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Retirement Allowance
Limits
An
employer can pay and a retiring employee a retiring allowance or termination
payment (which the employer deducts as a business expense) and the employee can
rollover the amount paid to an RRSP on a tax-deferred basis. This means the
employee includes the amount received in income, but gets a deduction on their
tax return for the amount rolled over to the RRSP. Click HERE
for more information on tax planning. Click
HERE for the CRA document discussing retirement allowances. There
are limits on the amount you can transfer to your RRSP. The amount cannot exceed
the lesser of:
-
The
amount received
-
the
sum of $3,500 times the number of years before 1989 during which the
taxpayer was employed by the employer (the $3,500 is reduced to $2,000 where
the employer makes contributions to a pension fund or plan or a deferred
profit sharing plan where the amount is considered vested in the employee at
the time of payment of the retirement allowance) and $2,000 times the number of years
after 1988 and before 1996. No amount is eligible for employment after 1995.
Contact Keith Anderson CA
at (780) 447-5830 if you have
further questions, concerns, or the need for advice.
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