2007 Budget - Questions and Answers

For obsolete questions, visit the Archived FAQs.

• Implementation of the proposed increase in the age limit
• Amendment to take advantage of the increase to the age limit
• Contribution to RRSP in 2007 if you are 70 or 71
• Transfer from RRIF to RRSP
• Financial institutions that do not allow making RRSP contributions if you are 70
• Minimum RRIF withdrawal
• RRIF tax withholding rules
• Phased retirement
• T4RIF slip reporting - Annuitants turning 70 or 71 in 2007 or 71 in 2008

Implementation of the proposed increase in the age limit (archived)

Amendment to take advantage of the increase to the age limit

Will my RPP, DPSP, or RRSP have to be amended to take advantage of the increase to the age limit?

Possibly. If your plan makes specific reference to the age limit being 69 years of age, the plan will have to be amended to take advantage of the increase in the age limit to 71. If the wording is general in nature and only refers to the age limit as defined in the Income Tax Act, the plan does not need to be amended.

Contribution to RRSP in 2007 if you are 70 or 71

Can I make a contribution to an RRSP in 2007, if I'm 70 or 71 years of age?

Yes, you can make contributions to an RRSP until the end of the year in which you become 71 years of age. You should verify your RRSP deduction limit to ensure that you have room to make contributions so they are not considered excess contributions. Your RRSP deduction limit can be obtained from your Notice of Assessment or Notice of Reassessment or by contacting us at 1-800-959-8281.

Transfer from RRIF to RRSP

If I'm 70 or 71 years of age at the end of 2007, under the changes to the age limit, can I transfer the funds from my RRIF to an RRSP?

Yes, you can transfer the funds from your RRIF to an RRSP. However, you must convert the RRSP to a RRIF before the end of the year in which you become 71 years of age.

Financial institutions that do not allow making RRSP contributions if you are 70

I'm 70 years of age and my financial institution will not allow me to make a contribution to my RRSP. With the changes to the budget, why won't they allow me to make contributions?

The CRA has advised employers, issuers, and carriers that they can amend and administer their plans in accordance with the legislation. It is up to employers, issuers and carriers to decide whether they will do so.

Minimum RRIF withdrawal

If I'm 70 or 71 years of age at the end of 2007, do I still have to make my minimum RRIF withdrawal?

No. The minimum RRIF withdrawal requirement will be waived in 2007 for those turning 70 or 71 in 2007, and in 2008 for those turning 71 in 2008. For more information, you should contact the financial institution that holds your RRIF.

Transfer of RRIF "Eligible Amount" - Annuitants who reach the age of 70 or 71 in 2007, or who reach the age of 71 in 2008, who are paid the amount that would have been the minimum amount

Based on the changes announced in the 2007 Federal Budget that recently became law, the 2007 RRIF minimum amount is nil if the annuitant reaches the age of 70 or 71 in 2007. Similarly, the 2008 minimum amount is nil if the annuitant reaches the age of 71 in 2008.

Before these changes were announced, some annuitants had already been paid the amount that would have been the 2007 minimum amount. Some of these annuitants may also be paid this amount after the changes were announced or made law. Similarly, in 2008, some of these annuitants may be paid the amount that would have been the 2008 minimum amount.

If the amount that would have been the 2007 or 2008 minimum amount is paid to an annuitant who reaches the age of 70 or 71 in 2007, or who reaches the age of 71 in 2008, respectively, can the annuitant use that amount to make a deductible contribution to an RRSP, a RRIF, or to purchase an eligible annuity?

Yes. Under the new rules, this payment is considered an "eligible amount" for purposes of the deductible transfer rules. The deduction is not linked to whether the annuitant has an RRSP deduction limit for the year. Rather, it is linked to whether the amount is paid to the annuitant and included in the annuitant's income, and whether the annuitant uses the payment to make a contribution to an RRSP, a RRIF, or to purchase an annuity.

The amount paid in 2007 that would have been the minimum amount for the year must be reported in box 16 of a 2007 T4RIF slip. If the annuitant contributes part of this amount to an RRSP, a RRIF, or uses it to purchase an annuity, an official receipt must be issued to the annuitant.

