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2019 annual TFSA limit set at $6,000.00
November 20, 2018
4:15 am
frugal lady
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December 2, 2018
3:05 am
ValueTime
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Let's suppose I have made the maximum contributions every year and therefore I have no "room" to put any more funds in until next year 2019.
Since the TFSA was started in 2009 I have found it necessary to move from one provider to another several times because of better rates or because the provider was bought out (ING, ALLY).
It is the responsibility of the providers to inform CRA of all fund transfers BUT my experience is this has sometimes been "missed" by the provider or CRA or perhaps both.
Looking online at my transaction records as stored by CRA I find it shows me having over $30,000 of "room" in my TFSA as of Jan 2018.
What would you do?

December 2, 2018
3:20 am
Loonie
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I would assume their records will catch up eventually, continue to keep good records and documentation, and would make my $6000 contribution in January.

December 2, 2018
3:39 am
ValueTime
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Thx Loonie. Can I / you remove the other post?
Yes I do plan to make $6000 contributions in both my and my wife's TFSA
Oh and I could mention I do all the investing and my wife's TFSA also shows over $30K of contribution room as at Jan 2018.
I kind of wonder if the CRA's tracking machine/system or whatever you would call it will be or already is overwhelmed by all the transactions and they'll shut the whole thing down some day.
Being 70yrs old (today) I can remember when interest income was NOT taxed which is how it should be.

December 2, 2018
4:35 am
NorthernRaven
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CRA only tracks contributions and withdrawals (which is what affects your room calculation), not registered transfers from one TFSA provider to another. So their records may not show the current location of all your funds.

So if you contribute to Scotiabank, then do a transfer to BMO, CRA will show the Scotiabank contribution, but not the transfer to BMO. But if you withdraw from BMO, then later (next year if you don't have other room immediately) re-contribute to CIBC, they would show that BMO withdrawal and the CIBC contribution.

Their records should show all your contributions and withdrawals, and their statement of your available room should be accurate to the date they indicate. If it isn't, you should be able to look at their list of your contributions (and withdrawals) and see exactly what they have missed. If you have been making annual contributions, it would seem unlikely that they have missed multiple contribution events?

December 2, 2018
5:00 am
NorthernRaven
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ValueTime said
Being 70yrs old (today) I can remember when interest income was NOT taxed which is how it should be.  

In what sense do you mean that interest income was not taxed? Personal income tax dates back to World War I. The internet being a wonderful thing, the Income War Tax Act of 1917 can be found online, and section 3 (1) indicates that "For the purposes of this Act, 'income'...shall include the interest, dividends or profits directly or indirectly received from money at interest upon any security or without security..."

I'm pretty sure interest would always have been taxable (it would be unfair otherwise), although I believe the accrual and annual reporting for things like multi-year GICs may have changed over the years.

December 2, 2018
5:26 am
Alexandre
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ValueTime said
Let's suppose I have made the maximum contributions every year and therefore I have no "room" to put any more funds in until next year 2019.
...
Looking online at my transaction records as stored by CRA I find it shows me having over $30,000 of "room" in my TFSA as of Jan 2018.
What would you do?  

I noticed the same issue with TFSA contributions how they are reported by CRA in My Account. I've decided to ignore what CRA reports and track my contributions by myself. It is easy for me, because for next few years I plan to contribute to TFSA and not withdraw from it.

This is my approach: on January 1st of calendar year I move that year maximum allowed contribution amount to my TFSA account and do not worry about TFSA contribution room for the rest of the year.

For example, on January 1, 2019 I will be moving $6,000 to my TFSA account.

December 2, 2018
6:52 am
GR
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NorthernRaven said

In what sense do you mean that interest income was not taxed? Personal income tax dates back to World War I. The internet being a wonderful thing, the Income War Tax Act of 1917 can be found online, and section 3 (1) indicates that "For the purposes of this Act, 'income'...shall include the interest, dividends or profits directly or indirectly received from money at interest upon any security or without security..."

I'm pretty sure interest would always have been taxable (it would be unfair otherwise), although I believe the accrual and annual reporting for things like multi-year GICs may have changed over the years.  

Not so many years ago, the first $1,000 of interest income was not taxable.

December 2, 2018
7:02 am
gamgam
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GR said

Not so many years ago, the first $1,000 of interest income was not taxable.  

I too remember and did take advantage of that benefit back in the day!

December 2, 2018
7:03 am
threeoakwest
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Yes, I remember well the days of the first $1000.00 interest being tax free.

Those days are gone forever!

December 2, 2018
7:43 am
NorthernRaven
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GR said

Not so many years ago, the first $1,000 of interest income was not taxable.  

Ah. Looks like that exemption was ended in 1988. That was the year of some major changes to the tax system, including reducing the number of tax brackets and increasing the basic personal amount (which became a credit instead of a deduction, I believe). Those would have in effect replaced the interest exemption for many Canadians.

I'm not sure when the $1000 exemption was introduced. But there's a mention from the 1986 changes that it "was introduced at a
time of high inflation and high personal tax rates
", and I suspect it only dates back to the 1970s.
With various interest rates exceeding 10% in the late 80s, it was certainly an interesting time... 🙂

December 2, 2018
1:33 pm
Loonie
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Changes in interest deductibility, tax credits etc are a reminder that TFSAs too will likely change at some point. Take advantage while you can.

December 2, 2018
4:59 pm
ValueTime
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Way back when the first $1,000 interest was not taxable I would have been no where close to having that much interest.

