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Impact on OAS-GIS

A number of people have inquired recently about how their Old Age Security (OAS) and Guaranteed Income Supplement (GIS) will be affected by income from a Registered Disability Savings Plan when they turn 65.

When people turn 65, in all provinces and territories, they begin to receive OAS.  If a person has no or limited income, as is the case for most people on provincial social assistance / disability assistance, her or she will also qualify for GIS.

Currently, the maximum OAS is $540.12 per month and the maximum GIS is 732.36 per month for a monthly total of $1,272.48.  The amounts are indexed to the consumer price index, which means that as the cost of living rises, so too will OAS and GIS amounts. If you want more information on OAS or GIS rates, you can access it here.

Where a person has taxable income, most commonly from Registered Retirement Savings Plans but sometimes from non-registered investments, employment or a business, this income is deducted from GIS at 50%.  For example, suppose a person receives taxable income of $500 per month from an RRSP or an RRIF.   Their GIS would be reduced by $250 per month.  We have previously written about this and an the implications for people with lower incomes who are saving for their retirement.  If you are interested you can access the post here.

The quick answer to the query is that income from an RDSP will not reduce a beneficiary’s OAS or GIS payments.

Among you, however, there are skeptics.  People who say “show me the money”.  In no way do we want to discourage those people.  Skeptics are good; they hold people accountable.  A reliable source should be able to point to the source of their information.  While it is great to be able to name a source, the actual best source in most matters is the legislation.

While it is relatively easy to point to provincial legislation that exempts RDSP income, it is not so easy to point to a piece of legislation which says, “for the purposes of calculating eligibility for GIS, RDSP income is exempt.”

The reason for this is that it is hidden in the Income Tax Act.  Here is how it works:

The definition of “income” in section 2 of the Old Age Security Act, which is used for the purpose of determining GIS benefits, has an exclusion for any amount included under paragraph 56(1)(q.1) of the Income Tax Act.  This section of the Income Tax Act excludes, along with a long list of items, the taxable portion disability assistance payments from the calculation of taxpayer’s income (as per the Old Age Security Act) for the year.  Of course, the non-taxable portion is just that: non- taxable and also not included in the calculation of taxable income.

If you want a less technical confirmation, you can also refer to Service Canada’s GIS Application Guide, which specifies that RDSP payments are not to be included as a source of income in a person’s GIS application.