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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: How is the "group RRSP amount" calculated?
Position: Confirmed example submitted.
Reasons: Subsection 204.2(1.3).
June 19, 2002
HEADQUARTERS HEADQUARTERS
Individual Returns and Payments Income Tax Rulings
Processing Directorate Directorate
G. Kauppinen
Attention: Pierre Beaudry
Pensions & Trusts Section
2002-014064
Calculation of Group Registered Retirement Savings Plan Amount ("GA")
This is in reply to your e-mail dated May 14, 2002 regarding the calculation of the GA.
Your queries
You state that the GA is supposed to ensure that a taxpayer who makes the required contribution under a group RRSP, based on current-year earnings, and who would otherwise be subject to the 1% Part X.1 tax in the year on some or all of those contributions, will not be subject to the tax on those contributions in that year provided they do not exceed the RRSP dollar limit for the following year.
You provided an example and asked us to confirm your calculation of the GA. You also asked for our views on whether the GA should shelter mandatory group RRSP contributions from Part X.1 tax in all situations.
The facts of the example are as follows:
- calculation is for the 1998 tax year;
- unused RRSP deduction room at the end of 1997 is $2,873;
- new RRSP deduction room for 1998 is $0;
- the taxpayer's mandatory group RRSP contributions for 1998 amounted to $1,258;
- in addition to making group RRSP contributions, the taxpayer contributed $2,873 to his RRSPs in 1998;
- the taxpayer had unused RRSP contributions of $7,567 at the beginning of the year;
- the taxpayer does not have a transitional amount; and
- the taxpayer does not have a pension adjustment reversal (PAR) for 1998.
You calculated a GA of $0 as follows:
The lesser of a) $0 and b) $6,825
a) the lesser of i) $1,258 and ii) $0
i) the lesser of the qualifying group RRSP contributions paid by the
taxpayer in the year up to the time, if they are included in determining the taxpayer's undeducted premiums at the time ($1,258) and the RRSP dollar limit for the following year ($13,500)
ii) the amount determined by the formula F - (G - K) or
[$1,258 - ($2,873 - 0)]
where,
F = the lesser of the qualifying group RRSP contributions paid by the
taxpayer in the year up to the time if they are included in
determining the taxpayer's undeducted premiums at the time and
the RRSP dollar limit for the following year ($1,258 and $13,500)
G = the sum of the taxpayer's unused RRSP deduction room at the end
of the preceding year, the taxpayer's new room for the year
without regard to any net PSPA, and the taxpayer's PAR for the
year ($2,873 + $0 + $0)
K = the taxpayer's GA at the end of the preceding year ($0)
The following is our verification of your calculation by cross-reference to the provisions of the Act (we have inserted the numbers from your numerical example in bold type):
Subsection 204.2(1.3) defines "group RRSP amount" to be the lesser of (a) and (b) where:
A (a) is the lesser of the value of F [$1,258] and the amount determined by the formula
F[$1,258] - (G[$2,873] - K[$0]) = $0
where
F is the lesser of
(i) the total of all amounts each of which is a qualifying group RRSP premium paid by the individual, to the extent that the premium is included in determining the value of I in subsection (1.2) in respect of the individual at that time[$1,258], and
Clause I of subsection 204.2(1.2) reads as follows:
I is the total of all amounts each of which is
(a) a premium (within the meaning assigned by subsection 146(1)) paid by the individual in the year and before that time under a registered retirement savings plan under which the individual or the individual's spouse or common-law partner was the annuitant (within the meaning assigned by subsection 146(1)) at the time the premium was paid [$1,258 + $2,873], other than
(i) an amount paid to the plan in the first 60 days of the year and deducted in computing the individual's income for the immediately preceding taxation year [$0],
(ii) an amount paid to the plan in the year and deducted under paragraph 60(j), (j.1), (j.2) or (l) in computing the individual's income for the year or the immediately preceding taxation year[$0],
(iii) an amount transferred to the plan on behalf of the individual in accordance with any of subsections 146(16), 147(19) and 147.3(1) and (4) to (7) or in circumstances to which subsection 146(21) applies[$0],
(iv) an amount deductible under subsection 146(6.1) in computing the individual's income for the year or a preceding taxation year[$0], or
(v) where the individual is a non-resident person, an amount that would, if the individual were resident in Canada throughout the year and the immediately preceding taxation year, be deductible under paragraph 60(j), (j.1), (j.2) or (l) in computing the individual's income for the year or the immediately preceding taxation year[$0], or
(vi) an amount paid to the plan in the year that is not deductible in computing the individual's income for the year because of subparagraph 146(5)(a)(iv.1) or (5.1)(a)(iv)[$0], or
(b) a gift made in the year and before that time to a registered retirement savings plan under which the individual is the annuitant (within the meaning assigned by subsection 146(1)), other than a gift made thereto by the individual's spouse or common-law partner[$0].
(ii) the RRSP dollar limit for the following taxation year [$13,500],
G is the amount that would be determined under paragraph (1.1)(b) in respect of the individual at that time if the values of C, D and E in that paragraph were nil, and
Without C, D and E, paragraph (b) of subsection 204.2(1.1 )reads as follows: A
(b) the amount determined by the formula
A[$2,873] + B[$0-($0+$0)] + R[$0] = $2,873
where
A is the individual's unused RRSP deduction room at the end of the preceding taxation year,
B is the amount, if any, by which
(i) the lesser of the RRSP dollar limit for the year and 18% of the individual's earned income (as defined in subsection 146(1)) for the preceding taxation year
exceeds the total of all amounts each of which is
(ii) the individual's pension adjustment for the preceding taxation year in respect of an employer, or
(iii) a prescribed amount in respect of the individual for the year,
R is the individual's total pension adjustment reversal for the year.
K is
(i) where the year is the 1996 taxation year, the amount, if any, by which the amount of the individual's undeducted RRSP premiums at the beginning of the year exceeds the individual's cumulative excess amount in respect of registered retirement savings plans at the end of the 1995 taxation year[$0], and
(ii) in any other case, the group RRSP amount in respect of the individual at the end of the preceding taxation year[assumed to be nil], and
A
(b) the amount that would be the individual's cumulative excess amount in respect of registered retirement savings plans at that time if the value of D in paragraph (1.1)(b) were nil.
We have not verified (b) since the result in (a) is $0 and the results of these calculations cannot be negative.
Based on the above calculations, in our view, the GA will not shelter mandatory group RRSP contributions from Part X.1 tax in all situations. This is supported by the following statement in the March 28, 1996 Technical Notes that accompanied the introduction of the GA under subsection 204.2(1.3) to the effect that "the purpose of this amount is to ensure that, within limits, non-discretionary contributions can be made to a group RRSP on the basis of current year earnings without being subject to penalty tax."
We trust the foregoing is of assistance. If there are further questions, please contact Gord Kauppinen at 957-8971.
Roberta Albert, CA
Manager
Deferred Income Plans Section
Income Tax Rulings Directorate
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