Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Can banked overtime pay be transferred to an RRSP without withholdings?
Position: Yes
Reasons: This is provided for in subsection 100(3) of the Regulations.
XXXXXXXXXX 2001-006668
S. E. Thomson
March 8, 2001
Dear XXXXXXXXXX:
Re: Overtime pay transferred to an RRSP
This is in reply to your undated letter to the Canada Customs and Revenue Agency (the "CCRA") received by the Ottawa Technology Centre on January 11, 2001 in which you ask if banked overtime pay can be transferred to an employee's RRSP without withholdings.
The opinion you seek appears to relate to specific proposed transactions and, therefore, we bring to your attention to Information Circular 70-6R4 Advance Income Tax Rulings, dated January 29, 2001, available on our website at www.ccra-adrc.gc.ca. Confirmation of tax consequences with respect to proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. However, we can provide you with the following general comments, which may or may not relate to your situation. As such, these comments are not binding on the CCRA.
Subsection 100(3) of the Income Tax Regulations (the "Regulations") provides that where an employer deducts or withholds from a payment of remuneration to an employee an amount which is a premium under a registered retirement savings plan (an RRSP"), the balance remaining shall be deemed to be the amount of that payment of remuneration. In other words, where an employer directly transfers a portion of an employee's remuneration to the employee's RRSP, it can be done without income tax withholdings as normally would be required to be withheld under subsection 153(1) of the Income Tax Act. Note, however, that CPP and EI deductions are still required, if applicable.
Generally we consider a payment of banked overtime pay to be a payment of "remuneration", and therefore eligible for transfer to an RRSP without withholdings as provided above.
Further, we do not consider banked overtime pay to be a lump sum payment, a bonus or a retroactive payment as contemplated in subsection 100(3.2) of the Regulations, and accordingly, would not be subject to the $10,000 limit as currently provided in that subsection.
We trust that our comments have been helpful.
Yours truly,
Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
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