Personal Finance

High Interest Cash (< 5.02%) [CAD/USD] [CDIC: NO!] + Money Market ETFs

  • Last Updated:
  • Jan 29th, 2023 3:28 am
Tags:
Sr. Member
Mar 6, 2007
668 posts
43 upvotes
av10000 wrote: Not sure if my understanding is correct, but even the ETFs that pay dividends (the ones other than HSAV) should be more advantageous for taxes than
the regular HISAs? A HISA reports interest in the T5, but if the ETF reports the interest as dividends I understand we pay less taxes?

Federal dividend tax credit: "Multiply the taxable amount of eligible dividends you reported on line 12000 of your return by 15.0198%."
https://www.canada.ca/en/revenue-agency ... redit.html
Generally their distribution are not counted as dividend, rather it is equivalent to interest income; specifically 'other income'. There may also be a small return of capital component, see my comment below.
wayneg9999 wrote: Correct me if I am wrong but from my research reading the prospectus and data sheets, the monthly distributions count as "other income" on t3 form not dividends for PSA. I am not sure about CASH or others. So essentially the tax difference is same as if you put the money in a hisa and get a t5.

Has anyone invested before 2022 in these funds can confirm what they receive in their t3s or whatever their broker gives them?
Generally their distribution are taxed like interest income. However, there may also be a small return of capital component, depending on the fund,
For references, if you held for the whole year in 2021, the T3 Factors for PSA are as follows (will be different for 2022):
PSA for 2021: other income 0.2871 and return of capital 0.0073 (i.e. reduce your adjusted cost base) for a total distribution of 0.2944
Jr. Member
Sep 28, 2012
154 posts
271 upvotes
jmc0 wrote: Generally their distribution are not counted as dividend, rather it is equivalent to interest income; specifically 'other income'. There may also be a small return of capital component, see my comment below.


Generally their distribution are taxed like interest income. However, there may also be a small return of capital component, depending on the fund,
For references, if you held for the whole year in 2021, the T3 Factors for PSA are as follows (will be different for 2022):
PSA for 2021: other income 0.2871 and return of capital 0.0073 (i.e. reduce your adjusted cost base) for a total distribution of 0.2944
Thanks a lot for clarifying!
[OP]
Deal Addict
User avatar
Jan 11, 2020
3966 posts
3268 upvotes
Torontois @ 宇宙中心
jmc0 wrote: Generally their distribution are not counted as dividend, rather it is equivalent to interest income; specifically 'other income'. There may also be a small return of capital component, see my comment below.


Generally their distribution are taxed like interest income. However, there may also be a small return of capital component, depending on the fund,
For references, if you held for the whole year in 2021, the T3 Factors for PSA are as follows (will be different for 2022):
PSA for 2021: other income 0.2871 and return of capital 0.0073 (i.e. reduce your adjusted cost base) for a total distribution of 0.2944
av10000 wrote: Thanks a lot for clarifying!
There could be a strategy behind that one. If you have super high income (or have lower income but would like to stick it to the Feds), you would go the capital gains route. So you'd buy right AFTER the dividend pay date, and you sell it before the ex-dividend date. So it'll capture the built in distribution price in the ETF value. This way, there is no distribution, so no interest taxes. Slippage is another issue because of the bid/ask spreads, making this viable for those who would rather light their money afire before having it taxed. That's a lot of micro-management though, but I'm sure it can be scheduled/automated - someone who makes that much income might not waste their time this way, or they'd just pay the premium on HSAV.

I do contend that there a myriad ways in which one can turn tricks in this market...
Sr. Member
User avatar
Jul 14, 2018
526 posts
652 upvotes
ADenariusSaved wrote: making this viable for those who would rather light their money afire before having it taxed
This sounds perfect for me! Thank you.
[OP]
Deal Addict
User avatar
Jan 11, 2020
3966 posts
3268 upvotes
Torontois @ 宇宙中心
NinjaSaves wrote: This sounds perfect for me! Thank you.
HSAV and HSUV.U for you!
Or the convoluted method above...

With Wealthsimple Disnat and National Bank, this is all viable as there are no buy/sale commissions. I wonder if that'll change if we keep abusing their generosity?
Deal Addict
May 3, 2008
2700 posts
1758 upvotes
Markham
If I sell these just before monthly distribution, the price diff will then be counted as capital gain ?
Assume 1cents bid offer slippage and $6.95*2 round trip commission, may still worth it ??
Member
May 15, 2019
367 posts
374 upvotes
GWN
savemoresaveoften wrote: If I sell these just before monthly distribution, the price diff will then be counted as capital gain ?
Assume 1cents bid offer slippage and $6.95*2 round trip commission, may still worth it ??
If there is a series of purchases and sales, then it can be considered "adventure in the nature of trade" and thus taxed as ordinary income.
[OP]
Deal Addict
User avatar
Jan 11, 2020
3966 posts
3268 upvotes
Torontois @ 宇宙中心
SnowyDumpling wrote: If there is a series of purchases and sales, then it can be considered "adventure in the nature of trade" and thus taxed as ordinary income.
Wow, thanks for that input. That makes sense. HSAV it is then...No wonder why it sells at a premium.

This would be 2 transactions per month though, that bad? I don't recall getting into granular transaction details on my taxes, except when Trudeau busted my HXS swap-operation.

