Personal Finance

Spousal RRSP Contributions and Attribution

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  • May 17th, 2011 11:25 pm
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Deal Addict
Jul 23, 2009
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Spousal RRSP Contributions and Attribution

Yes, I have a question about everybody's favorite topic spousal RRSP attribution.

I have searched the forum, and did quite a bot of research, but still cannot figure out the answer to my question.

Through work I contribute monthly to a spousal RRSP. My wife doesn't work, and we could use the funds, so it seems obvious to try and pull these out into her name.

I have read that you should wait three years to withdraw to avoid attribution, and that contributions come out on a FIFO basis. However is is unclear to me if the fact that I would still be contributing to her RRSP monthly in the year of contribution (i.e. I pull out 2008's total contribution of $1,000 in 2011, but still contribute $200/mo to the spousal RRSP) will cause the 2008 contribution to be attributed back to me, even though I waited three years.

Can anyone clarify for me? The RRSP contribution is a taxable benefit to me, so its not like I can stop contributing.
11 replies
Deal Addict
User avatar
Apr 6, 2008
1613 posts
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Toronto
EvilMonkey25 wrote: Yes, I have a question about everybody's favorite topic spousal RRSP attribution.

I have searched the forum, and did quite a bot of research, but still cannot figure out the answer to my question.

Through work I contribute monthly to a spousal RRSP. My wife doesn't work, and we could use the funds, so it seems obvious to try and pull these out into her name.

I have read that you should wait three years to withdraw to avoid attribution, and that contributions come out on a FIFO basis. However is is unclear to me if the fact that I would still be contributing to her RRSP monthly in the year of contribution (i.e. I pull out 2008's total contribution of $1,000 in 2011, but still contribute $200/mo to the spousal RRSP) will cause the 2008 contribution to be attributed back to me, even though I waited three years.

Can anyone clarify for me? The RRSP contribution is a taxable benefit to me, so its not like I can stop contributing.

The withdrawal would be attributed back to you. You will have to wait for 3rd year after the last contribution to your spousal RRSP.

Read from these links for clarification.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs ... l-eng.html

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs ... l-eng.html
Pramod Chopra
Mortgages and Investments
Jr. Member
Apr 1, 2010
103 posts
9 upvotes
GTA
It's not FIFO. Wonder dollar's explanation is on the mark. Also, It's three years from any spousal contribution to ANY spousal contribution. So, contributions made in 2011 can't be withdrawn without attribution in 2014 as you'd likely still be contributing after this year.
Member
Feb 25, 2009
300 posts
7 upvotes
Mirabel
Sweet Cheeks wrote: ... contributions made in 2011 can't be withdrawn without attribution in 2014 as you'd likely still be contributing after this year.

So if the spouse plans to withdraw early from spousal RRSP due to lowered income from extended mat leave, etc, is it adviseable to contribute to a separare spousal RRSP account every year? This would provide a clean delimitation, and prevent attribution back to the higher income contributing spouse?
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Apr 6, 2008
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Toronto
dcaron9999 wrote: So if the spouse plans to withdraw early from spousal RRSP due to lowered income from extended mat leave, etc, is it adviseable to contribute to a separare spousal RRSP account every year? This would provide a clean delimitation, and prevent attribution back to the higher income contributing spouse?
You wish and I wish too!! But it is not possible. If it was, every body would be doing the same thing.

You can have a number of accounts with as many institutions but CRA maintains only one account for you and all the contributions you make to various account would be combined in to one with CRA in one and hence this type of arrangement would not work. Just to clarify further, you can have 4 contributions receipts from 4 different lenders for your spousal account but when you file the tax return, you enter all these amount in schedule 7 and every thing gets combined as one total contribution for that particular year.

Hence, You can only start withdrawing from spousal RRSP only after the 3rd year from your last contribution if you do not wish the income to be attributed back to you.
Pramod Chopra
Mortgages and Investments
Member
Feb 25, 2009
300 posts
7 upvotes
Mirabel
Wonderdollar wrote: You wish and I wish too!! But it is not possible. If it was, every body would be doing the same thing. Hence, You can only start withdrawing from spousal RRSP only after the 3rd year from your last contribution if you do not wish the income to be attributed back to you.
This is what I intended, and perhaps it came out wrong ... I know I have to wait three years, what Im wondering is how to cleanly distingiush on contributions I made in year 1, from ongoing contributions, when I retrieve the "1st" year contribution.
Deal Addict
Jul 8, 2009
2028 posts
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Edmonton
dcaron9999 wrote: This is what I intended, and perhaps it came out wrong ... I know I have to wait three years, what Im wondering is how to cleanly distingiush on contributions I made in year 1, from ongoing contributions, when I retrieve the "1st" year contribution.

