Guaranteed Income Supplement
The Guaranteed Income Supplement (GIS) provides a monthly non-taxable benefit to Old Age Security (OAS) recipients who have a low income and are living in Canada. To be eligible for the GIS benefit, you must be a legal resident of Canada and be receiving the Old Age Security pension. It is an income tested benefit, meaning that your annual income (combined income for couples) from the previous year is used to determine eligibility. The Service Canada website should be consulted to determine the maximum annual income level.
What is considered to be income?
Because GIS is a poverty reduction measure for seniors, it quickly decreases as other income becomes available.
When applying for the GIS benefit, you, and in the case of a couple, you and your spouse or common-law partner, must report the following income:
- Canada Pension Plan (CPP) or Québec Pension Plan (QPP) benefits. CPP death benefits are not included
- other pension income, such as private pension income, superannuation, Registered Retirement Income Fund (RRIF) withdrawals and foreign pension income
- Registered Retirement Savings Plans (RRSPs) that you cashed during the year
- Employment Insurance benefits (includes Workers' Compensation benefits)
- interest and other investment income
- any capital gains or dividends
- income from any rental properties
- any employment income above $3500
- income from other sources such as workers' compensation payments, alimony, etc.
Applying for the Guaranteed Income Supplement
You must apply in writing for the Guaranteed Income Supplement using the Guaranteed Income Supplement or Statement of Income for the Allowance or Allowance for the Survivor application form (ISP-3025). You can also get an application form by calling Service Canada 1 800 277-9914.
The type of documents you are required to provide will depend on your marital status, the type of application you are making, and whether you are applying for the first time.
The application kit will describe what documents, if any, you need to provide. If you are married may be asked to provide a marriage certificate. If you are living with a common-law partner (same sex or opposite sex), you may be asked to complete and sign a "statutory declaration" and provide other supporting documentation.
Continuity of your benefits
The Guaranteed Income Supplement is based on your annual income, or the combined annual income of you and your spouse or common-law partner and that annual income can change from year to year. GIS will be automatically renewed simply by filing an income tax return by April 30. While GIS for any payment year (July to June) is normally based on income from the previous calendar year, there is a provision for basing it on an estimate of your current income if you have had a loss or reduction in a regularly recurring income such as employment earnings, pension, EI etc.
If you do not file a tax return or if more information is needed, you will receive a renewal application form in the mail. If you receive a renewal form, you must complete and return it as soon as you have all the necessary income information, even if you file a tax return.
Each July, you will receive a letter that tells you the new amount of your monthly payment.
If you do not re-apply for the GIS benefit in the spring, or if your income is now too high to qualify for it, you will only get the basic Old Age Security pension starting in July of that year.
Your GIS payment will also be stopped if you leave Canada for more than six consecutive months.
Benefit payment amounts
The GIS benefit payment amounts are reviewed quarterly and are indexed to the Consumer Price Index The Service Canada webpage is your best resource to determine expected benefit payment amounts.
Benefits received from the Old Age Security program, including the Guaranteed Income Supplement and the Allowance, are reported on your T4A(OAS) tax slip. It is reported as income, but it is deducted later on your tax return so does is not included in Taxable Income.
The GIS benefit is based on income not assets. It's possible to have substantial assets and still collect a GIS benefit.
Each dollar of income reduces your GIS benefit by 50 cents. There may be a provincial benefit as well. In Alberta, each dollar of income reduces your Alberta Seniors Benefit by 18 cents for a total of 68 cents. Even if you pay no income tax, your marginal "tax" rate is 68%. And there are income-based medical benefits as well.
If you think you will qualify for GIS, there are several things you can do to increase the size of the benefit. You have to decide, based on your individual circumstances, which, if any, of the suggestions to implement.
Where should your savings be? The following list is from best to worst:
- Income earned within a Tax-Free Savings Account (TFSA) and any withdrawals from a TFSA do not affect your benefit
- Taxable account. Income is taxable and reduces your benefit
- RRSP or other retirement account. Total value is taxable and reduces your benefit when withdrawn
Every dollar of investment income reduces your benefit. But some types of income reduce it by more than others. This is because each type is added to Net Income on your tax return differently. What type of investment income do you want? The following list is from best to worst:
- Capital gains
- Payments which contain return of capital – REITs, prescribed annuities, etc.
- Foreign income with foreign tax withheld
- Canadian dividend income
The best investment is to buy the next Google in your TFSA and collect GIS while it multiplies 100 fold. Not very realistic for most people. Once your savings exceed the TFSA maximum, most of your investment income will be clawed back by reduced benefits.
One way to eliminate the clawback is to own your own home. The home might increase in value. And maintenance expenses should be less than ever increasing rent.
You can start your GIS planning a few years before you start collecting benefits.
If possible, you can consider collecting CPP early.
If you have a small RRSP, you should evaluate if it would be better to cash it in over a year or two before you reach age of eligibility for GIS.
If you have investments with unrealized capital gains, you could sell them. Since there is no superficial gain, you can buy them back immediately.
After you become eligible for GIS, you should plan to avoid having your income just above the cutoff every year. So you never collect any benefits. It would be better to maximize your income one year followed by no benefits. And then have a few years of lower income and collect benefits.
If you still have a RRSP or RRIF after you are eligible for GIS, you could cash it in over a few years. Deposit the proceeds in your TFSA. Or, if you want to convert your RRSP into an annuity, it may be better to collapse the RRSP and buy a prescribed annuity with the non-registered money. Only the interest part of the prescribed annuity will reduce your GIS benefit.
Provincial and territorial benefits
If you qualify for GIS, you may qualify for provincial benefits too.
- British Columbia
- New Brunswick
- Nova Scotia: no top-up?
- PEI: no top-up?
- Québec: no top-up?
- Guaranteed Income Supplement - Service Canada, viewed January 8, 2014.
- Sources of income and deductions - Service Canada, viewed January 8, 2014.
- Service Canada Forms - List of Forms, viewed January 10, 2014.
- Old Age Security payment amounts - Service Canada, viewed January 8, 2014.
- What you need to know while receiving the Old Age Security pension - Service Canada, viewed January 8, 2014.
- T4A(OAS), Statement of Old Age Security, viewed January 8, 2014.
- Line 146 - Net federal supplements, viewed January 8, 2014.
- TaxTips.ca - Guaranteed income supplement (GIS), viewed January 8, 2014.
- Line 260 - Taxable income, viewed January 8, 2014.
- Canada Revenue Agency, Impact on your government benefits and credits, viewed January 9, 2014.
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