The annuitant includes in income on line 115 of his or her 2007 tax return the amount shown in box 16 of the 2007 T4RIF slip. If that amount is contributed to an RRSP, the annuitant completes Schedule 7 and deducts the amount on line 208 of the 2007 tax return. If that amount is contributed to a RRIF or used to purchase an annuity, the annuitant deducts the amount on line 232 of the 2007 return.

Example 1

• An annuitant who reached 71 years of age on January 15, 2007, is paid $6,000 from his RRIF on January 31, 2007. This would have been the 2007 minimum amount.
• A 2007 T4RIF slip that reports this amount in box 16 is issued to him.
• In December 2007, he contributes the entire $6,000 to the RRIF from which the amount was paid to him on January 31, 2007.
• The financial institution that holds his RRIF issues him an official receipt to show that he contributed $6,000 to his RRIF in 2007.
• He reports the $6,000 as income on line 115 of his 2007 tax return and deducts the $6,000 he contributed to his RRIF on line 232 of that tax return.

Note

If:

• the annuitant fully contributes the "eligible amount" to the same RRIF from which it was paid, and he makes the contribution in the year the amount is received, or within the first 60 days of the following year; and
• the RRIF carrier is prepared to modify its ordinary reporting mechanisms so that no T4RIF slip or official receipt is issued;

then the CRA is prepared to accept this modified reporting.

We will accept this because individuals will have fewer income slips and receipts to reconcile on their tax return for 2007 or 2008. This should result in fewer 2007 or 2008 income tax returns being filed or assessed incorrectly.

Example 2

• An annuitant who reached 71 years of age on January 31, 2007, is paid $38,000 from her RRIF on October 30, 2007. This would have been the 2007 minimum amount.
• A 2007 T4RIF slip that reports this amount in box 16 is issued to her.
• In December 2007, she contributes the entire $38,000 to an RRSP under which she is the annuitant.
• The financial institution that holds her RRSP issues her an official receipt to show that she contributed $38,000 to her RRSP in 2007.
• She reports the $38,000 as income on line 115 of her 2007 tax return and deducts the $38,000 she contributed to her RRSP on line 208 of that tax return. She also completes the 2007 Schedule 7 to record the RRSP contribution on lines 245 and 240 of the Schedule.

Note
An annuitant who is 71 years of age on December 31, 2007, or December 31, 2008, who contributes the "eligible amount" to their RRSP must make the contribution by December 31 of the year.

RRIF tax withholding rules

Are there any changes to the RRIF tax withholding rules on account of these changes?

No, notwithstanding that the minimum RRIF withdrawal will be waived for certain eligible individuals, withdrawals up to the minimum amount that would otherwise be determined under the normal rules will continue to be exempt from tax withholding.

Phased retirement (archived)

Phased retirement (Question 26 of the RPP Questions and Answers)

T4RIF slip reporting - Annuitants turning 70 or 71 in 2007 or 71 in 2008

The requirement for a minimum registered retirement income fund (RRIF) withdrawal will be waived in 2007 for annuitants who turn 70 or 71 in 2007, and in 2008 for annuitants who turn 71 in 2008. Many of these annuitants will still want this amount paid to them in 2007 and 2008. An amount paid to an annuitant from a RRIF that is not a minimum amount is an excess amount. The Canada Revenue Agency ordinarily requires that a RRIF excess amount be reported in box 16, Taxable amounts, and box 24, Excess amount, on a T4RIF slip.

Will the Canada Revenue Agency require the RRIF industry to reprogram their systems for 2007 and 2008 to report, in boxes 16 and 24 of the T4RIF slip, the excess amount that, but for the 2007 federal budget measure, would have been a minimum amount?

No. An amount paid in 2007 to an annuitant who turns 70 or 71 in 2007, and in 2008 to an annuitant who turns 71 in 2008 that would have been the minimum amount for the year can be reported in box 16 only of the T4RIF slip.

For information about how to report other RRIF amounts on T4RIF slips, please refer to the T4079, T4RSP and T4RIF Guide or call 1-800-959-5525.