With the federal election less than a week away on October 19, 2015, Tax-Free Savings Accounts (TFSAs) are a hot topic with voters. We ran a social poll over the past couple of weeks on what financial federal issue people felt was most important and surprise, surprise, TFSAs topped the list. To help voters make up their mind on election day, here are the stances of each of the federal parties on TFSAs.
Conservatives – Higher Contribution Limits
The Conservatives announced in the spring of 2015 they were increasing the annual TFSA contribution limit to $10,000 from $5,500 effective immediately. Anyone who had contributed $5,500 in 2015 could top up their TFSA with a $4,500 contribution. The Tories are committed to maintaining the $10,000 annual contribution limit should they be re-elected, and are hoping to appeal to the middle class by portraying TFSAs as an important savings tool for all Canadians.
“Some are saving money to buy their first home, or to start their first business. Some are saving to put their children through college or university,” said Federal Finance Minister Joe Oliver. “Others are putting away extra income to make their hard-earned retirement more comfortable and enjoyable.”
When it comes to TFSA withdrawals, the Tories said it wouldn’t be counted towards means-tested benefits like Old Age Security (OAS) and Guaranteed Income Supplement (GIS). As for a lifetime limit on TFSA contributions, the Tories don’t have an official party stance, but it seems unlikely to come from them since they introduced the TFSA in 2009.
Liberals – A Roll-Back on Room
The Liberals have said they will cancel the $10,00 annual contribution limit increase and roll it back to $5,000 should they be elected. The Grits aren’t against the TFSA, but see the $10,000 a year contribution limit as something that mostly helps well-off Canadians.
“The TFSA itself, up to $5,000, is an encouragement to people to save,” said Liberal Leader Justin Trudeau,” but the reality is there’s not a lot of people who, at the end of the year, have $10,000 laying around that they can invest.”
The Liberals have a similar stance to the Tories on TFSA withdrawals. The Grits wouldn’t change the rules when it comes to counting TFSA withdrawals as income. The Grits have almost promised not to impose a lifetime limit on TFSA contributions.
NDP – Not Clear on Limits
The NDP has a similar stance as the Liberals. The New Democrats would roll back the $10,00 annual contribution limit increase to $5,000 should they form government. Similar to Liberal Leader Justin Trudeau, NDP Leader Thomas Mulcair sees the TFSA as a saving vehicle for the rich.
NDP leader Thomas Mulcair said an enhanced TFSA is “great if you’re having trouble making your payments on your second BMW, but it does nothing for the middle class that is actually earning less than today than it was 30 years ago.”
The NDP were less clear on whether they would count TFSA withdrawals as income. Currently, it’s possible for some high net worth seniors to game the tax system and structure their investment portfolio so they could collect GIS. The NDP is looking at closing this loophole. The NDP is also vague on whether they would impose a lifetime limit on TFSA contribution limits.