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TFSA Transfer Charges
November 2, 2020
10:10 am
JenE
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I’ve just transferred a matured GIC from Meridian and been charged $50, taken directly from the GIC proceeds, which won’t be covered by the new institution. My question is, am I allowed to add that $50 to a TFSA deposit in the new year? Thanks in advance.

November 2, 2020
10:42 am
Rick
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JenE said
I’ve just transferred a matured GIC from Meridian and been charged $50, taken directly from the GIC proceeds, which won’t be covered by the new institution. My question is, am I allowed to add that $50 to a TFSA deposit in the new year? Thanks in advance.  

Good question. Does this help?:
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/tax-free-savings-account/contributions.html

Management fees related to a TFSA trust and paid by the holder are not considered to be contributions to the TFSA. The payment of investment counsel, transfer, or other fees by a TFSA trust will not result in a distribution (withdrawal) from the TFSA trust.

So no....doesn't look like you get your $50 back. I always ask the charging FI to take their fee from a non-registered account so as not to reduce the registered funds. Unless it's a massive amount that would cost you more than $50 in interest, it's so close to the end of the year, I think I would have just withdrew the funds from the TFSA, transferred for free from a regular account, let it earn taxable interest until January, and redeposited in a new TFSA Jan 1. The "December Maneuver"

November 2, 2020
10:58 am
AltaRed
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As already said, fees from within an account is money lost. For the future, do as Rick suggested. Don't do a transfer. Withdraw the funds from the TFSA instead, even down to zero, and re-contribute them to a new TFSA elsewhere on Jan 2nd.

P.S. There is no reason for another FI (of a savings institution type) to want your business bad enough to pay your transfer fee....unless it is a big enough account, e.g. $50k, for it to be worth the possible opportunity of future profit from you for that FI to do so.

November 2, 2020
11:02 am
Norman1
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Rick said
… I always ask the charging FI to take their fee from a non-registered account so as not to reduce the registered funds. …

That is a risky thing to do tax wise.

There is some evolving thought about whether doing so is an "advantage" or not under the Income Tax Act. CRA thinks it is and was intending to apply the 100% tax on such an "advantage"!

Law firm Torys LLP discusses this in CRA and Finance clarify certain registered account fees can continue to be paid by planholders (October 23, 2019).

November 2, 2020
11:07 am
Rick
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Norman1 said

Rick said
… I always ask the charging FI to take their fee from a non-registered account so as not to reduce the registered funds. …

That is a risky thing to do tax wise.

There is some evolving thought about whether doing so is an "advantage" or not under the Income Tax Act. CRA thinks it is and was intending to apply the 100% tax on such an "advantage"!

Law firm Torys LLP discusses this in CRA and Finance clarify certain registered account fees can continue to be paid by planholders (October 23, 2019).  

Interesting Norman. I can see the point when it comes to management fees, but don't see CRA chasing after anyone for a $50 transfer fee. If they want to come after me....bring it on. Personally, I think they have better things to do.

November 2, 2020
1:54 pm
JenE
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I did ask Meridian to take the charge from my chequing account but was told they wouldn’t do that. I’m not happy, overall, with Meridian, and plan to close my accounts with them when the remainder of my GICs mature. Thanks all.

November 2, 2020
3:21 pm
Loonie
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This doesn't answer the question but I can't help but think that the simplest thing would be if they all eliminated these transfer fees. This would relieve them all of the nuisance of reimbursing each other's fees. It's such a charade!

One can dream....

Hubert, Peoples, and Oaken have figured this out. They also tend to have good rates. Most of our registered GICs are migrating there, bit by bit.

That's pathetic that Meridian wouldn't let you take the fee out of non-registered.

Withdrawing doesn't always help. You can't reasonably withdraw RSP money as it's not replaceable. If your TFSA GIC matures in January, as many do, you lose a whole year of higher rates or income sheltering. And the odds of a person who consistently puts their TFSA money into laddered GICs hitting $50K in any one GIC are non-existent. That cloud take another 15-20 years!

But, look on the bright side! The way interest rates are going, TFSA GICs and savings accounts will soon be irrelevant, so, no fees!sf-surprised

November 2, 2020
3:36 pm
RetirEd
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I asked Tangerine to take the $50 from my savings account, but they insisted on taking it from my TFSA. (I had already decided to stop doing business with them.) They insisted I would be able to re-deposit it next year. I asked one person at CRA and was told the same.

I will make the deposit next year and see what they say! If anyone else has any other references, please share them.
RetirEd

November 2, 2020
3:44 pm
Rick
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RetirEd said
I asked Tangerine to take the $50 from my savings account, but they insisted on taking it from my TFSA. (I had already decided to stop doing business with them.) They insisted I would be able to re-deposit it next year. I asked one person at CRA and was told the same.

I will make the deposit next year and see what they say! If anyone else has any other references, please share them.
RetirEd  

Motive did it for me on my RSP transfer to Hubert without a problem. Was that a one-off or error? Too late now. It's done.

November 2, 2020
5:21 pm
Norman1
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RetirEd said
I asked Tangerine to take the $50 from my savings account, but they insisted on taking it from my TFSA. (I had already decided to stop doing business with them.) They insisted I would be able to re-deposit it next year. I asked one person at CRA and was told the same.

It depends on how the $50 fee was charged.

If the $50 was charged directly against the TFSA contract, then there was no TFSA withdrawal. Consequently, nothing will be reported to CRA and one's contribution room next year won't go up by $50.

