CRA indicates that an HBP balance is not reduced at the beginning of the year of a contribution repayment by the repayment amount until the repayment is made

As part of the rules for allowing an individual to participate in a home buyers’ plan (HBP) in more than one calendar year, individuals can have a fresh participation period in which they can make a further HBP withdrawal if they have contributed amounts to their RRSP that are designated to be non-deductible HBP repayments, so as to reduce their “HBP balance” to nil. In particular, in order for a withdrawal to qualify as a “regular eligible amount,” para. (i) of the definition thereof requires the individual’s HBP balance at the beginning of the withdrawal year be nil.

An individual, who separated in September 2021, withdrew from his HBP on January 20, 2022 in order to purchase a new qualifying home, and made an RRSP contribution of $5,000 in February 2022 to repay his HBP balance for the 2021 taxation year.

CRA indicated that although, once this contribution was made and the prescribed form filed, it would have reduced his HBP balance as at January 1 of that year, at the time of the withdrawal these conditions (re the contribution and filing) had not yet been satisfied, so that the requirement for a nil HBP balance was not satisfied. Hence, the withdrawal did not qualify.

Neal Armstrong. Summary of 7 October 2022 APFF Financial Strategies and Instruments Roundtable, Q.7 under s. 146.01(1) – regular eligible amount - para. (i).