Tax-efficient investing

Tax-efficient investing doesn't mean tax-free investing. It means that once an asset allocation is determined, it should be set up in a tax-efficient manner, while at the same time being mindful to not let the tax tail wag the dog. An asset's tax efficiency is affected by both its expected return and the tax rate on such return. Remember that taxes are one aspect of investing that you can control. While there is no "one rule fits all" concept, the strategies presented here are mostly intended to provide guidance to investors in the accumulation phase (saving for retirement).

Generally investors should take full advantage of registered (tax-sheltered) accounts before investing in non-registered accounts as this is the most tax efficient strategy. If you cannot fully tax shelter all of your investments, you need to be aware that Canadian tax laws treat various types of investment income differently. The goal of this article is to guide you on how you might reduce (or minimize) the taxes you pay by strategic placement of investments among various investment accounts. This is also know as "asset location". A word of caution, Canadian tax laws are sufficiently different from American tax laws that advice written for Americans is inapplicable or even wrong when Canadian investing is considered.

Prioritizing investments
Prioritizing investments is sometimes a challenge for investors who are able to place their investments in several different kinds of accounts. Investing in a prioritized order can maximize the tax efficiency of a portfolio (pay the minimum amount of taxes). It can also maximize matching funds from employers and government grants.

Tax treatment of different investments
There are three main types of investment income: interest, dividends, and capital gains, and these are taxed differently in non-registered accounts. Also, dividends are taxed differently depending on their provenance (Canadian versus foreign). Different types of investments generate different types of income:
 * Cash investments, such as savings accounts and money market funds, generate interest
 * Fixed income investments, such as bonds and guaranteed investment certificates (GICs), generate mostly interest (selling bonds before maturity can create capital gains or losses)
 * Equity investments such as common shares and preferred shares can generate dividends and capital gains (or losses)
 * Commodities create capital gains or losses

Interest and foreign dividends
Interest, foreign interest, foreign dividend income, and other investment income go on line 121 of your federal tax return. This income is taxed at your usual marginal rate, i.e. an extra dollar of interest income is typically equivalent to an extra dollar of employment income.

Canadian Dividends
Dividends received from Canadian corporations go on line 120. These dividends are taxed more lightly than interest and foreign dividends, due to the dividend tax credit (further explained below).

Capital gains
Capital gains are generated when a security is sold at a price higher than the adjusted cost base. Capital gains are reported on line 127 and also receive a different tax treatment. An inclusion rate, currently 50%, is applied to the capital gain before tax is calculated. In other words, a dollar of capital gains will be taxed at half the rate of a dollar of interest. Capital gains can be offset by capital losses.

Marginal tax rates
Putting it all together, the actual tax rates applicable to each income source vary by province or territory and with income level (see Tax rate calculators), but are generally in accordance with the following progression :


 * {| class="wikitable"

!Type !Examples Tax-efficient asset allocation places the highest taxable sources of income into non-taxable accounts whenever possible.
 * +Marginal Tax Rates
 * Highest
 * Interest income, RRSP withdrawals, dividends or distributions from non-Canadian sources
 * Intermediate
 * Capital gains, Canadian eligible dividends in high tax brackets
 * Lowest
 * Canadian eligible dividends in low tax brackets
 * Deferred
 * Return of capital that reduces the adjusted cost base (ACB) (eventually payable at capital gains rates)
 * }
 * Deferred
 * Return of capital that reduces the adjusted cost base (ACB) (eventually payable at capital gains rates)
 * }
 * }
 * }

The dividend tax credit
Common share and preferred share dividends from most Canadian corporations are eligible for a dividend tax credit, which significantly reduces the tax rate in non-registered accounts, particularly in the lowest tax bracket. For this reason, such shares are preferably held in non-registered accounts (assuming all registered accounts are already full). After 2005, most dividends from public corporations are eligible, and thus known as eligible dividends, for the enhanced dividend tax credit, with dividends from Canadian controlled private corporations, known as non-eligible dividends, are subject to the regular dividend tax credit. You should also note that there are two parts to the dividend tax credit, the federal dividend tax credit (Line 425 on your federal tax return ) and a provincial or territorial tax credit.

