TFSAs will lead to 'welfare' for the wealthy, government warned
The Conservative government is facing calls to change the rules around tax-free savings accounts now before a loophole means some of Canada's wealthiest people could start receiving "welfare for seniors."
TFSAs were created in 2009 and designed to encourage Canadians to save by – as the name suggests – putting such accounts out of the reach of the Canada Revenue Agency when it comes to taxing capital gains and other income such as dividends.
However, because the accounts operate outside the tax system, they are also ignored when it comes to income-tested government benefits such as Old Age Security (OAS), the Guaranteed Income Supplement (GIS), and even the allowance designed with the country's lowest income seniors in mind.
"The question is: what do we do?" asks Rhys Kesselman, who holds the Canada Research Chair in Public Finance at Simon Fraser University. "Do we continue to pay the GIS, which is intended for low-income seniors, to people who have large amounts in their TFSA?"
Kesselman estimates a person who starts squirrelling away significant amounts into their TFSA at an early age and invests it in a diversified portfolio can expect to have $750,000 to $1 million or more in that account by the time they reach retirement age – a sort of personal endowment fund that would continue to generate income tax free.
"If you're balanced between fixed income and equities, [you could get] six per cent, $60,000 a year — and that's tax-free," he said.
...more....
http://www.cbc.ca/m/news/politics/t...e-for-the-wealthy-government-warned-1.2843835
The Conservative government is facing calls to change the rules around tax-free savings accounts now before a loophole means some of Canada's wealthiest people could start receiving "welfare for seniors."
TFSAs were created in 2009 and designed to encourage Canadians to save by – as the name suggests – putting such accounts out of the reach of the Canada Revenue Agency when it comes to taxing capital gains and other income such as dividends.
However, because the accounts operate outside the tax system, they are also ignored when it comes to income-tested government benefits such as Old Age Security (OAS), the Guaranteed Income Supplement (GIS), and even the allowance designed with the country's lowest income seniors in mind.
"The question is: what do we do?" asks Rhys Kesselman, who holds the Canada Research Chair in Public Finance at Simon Fraser University. "Do we continue to pay the GIS, which is intended for low-income seniors, to people who have large amounts in their TFSA?"
Kesselman estimates a person who starts squirrelling away significant amounts into their TFSA at an early age and invests it in a diversified portfolio can expect to have $750,000 to $1 million or more in that account by the time they reach retirement age – a sort of personal endowment fund that would continue to generate income tax free.
"If you're balanced between fixed income and equities, [you could get] six per cent, $60,000 a year — and that's tax-free," he said.
...more....
http://www.cbc.ca/m/news/politics/t...e-for-the-wealthy-government-warned-1.2843835
