retire early, and I'm "rich" (not really but compared to norms who have car payments...), so I don't feel it'd be fair to get GIS.

Of course, when I DO get to that age and am eligible, or not, I might feel different.

nobodyspecial

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Re: Canadians, TFSA changes, taxes, & clawback.
« Reply #3 on: October 04, 2015, 12:11:10 PM »
Well, I don't really see you should be getting GIS if you have a million in a TFSA OR a mil in your home. OAS less so, but still somewhat. CPP of course no impact.
Nobody is. It's economists speculating, and journalists claiming that you could have in 40 years people with a $M in a TFSA which wouldn't count as income so would be eligible for GIS.

A survey here in Vancouver showed that some of the richest areas had mean incomes below the poverty level. The cause was people who work abroad but own a house here, that their wives/children may live in. Canada doesn't tax or even know your overseas income if you aren't resident.
So the papers were full of stories of people living in $MM homes who "could" claim free school meals taking money from honest taxpayers.
Of course nobody was getting handouts, and it was aimed at a specific ethnic group who are currently being blamed for high house prices.

Equity in houses are trickier. It's going to be a brave politician who goes around forcing widows in Vancouver/Calgary/Toronto to sell their now valuable family home, sends them to internal exile in the prairies and then refuses them any money because they have a $M.
   

Retire-Canada

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Re: Canadians, TFSA changes, taxes, & clawback.
« Reply #4 on: October 05, 2015, 06:17:50 AM »
What's going to happen to the TFSA is the least of my worries this election.

If I have multi-millions and the gov't wants to avoid paying me GIS. I can't really argue that's wrong or unfair.

RichMoose

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Re: Canadians, TFSA changes, taxes, & clawback.
« Reply #5 on: October 05, 2015, 09:58:44 AM »
What's going to happen to the TFSA is the least of my worries this election.


+1.

Heckler

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Re: Canadians, TFSA changes, taxes, & clawback.
« Reply #6 on: October 18, 2015, 10:43:33 AM »
What's going to happen to the TFSA is the least of my worries this election.



As someone who is working hard to fill his TFSA limit for the first time, who've never maxed thier RSP, this is actually the one thing makng me consider a government who supports the TFSA. We will be mortgage free early next year and now have plans to max both in the next 3 years. 


Retire-Canada

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Re: Canadians, TFSA changes, taxes, & clawback.
« Reply #7 on: October 18, 2015, 04:13:27 PM »

As someone who is working hard to fill his TFSA limit for the first time, who've never maxed thier RSP, this is actually the one thing makng me consider a government who supports the TFSA. We will be mortgage free early next year and now have plans to max both in the next 3 years.

There is no party that doesn't support the TFSA.

The Conservative doubling came at the expense of any inflation adjustments.  The other parties are just talking about going back to the old system of adjusting the TFSA upwards with inflation, but a lower contribution limit to start with.

Regardless of who gets in you'll get a solid TFSA contribution option.

I also would not be surprised if the Liberal/NDP gov't doesn't roll the contribution limit back notwithstanding their election rhetoric.

Heckler

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Re: Canadians, TFSA changes, taxes, & clawback.
« Reply #8 on: October 18, 2015, 05:17:23 PM »


There is no party that doesn't support the TFSA.


I also would not be surprised if the Liberal/NDP gov't doesn't roll the contribution limit back notwithstanding their election rhetoric.

I looked up the Liberal budget plan and it has line items for increased revenue due to TFSA limit reductions in year one. 

Im surprised there isn't more MMM outcry on reducing the TFSA limit.   I sure hope you're right on the first point.  I'm certainly not one of the 1% rich - my plans were laid out to never even need a taxable investment account.

How does a taxable account even work?   Assume a couch potato portfolio (VAB, VCN, VUN, XEF)

daverobev

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Re: Canadians, TFSA changes, taxes, & clawback.
« Reply #9 on: October 18, 2015, 06:32:05 PM »
Just remember the UK has a 'use it or lose it' thing called an ISA, basically the same as the TFSA except when you withdraw you lose the room, and the contrib. amount does not carry forward.