On the other hand, if a $50 withdrawal was made against the TFSA contract and the $50 was charged against that withdrawal, then there was a TFSA withdrawal. The $50 withdrawal will be reported to CRA and one's contribution room next year will go up by $50.

November 2, 2020
5:50 pm
Kidd
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Norman1 said

It depends on how the $50 fee was charged.

If the $50 was charged directly against the TFSA contract, then there was no TFSA withdrawal. Consequently, nothing will be reported to CRA and one's contribution room next year won't go up by $50.

On the other hand, if a $50 withdrawal was made against the TFSA contract and the $50 was charged against that withdrawal, then there was a TFSA withdrawal. The $50 withdrawal will be reported to CRA and one's contribution room next year will go up by $50.  

Norman, this is why i read your posts. Two thumbs up. Tangerine charged me a fee to move my tfsa. I looked at the fee as the price of doing business and never thought anything more of it. Now (tomorrow) I'm going to go digging to see where that fee actually came from.

Thank you.

November 2, 2020
6:53 pm
Bill
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JenE, you say you "transferred a matured GIC" - ? Do you mean a GIC inside a TFSA account matured and then you had Meridian transfer the now cash, still within the/a Meridian TFSA account, directly to a TFSA account at another institution? If so, and they transferred the full amount of the matured GIC less $50 transfer fee to your new TFSA account elsewhere, then I agree with those who are saying there was no withdrawal, no ability to recontribute the $50 next year.

November 2, 2020
7:08 pm
JenE
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Bill you’ve understood exactly what I did.

Norman, I’m going to check out what you’ve said and ask Meridian exactly how the amount was charged. I’ll report back.

November 3, 2020
1:57 am
Loonie
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The FIs that charge this fee call it a "service" fee. It's no service if they take the easy way out (for them) and just grab it and don't declare it as a withdrawal that you can recontribute later as there is no extra paper work.
If they declare it as such to CRA, aren't they just making twice as much work for themselves - once to register the withdrawal and once to do the registered transfer with paper trail?
Their (thin) argument for having this fee in the first place is because of the paper work, so it doesn't make sense to me that they would do more than they could get away with.

I'll be happy to hear my suspicions are wrong.

there is no good reason why they can't take it out of your non-registered account.

November 3, 2020
12:15 pm
Norman1
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The financial institution will likely not take the transfer fee out of a non-registered account while there is uncertainty about that being "advantage" or not.

If that does turn out to be an "advantage", then one will have a 100% advantage tax to pay for doing that.

November 3, 2020
6:13 pm
Loonie
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I don't see any issue of "advantage". The legal brief refers to "management fees". As I understand it, management fees have to do with the management of money in an account for best financial outcomes (allegedly), so there is an argument that they provide an "advantage". Transfer fees provide no advantage whatsoever to the customer as there is no hope of gain; There is only disadvantage.
I am not a lawyer.

The easiest and clearest solution is the elimination of transfer fees.

November 3, 2020
6:27 pm
Bill
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Norman1, your link to Torys outlining the policy approach deals just with "the fees set out in subparagraph 20(1)(bb) of the Act (i.e., investment management fees paid to a taxpayer whose principal business is advising on the purchase and sale of specific shares or securities or whose principal business includes providing services in respect of the administration or management of shares or securities and the fee is paid for such advice or such services, as the case may be)".

So I'm not sure this policy really relates at all to Rick's (or JenE's $50, for that matter) fees, doesn't look to me like banks' or credit unions' "principal business" fits the requirements above. Seems to be aimed at something more specific, and connected perhaps with investment advisers, full-service brokerages, etc. At least if I'm reading it right - ?

And I agree with you, Rick, that CRA won't chase you/us for $50 extra income tax due to a $50 transfer fee related to registered accounts.

November 3, 2020
8:19 pm
Norman1
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It's not the management fees that are the "advantage." It is the payment of those "management fees" by someone other than the registered account that's the "advantage".

The subparagraph 20(1)(bb) material mentioned is for a proposed amendment that will exclude the outside payment of subparagraph 20(1)(bb) fees (investment counsel fees) from the definition of "advantage":

Therefore, Finance expressed its intention in the comfort letter to recommend that the definition of “advantage” in subsection 207.01(1) be amended such that it does not apply to payments by a controlling individual of a registered account, not exceeding a reasonable amount, of the fees set out in subparagraph 20(1)(bb) of the Act (i.e., investment management fees

Paying of other fees, not included in 20(1)(bb), from outside of the registered account, will still be considered an "advantage" by CRA.

November 3, 2020
9:02 pm
Loonie
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I still don't see that this applies to transfer fees.

November 3, 2020
9:37 pm
Norman1
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I see the connections as follows.

Transfer fees are fees.

The Torys LLP article says

…The option of paying fees outside the registered account was cast into doubt in 2016 when the Canada Revenue Agency (CRA) issued draft administrative guidance announcing a review of the “advantage” rules in subsection 207.01(1) of the Income Tax Act (Act).

The CRA proposed to treat fees paid outside an account to be an “advantage” and subject to tax to the holder or annuitant.…

However, there seems to be an upcoming exclusion for investment counsel fees:

On October 9, [2019] the CRA released a comfort letter it received from Finance on August 26 to the public to the effect that Finance will make the changes required to clearly demonstrate that investment management fees paid outside a registered account will not be an “advantage”.

That leaves the paying of other fees, like transfer fees, outside the registered account to be still an "advantage".

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