Tax Free Savings Account (TFSA)

In the 2008 Federal Budget, the government introduced a new tax free vehicle which allows individuals to save up to $5,000 per year. This new account will come into effect in January 2009. DUCA will be offering this new account as either a savings account, term deposit or Mutual Fund product. Below are some highlights that will characterize this new type of account:

• Open to Canadian residents only who are 18 years or older with a valid Social Insurance number;
• The annual limit is $5,000. Any unused contribution room is carried over to the following year;
• Unlike a Registered Retirement Savings Plan, only the interest earned is sheltered from tax. The contribution itself is not;
• Withdrawals can be made from your TFSA at any time and for any reason. In addition, the amount of your withdrawal is added to your contribution limit;
• In the case of couples, both for married and common-law relationships, each person canhold a TFSA and individuals are allowed to contribute to their spouse's TFSA without the income attribution rules applying.
• Assets in a TFSA can be transferred tax free to the surviving spouse on death.

More details about the benefits and features of this product will be published as the information becomes available through the government.

BDO Dunwoody, our auditors, published a good article on this new investment vehicle in their February 2008 edition of the BDO Tax Factor.