A couple of weeks ago we spoke about the changes to Old Age Security. Another component of Old Age Security is the Guaranteed Income Supplement. This benefit is designed to support those with low income.
Here are the details on how to qualify for GIS:
You may be able to get this benefit if:
- You are 65 or older.
- You live in Canada.
- You receive the Old Age Security (OAS) pension.
- Your income is below $18,984 if you are single, widowed, or divorced.
- Your income plus the income of your spouse/common-law partner is below:
- $25,104 if your spouse/common-law partner receives the full OAS pension.
- $45,504 if your spouse/common-law partner does not receive an OAS pension.
- $45,504 if your spouse/common-law partner receives the Allowance.
These income figures exclude the OAS benefit.
The GIS benefit is combined with OAS.
If you qualify, you can earn up to $5,000 in employment income without affecting their GIS. For every dollar of net income more than $5,000, GIS is reduced by 50%. For example, if a client earned $6,000, that’s $1,000 in excess so their GIS would be reduced by $500.
The definition of income includes the following sources:
- Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) benefits.
- Other pension income, such as private pensions, superannuation, and foreign pension income.
- Registered Retirement Savings Plans (RRSPs) that you cashed during the year.
- Employment Insurance benefits.
- Interest and other investment income.
- Capital gains and taxable Canadian dividends.
- Net income from any rental properties.
- Net employment or self-employment income.
- Other income from sources such as workers’ compensation payments and alimony.
From a financial planning point of view, we can lower a client’s net income by choosing the type of investment income they receive in retirement.
In order of efficiency, here are the most effective withdrawal sources for reducing net income without reducing the amount of money going into your clients’ hands:
- TFSAs – no income reported at all.
- Insured Retirement Strategies – borrowed money is not reported as income.
- Capital gains – only 50% of the income reported.
- Interest income – 100% of the income reported.
- RRSP, RRIFs, LIRAs, and LIFs – 100% of the income reported.
- Dividend Income – Grossed up dividend reported as income so not as efficient.
Another great source of tax-efficient income is non-registered prescribed annuities. For older Canadians, the amount of taxable income can be very low, sometimes zero.
I hope you find this information useful.
THIS ARTICLE IS PROVIDED AS A GENERAL SOURCE OF INFORMATION ONLY AND SHOULD NOT BE CONSIDERED TO BE PERSONAL INVESTMENT OR LEGAL ADVICE. READERS SHOULD CONSULT WITH THEIR FINANCIAL OR LEGAL ADVISOR TO ENSURE IT IS SUITABLE FOR THEIR CIRCUMSTANCES.