And it is ~$30k a year room on current exchange rates.

The problem with the TFSA isn't its size, it is that is so flexible. $10k really isn't much, and $5.5k... well. I guess if you max it for 25 years it's still enough future-taxation-removing.

Just say a smart person uses the full $5.5k over a career, retires at 50 with what, $300k? Probably more?

If that was unreg, at 3% divis, $9k... well of course it depends on your tax bracket but assuming you're not paying zero tax, you're probably saving $1800 a year in tax - and that's just divis, not cap gains.

10 million retirees saving $2k in tax = $20 billion a year?

Retire-Canada

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Re: Canadians, TFSA changes, taxes, & clawback.
« Reply #10 on: October 18, 2015, 07:09:06 PM »

How does a taxable account even work?   Assume a couch potato portfolio (VAB, VCN, VUN, XEF)

You put after tax dollars into it and you pay taxes on dividends/interest/capital gains as applicable.

I like having more room in my TFSA than less each year, but it's not that big a deal. I'd much rather have a government with policies I support in place with less TFSA room than more TFSA room and a government I dislike.

Having so much money saved and invested that I run out of tax advantaged accounts to stuff it into really is a first world problem.

K-ice

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Re: Canadians, TFSA changes, taxes, & clawback.
« Reply #11 on: October 18, 2015, 07:32:35 PM »


How does a taxable account even work?   Assume a couch potato portfolio (VAB, VCN, VUN, XEF)


Once your RRSP and TFSA are full you just start saving in a regular account.

But there are still ways to do this more tax efficiently. For example, keeping VCN in the unregistered accoubt is better because of the Canadian dividend tax credit.

Money Sense and Couch potato have had a few articles on this.

Kaspian

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Re: Canadians, TFSA changes, taxes, & clawback.
« Reply #12 on: October 19, 2015, 02:26:29 PM »
You know what...?  I didn't vote Conservative, but also fuck those Liberal and NDP jerks who want to toy with the TFSA.  They can smash/cap/whatever my tax shelter and OAS all they want, I'll still come out ahead.  I almost see this as someone trying to prevent me from succeeding which makes me clench my determined MMM teeth all the harder.  I'll be one of your hated "1%" of wealthy Canadians one of these days, you pandering political jackasses.  And the hard-done-by-middle-class that spends all their money at Wal-Mart and McDonalds every day of the week?  I'll still laugh that I have money while they whine in retirement.  :D

PharmaStache

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Re: Canadians, TFSA changes, taxes, & clawback.
« Reply #13 on: October 19, 2015, 06:54:23 PM »
How long will it take for the inflation adjusted TFSA (assuming it's going back to 5.5k) to "catch up" to the 10k TFSA?  Is it supposed to be increased every X number of years on a regular schedule?

I have 4 years to figure out how to do non-registered investing.  Maxing our RRSPs, TFSAs, RESPs and finishing off the mortgage will keep us busy until then!

daverobev

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Re: Canadians, TFSA changes, taxes, & clawback.
« Reply #14 on: October 19, 2015, 07:29:31 PM »
How long will it take for the inflation adjusted TFSA (assuming it's going back to 5.5k) to "catch up" to the 10k TFSA?  Is it supposed to be increased every X number of years on a regular schedule?

It was linked to inflation, rounded to the nearest $500. I think CPI.

So at 2% inflation, it'll take 4-5 years (edit: to go up $500!) since the last bump. Obviously the bumps would get closer over time. Barring more tinkering, of course.
« Last Edit: October 20, 2015, 08:14:51 AM by daverobev »

Retire-Canada

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Re: Canadians, TFSA changes, taxes, & clawback.
« Reply #15 on: October 19, 2015, 07:31:50 PM »
How long will it take for the inflation adjusted TFSA (assuming it's going back to 5.5k) to "catch up" to the 10k TFSA?  Is it supposed to be increased every X number of years on a regular schedule?

There is no schedule. It will depend on what the gov't determines the real inflation rate is and they'll probably wait until the change would be $500+ before adjusting it by a round number.