You can't retrieve first-year contributions. It's not first in, first out.
Member
Feb 25, 2009
300 posts
7 upvotes
Mirabel
Wing Nut wrote: You can't retrieve first-year contributions. It's not first in, first out.
Im sure I can contribute a lump sum to my lower-income spouse's RRSP on year 1.
Open a new RRSP spouse account on year 2, and contribute another lump sum.

Then on year 4, have my spouse pull from her year-1 RRSP, and not get attribution back to me ...
Same idea on year 5, when I pull the year-2 contribution ...

Does this make sense?
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Apr 6, 2008
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Toronto
dcaron9999 wrote: Im sure I can contribute a lump sum to my lower-income spouse's RRSP on year 1.
Open a new RRSP spouse account on year 2, and contribute another lump sum.

Then on year 4, have my spouse pull from her year-1 RRSP, and not get attribution back to me ...
Same idea on year 5, when I pull the year-2 contribution ...

Does this make sense?
No.!!

On year 5 you can take out all the contributions if you wish to without having them attributed back to you but not in the year 4 as you would have had a spousal contribution in year 2 which will play a spoil sport for you.
Pramod Chopra
Mortgages and Investments
Member
Feb 25, 2009
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Mirabel
Wonderdollar wrote: No.!! On year 5 you can take out all the contributions if you wish to without having them attributed back to you but not in the year 4 as you would have had a spousal contribution in year 2 which will play a spoil sport for you.
Even if these are two contributions occured in two separate RRSP spousal accounts?
If so, my only option is to contribute every three years then if I want to avoid the attribution back to me...

(I just picked this up from various sites ...)

Edit #1: " The “three-year rule” means that income attribution will apply if contributions were made to any Spousal RRSP:
(a) at any time during he calendar year of the withdrawal (2010), or
(b) during the two preceding calendar years (2008 and 2009). '

Edit #2: Attribution rules kick in when money is withdrawn from a spousal RRSP during the calendar year of the contribution, or in the following two years. The attribution rules follow a “last in, first out” technique, whereby the funds most recently contributed are considered to be taken out first."

Edit #3: "If your spouse withdraws from their spousal RSP within three calendar years of your last contribution to any spousal RSP, the withdrawal is treated as income on your personal tax return. "
Deal Addict
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Apr 6, 2008
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dcaron9999 wrote: Even if these are two contributions occured in two separate RRSP spousal accounts?
If so, my only option is to contribute every three years then if I want to avoid the attribution back to me...

(I just picked this up from various sites ...)

Edit #1: " The “three-year rule” means that income attribution will apply if contributions were made to any Spousal RRSP:
(a) at any time during he calendar year of the withdrawal (2010), or
(b) during the two preceding calendar years (2008 and 2009). '

Edit #2: Attribution rules kick in when money is withdrawn from a spousal RRSP during the calendar year of the contribution, or in the following two years. The attribution rules follow a “last in, first out” technique, whereby the funds most recently contributed are considered to be taken out first."

Edit #3: "If your spouse withdraws from their spousal RSP within three calendar years of your last contribution to any spousal RSP, the withdrawal is treated as income on your personal tax return. "

With all this information it should be quite clear now.

And as I mentioned earlier, any number of accounts you open, they all are considered one account for the purpose of CRA. I believe people have this mis conception that the bank where they have this account would be attributing this income to them and if they have account at the other institution the first bank would not know and would not attribute the income back to you. This is partly correct but the real test would be by the CRA as they combine every contribution to one account and even if the bank does not catch you, the CRA ultimately will.

So, the gist is that if you do not wish the attribution rules kicked in, withdraw money from spousal RRSP only after 2 full years have passed from the contribution year. So, if you contributed in 2008 any time to your spousal RRSP, you can withdraw only in 2011 or after without having the income attributed back to you.
Pramod Chopra
Mortgages and Investments
Jr. Member
Aug 2, 2006
156 posts
4 upvotes
A strategy to consider. Once you hit the 3 year mark withdraw from the spousal RRSP (assuming the spouse is still in a lower tax bracket) and re-invest into TFSA. That way you lock in the low tax rate and the funds continue to grow tax free. With TFSA room jumping by $5k a year (maybe $10k once the conservatives balance the budget) between each couple you should have a fair bit of contribution room by then.

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