Understanding the OAS Clawback

Seniors don’t take kindly to the clawback of their OAS (Old Age Security) especially in these inflationary times, but this can happen, especially if there was an unusual receipt of income during the past calendar year.  Here’s what you need to know to explain the consequences for 2025 and 2026:

The April 2022 federal budget, introduced a Labour Mobility Deduction for skilled tradespeople and apprentices who need to temporarily relocate for work. It’s important to advise eligible taxpayers about this, so they keep receipts to back up the claims retroactively to January 1, 2022.   

In Canada, as in many advanced economies, the age group that grew the fastest in recent years was those aged 65 and over. That’s not pandemic-related, it’s simply the aging of the baby boomers. Those over 65 tend to have the lowest labour force participation rate, and that has been pulling down the growth of Canada’s labour force in recent years, according to recent remarks by Tiff Macklem, Governor of the Bank of Canada. In addition, many small businesses in Canada are owned by Baby Boomers.  There’s a potential problem if Baby Boomers own a business and plan to use the money they’ve invested to pay for their retirement years.

Nothing like a positive headline to grab your attention.  The Financial Post article goes on to say: It’s been a miserable year for the global economy. And things could get worse with a mild recession potentially on the horizon. In an extreme downside scenario, this could wipe out US$5 trillion in global output, according to Bloomberg Economics. So, what to do?

There is no doubt your clients are interested in knowing how to inflation proof and recession-proof their wealth and navigate successfully through emerging risks from the CRA. To accomplish the former, advisors must have broader knowledge on upcoming tax changes and how astute investment planning in a very new economic environment can help clients maximize after-tax income and reduce capital erosion.

Our economy is shrinking and we can’t avoid that.  This was the hard truth Canada’s Finance Minister delivered in her November 3, 2022 Fall Economic Report and Mini-budget, which was followed the next day with Explanatory Notes to a 169-page Ways and Means Motion that amends the Income Tax Act for new measures.  A brief synopsis of the economic issues follows.  Be sure to request a copy of the Knowledge Bureau Special Report; also enrol now to attend the Nov. 16 Annual Year End Tax Update for in-depth details for professional advisors. 

Taxes and source deductions will continue to rise despite last week’s grim economic forecasts from the Finance Department. Here is what’s in store based on forecasting in the Fall Economic Report, released November 3.