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RCA Income is Eligible For Pension Income Splitting 

Canadian Tax Adviser

 

October 01, 2013

 

A recent CRA technical interpretation (TI) serves as a good reminder that amounts received out of a retirement compensation arrangement (RCA) are generally eligible for pension income splitting, effective for 2013 and subsequent taxation years.

Legislative background
The Act allows a taxpayer, in certain circumstances, to split eligible pension income with the taxpayer's spouse or common-law partner. Prior to 2013, the definition of "eligible pension income" in subsection 60.03 of the Act included life annuity payments out of a registered pension plan (RPP), but did not include payments out of an RCA. Thus, payments out of a RCA were not eligible for pension income splitting purposes.

 

RCA amounts become eligible for pension income splitting
Subsection 60.03 in the definition of "eligible pension income" is amended to include amounts received out of an RCA, subject to certain conditions, effective for 2013 and subsequent taxation years. The amendment was included in Bill C-45 which contained certain 2012 federal budget measures.

 

In the TI, the CRA states that for the RCA payments to be eligible for pension income splitting, the following general conditions must be met:

 

  • The taxpayer must be at least 65 years of age

  • The RCA payments must be in the form of life annuity payments and be supplemental to a pension received out of a RPP, and

  • The RCA payments to be split cannot exceed a limit specified in the Act ($94,383 for 2013), minus the taxpayer's other eligible pension income.

For more information, contact your KPMG adviser.

 

 

 

 

 

 

Information is current to October 01, 2013. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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