I mean, the CRA won't believe us if we just say we have OCD once seeing those transaction details...
Jr. Member
Jul 3, 2013
174 posts
264 upvotes
Toronto
ADenariusSaved wrote: There could be a strategy behind that one. If you have super high income (or have lower income but would like to stick it to the Feds), you would go the capital gains route. So you'd buy right AFTER the dividend pay date, and you sell it before the ex-dividend date. So it'll capture the built in distribution price in the ETF value. This way, there is no distribution, so no interest taxes. Slippage is another issue because of the bid/ask spreads, making this viable for those who would rather light their money afire before having it taxed. That's a lot of micro-management though, but I'm sure it can be scheduled/automated - someone who makes that much income might not waste their time this way, or they'd just pay the premium on HSAV.

I do contend that there a myriad ways in which one can turn tricks in this market...
This would almost work except you'd get killed on spread each way. But yes, you could theoretically treat it as a capital gain that way.
Jr. Member
Jul 3, 2013
174 posts
264 upvotes
Toronto
ADenariusSaved wrote: HSAV and HSUV.U for you!
Or the convoluted method above...

With Wealthsimple Disnat and National Bank, this is all viable as there are no buy/sale commissions. I wonder if that'll change if we keep abusing their generosity?
HSAV trading at a significant premium compared to NAV, so probably not a great deal right now.
Deal Addict
User avatar
Oct 14, 2017
1088 posts
1535 upvotes
Toronto
blackhat8287 wrote: HSAV trading at a significant premium compared to NAV, so probably not a great deal right now.
It's a good deal. Pump my bags.
Member
Mar 11, 2008
242 posts
462 upvotes
Yeah, as mentioned above, if someone habitually moves money in and out of a HISA ETF each month to avoid distributions, there's also a good possibility that the CRA would consider it business income rather than capital gains.
[OP]
Deal Addict
User avatar
Jan 11, 2020
3966 posts
3268 upvotes
Torontois @ 宇宙中心
opendoor wrote: Yeah, as mentioned above, if someone habitually moves money in and out of a HISA ETF each month to avoid distributions, there's also a good possibility that the CRA would consider it business income rather than capital gains.
That does look sus if they ever look into the transaction data. Will they only find it in an audit or something?
Member
Aug 9, 2007
499 posts
199 upvotes
Nice thread, good discussions.

Any reason ZMMK is not listed here? I bought a bunch for my RRSP at Wealthsimple last week.

BMO is already a major bank so risk should be better? Also I found a loophole that RBC blocks CASH, CSAV, PSA, etc, but it does not block ZMMK ETF.
[OP]
Deal Addict
User avatar
Jan 11, 2020
3966 posts
3268 upvotes
Torontois @ 宇宙中心
tsuda wrote: Nice thread, good discussions.

Any reason ZMMK is not listed here? I bought a bunch for my RRSP at Wealthsimple last week.

BMO is already a major bank so risk should be better? Also I found a loophole that RBC blocks CASH, CSAV, PSA, etc, but it does not block ZMMK ETF.
Thanks, yield and MER look decent, could potentially be the most expensive, but it makes up for that in yield and accessibility.

https://www.bmogam.com/ca-en/advisors/i ... ries-zmmk/

This is a different class, but I'll add them anyway. How is CMR looking through your broker blacklist? That's iShare's equivalent.

https://wealthawesome.com/money-market-etfs-canada/

Thread summary updated
Images
  • ZMMK.PNG
Last edited by ADenariusSaved on Jan 17th, 2023 3:38 pm, edited 2 times in total.
Member
Aug 9, 2007
499 posts
199 upvotes
Good point, just checked CMR is not blocked at RBC Direct Invest, so probably you're right it's based on class whether it's competitive to HISA.
Thanks!
ADenariusSaved wrote: Thanks, yield and MER look decent, could potentially be the most expensive, but it makes up for that in yield and accessibility.

https://www.bmogam.com/ca-en/advisors/i ... ries-zmmk/

This is a different class, but I'll add them anyway. How is CMR looking through your broker blacklist? That's iShare's equivalent.

https://wealthawesome.com/money-market-etfs-canada/
[OP]
Deal Addict
User avatar
Jan 11, 2020
3966 posts
3268 upvotes
Torontois @ 宇宙中心
tsuda wrote: Good point, just checked CMR is not blocked at RBC Direct Invest, so probably you're right it's based on class whether it's competitive to HISA.
Thanks!
I'll check my TDDI broker. BMO check is probably irrelevant/un-necessary for ZMMK.

Confirmed, working for TD...
Images
  • TD ZMMK.PNG
  • TD CMR.PNG
[OP]
Deal Addict
User avatar
Jan 11, 2020
3966 posts
3268 upvotes
Torontois @ 宇宙中心
tsuda wrote: Also, note on https://www.blackrock.com/ca/investors/ ... market-etf#/

Effective January 12, 2023, the management fee of the Fund was reduced from 0.25% to 0.12%.
Updated in remarks. MER still stands at some ridiculous value, but Management fee pretty good at 0.12%. Sometimes criminal records / MER are useful.

Top

Thread Information

There are currently 8 users viewing this thread. (0 members and 8 guests)