December 2, 2018
6:33 pm
Norman1
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NorthernRaven said

I'm not sure when the $1000 exemption was introduced. But there's a mention from the 1986 changes that it "was introduced at a time of high inflation and high personal tax rates", and I suspect it only dates back to the 1970s.
With various interest rates exceeding 10% in the late 80s, it was certainly an interesting time... 🙂  

I think it was around 1974 by then Finance Minister John Turner. This is from article "Interest income" by Wayne G. Beach, on page 33 of The Globe & Mail, Toronto, January 28, 1975:

In his recent budget speech, Finance Minister John Turner said: "The House will recall that in my budget of last May, I proposed several measures to protect peoples' savings against the eroding effects of inflation. One measure was the introduction of an exemption for the first $1,000 of interest income received by individuals. This amendment will be reintroduced for 1974. In addition, for 1975, I propose to expand the scope of this exemption to include Canadian Dividend income…"

December 2, 2018
7:00 pm
Vatox
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I actually think TFSA reform is coming soon. It was a mistake to allow gains to increase contribution room. Government revenues are not just decreasing from the taxable gains of annual contributions. I think the TFSA was created in haste and we could easily see freezes on contributions, a cap on total lifetime contributions, a roll back on contributions, and even a clawback on things like OAS, if your TFSA value is over a certain amount.

December 2, 2018
8:34 pm
Retep
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Vatox said
I actually think TFSA reform is coming soon. It was a mistake to allow gains to increase contribution room. Government revenues are not just decreasing from the taxable gains of annual contributions. I think the TFSA was created in haste and we could easily see freezes on contributions, a cap on total lifetime contributions, a roll back on contributions, and even a clawback on things like OAS, if your TFSA value is over a certain amount.  

Vatox I think you have some rather punitive ideas.
It was a mistake to allow gains to increase contribution room.
....Why not...Trudeau is spending money like it's water.
I think the TFSA was created in haste and we could easily see freezes on contributions
....Or did it just replace the old no taxes on the first 1000 of interest
We could easily see freezes on contributions
....That would mean a change of legislation
A cap on total lifetime contributions
....Would that really be necessary.....how many people actually use TFSA...I still no people that don't now what a TFSA is?....Also the RRSP is a loss of income tax income.....and how many investors will drop RRSP for TFSA....so what is lost?
A roll back on contributions
....That has already happened...
A clawback on things like OAS
...that is a REAL BAD idea as some of us now have used the TFSA as a critical part of our retirement plan and I know some people have removed RRSP funds that they don't need yet and deposited into TFSA....that way as they age and are forced into RRIF they will have lower income to claim. The average Canadian will have retirement funds from OAS, CPP, RRIF and some type of a company plan.

It is a worth while effort to turn on ALERTS on your Credit Cards and Bank/Credit Union Accounts.

December 2, 2018
9:53 pm
Vatox
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When the government runs low on funds, everything is a target and TFSA revenue losses for the government will compound and soar over time.

It's not my idea, it's simply how government works and thinks. I love my TFSA and never want to see changes, but over time it will simply be too large for government to leave alone.

December 2, 2018
10:50 pm
Vatox
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This is a section of the Kesselman Report.

TFSA USAGE AND DISTRIBUTION
A Canada Department of Finance (2013) study provides statistics on the participation and usage patterns for TFSAs through 2011. The fact that investment earnings inside of TFSAs are indeed tax-free means that these incomes do not appear in the standard reporting of income tax statistics from the Canada Revenue Agency. However, the CRA (2009-2012) has published detailed online statistics on TFSA usage through 2012. A key and critical omission of the CRA reporting on TFSA usage is the lack of breakdowns by income of account holders, but very limited insights into these income patterns are provided in the 2013 Canada Finance study. The present paper draws on those sources and, for subsequent years, draws on limited data from a proprietary source.
Table 1 presents key aggregate and average gures for measures of TFSA participation, contributions, withdrawals, and year-end balances through 2012 and more limited measures for subsequent years. TFSA enrolment in the rst year was a robust 4.8 million and rose to 9.6 million separate individuals holding accounts by 2012. By mid-2014, about 13 million TFSA accounts had been opened, with the number of distinct TFSA holders likely exceeding 10 million. Total annual TFSA contributions have risen each year, hitting $33.5 billion in 2012, which exceeds RRSP deductions of $32.4 billion in that year (Canada Revenue Agency 2014, Table 2). 4
Withdrawals from TFSAs have also risen over time and are quite common, but they have been far outpaced by the mounting contributions. The aggregate market value of all TFSAs grew from $18 billion at year-end 2009 to an estimated $132 billion at mid-2014, which is a compound annual growth rate exceeding 50 percent.

Remember that TSFA gains and compound gains are never taxed and withdrawals can be recontributed. RRSPs are simply deferred tax, so government will get some taxes later.

I want to find some numbers closer to 2018. It will definitely balloon and those greedy governments will be drooling just waiting to pop it.

December 2, 2018
11:07 pm
Rick
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Vatox said
... those greedy governments will be drooling just waiting to pop it.  

I don't think there is a political party today willing to fall on their sword and piss off the grey wave to implement some of the changes you suggest (OAS claw-back, caps, etc). Maybe in 30 years or so when all us baby boomers are dead and the poor decisions our chosen leaders made come home to roost.

December 2, 2018
11:19 pm
Vatox
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Fair market value of all TFSAs, as reported by StatsCan in 2016

$151615000000. 151.6 billion. All the gains on that is Tax free. And some of those holders would probably pay 50 cents on the dollar. I suppose capital gains is only 50% taxed, but it's still very large.

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