All About Estates

Old Age Security Clawback – Grossed-Up vs Actual Dividends

The Canada Revenue Agency (CRA) was reminded by a taxpayer individual about a perceived lack of fairness when required to include the dividends received at a grossed-up amount when calculating net income rather than only including the actual amount of dividends received. The taxpayer felt this was unfair because net income is used to calculate the reduction his or her old age security (OAS) pension.

In their response the CRA confirmed the grossed-up but not the actual amount of dividends had to be included in an individual’s adjusted income to determine if his or her old age security benefit was clawed back. For 2017, any adjusted income over $74,788 would trigger a clawback of the taxpayer’s old age security benefit.

The CRA went on to confirm the Agency had no discretion to calculate the adjusted income with actual instead of grossed-up dividends. The CRA noted that only the Department of Finance, not the CRA, had the means to update the legislation to use actual instead of grossed-up dividends to calculate an individual’s OAS clawback.

In most instances with proper tax planning an individual may reduce the effect of the OAS clawback without affecting their cash needs.

About Derek de Gannes
CW LLP is a firm of professional advisors providing a comprehensive suite of services to a diverse client base. Our experienced and skilled team can provide personal and corporate solutions to maximize growth potential, wealth and value. Email: ddegannes@cwcagroup.com

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