Government Proposed Changes To TFSA Accounts

There hasn’t been too much news and happenings when it comes to tax free savings accounts since its launch. I would say the highlights would be how the interest rates took a huge dive which kind of killed the excitement of it for many.

However, I was just browsing around and reading a piece about the government of Canada proposing to add the following amendments to the income tax act in regards to how TFSA’s work:

-Make any income attributable to deliberate overcontributions and prohibited investments subject to existing anti-avoidance rules in the Income Tax Act.

-Make any income attributable to non-qualified investments taxable at regular income tax rates.

– Ensure that withdrawals of deliberate overcontributions, prohibited investments, non-qualified investments or amounts attributable to swap transactions, or of related investment income, from a TFSA do not create additional TFSA contribution room.

– Effectively prohibit asset transfer transactions between TFSAs and other accounts.

I suppose it is a direct attempt to prevent intentional abuse of the plan where one can avoid paying income taxes on their investments. An example would be someone intentionally over contributing to their account where the investment would then generate more money than the actual 1% penalty fee you would have to pay.

This doesn’t really affect the average person though that simply uses the account more as a savings account. Basically, I’m sure most people just want higher interest rates.

One response to “Government Proposed Changes To TFSA Accounts”

  1. I think I follow your reaonsing here but NO, you dont have to claim it as income. You didnt actually receive any money as a result of your bankruptcy you were just discharged from your debt you owed. However, you are required to report any refund you receive to the bankruptcy court officer/trustee (at least in the Western District you are). If you get back a huge chunk of money, you may have to pay a portion or all of it to the bankruptcy court so they can distribute it to your creditors’ as at least a little payment toward the debt they absolved you of. I filed Chap 7 in 2003. I got a refund in 2004 (for 2003) of about $1400 and reported it to the court trustee they didnt require me to pay a dime. I think they only take part of the money if you get back upwards of a few thousand or more. And by the way I had okay credit before filing bankruptcy (a result of being laid off for 7 months). It took a few years to get back in the swing of things but my credit is MUCH better now that it was before even with a bankruptcy on my record but I make sure to use credit responsibly now. There is life after bankruptcy. Dont let anyone tell you there isn’t. Donald Trump has filed twice. Take care.

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