Tax loss harvesting
If you sell a property or security on which you have a capital loss calculated using an adjusted cost base to determine your cost, you are allowed to deduct that loss from your capital gains, provided that you or a related entity does not buy and continue to hold the property or security for the 30 days preceding or 30 days following the sale. However, you can use those losses to reduce your taxes due by selling one security and immediately rebuying a similar but not identical security.

For example, suppose you hold an exchange-traded fund (ETF) such as the iShares S&P/TSX 60 Index ETF, which tracks 60 of the largest stocks in the TSX and trades on the Toronto Stock Exchange under the symbol XIU. Further suppose that you had suffered a large paper loss on that holding. You could sell your XIU position and immediately repurchase a similar dollar amount of XIC, which tracks a different stock index (the S&P®/TSX® Capped Composite Index) yet offers similar (but not identical) performance. You would have then captured the loss and could use it in the current tax year, while still maintaining a similar position so that you could benefit from future gains.

It should be specifically noted that, if a security is sold at a loss from a non-registered account and repurchased within 30 days in an Registered Retirement Savings Plan (RRSP), the tax credit from the loss will be disallowed and the loss deemed to be zero.

Charitable donations
It is possible to actually zero the taxes due on a security on which one has a significant capital gain by donating a portion of the shares to charity. A calculator that estimates the portion to be donated can be found here.

Bond taxation
Conventional bonds that trade at a premium above their face value ("premium bonds") should not be held in a non-registered account because of unfavourable taxation. In addition, strip bonds and Real Return Bonds (RRBs) will require payment of taxes on returns accrued but not paid as they are treated as prescribed debt obligations as described in paragraph 7000 of the Income Tax Act.

Prescribed debt obligations
Unless held in a registered account, the tax treatment and record keeping requirements of strip bonds and Real Return Bonds is complex.

The Canada Customs and Revenue Agency has indicated that purchasers of strip bonds will be treated as having purchased a “prescribed debt obligation” within the meaning of the Regulations. Accordingly, a purchaser will be required to include in income in each year a notional amount of interest, notwithstanding that no interest will be paid or received in the year.

Accrued Inﬂation Compensation for a series of Real Retun Bonds must be included in a your income in the manner described under "Canadian Federal Income Tax Considerations", notwithstanding that payment in respect thereof will not be made until Maturity for such series.

Registered accounts
It is usually recommended that fully taxed securities (i.e., those that pay interest) be placed inside registered accounts, in particular RRSPs. This conventional wisdom has been sometimes challenged in recent years due to low interest rates (e.g., ).

Nevertheless, at the very least, securities in which interest is deemed but not received such as compounding Guaranteed Investment Certificates, strip bonds, and RRBs should be held in registered accounts, rather than in a non-registered account.

RRSPs, RRIFs, LIRAs, RDSPs, and LIFs
These accounts all share the characteristic that any withdrawals are taxed as ordinary income.

RESPs
Registered Education Savings Plans (RESP) withdrawals are partially taxed in the hands of the student, who may pay little or no tax by using the basic personal exemption and the tuition credits. The original capital contributed to the plan was from after-tax savings, so its withdrawal is tax free, provided the beneficiary has started post-secondary education.

TFSAs
Tax-Free Savings Accounts (TFSA) differ from other registered investments in that no tax is due on withdrawn funds. They are compared with RRSPs here.

As discussed in the following section, foreign tax deducted at source (such as from most non-Canadian investments) is not recoverable in a TFSA. Although the dividend tax credit on Canadian securities is also lost, this loss is generally moot (except for those with very low incomes who have a negative income tax rate on dividends) since no tax is payable on TFSA holdings in any case.

Non-registered accounts
Upon death of a taxpayer, all non-registered assets are considered sold at fair market value (i.e. at the current price). This is also known as a deemed disposition and it often creates net capital gains (i.e. capital gains will likely be larger than any offsetting losses). Tax on these net capital gains must be paid on the final tax return of the deceased.

However, the appreciated non-registered assets can be transferred to a surviving spouse at cost, a.k.a. a spousal rollover, if this election is made. The securities have to be transferred in kind. This allows the capital gain taxes to be reported to a later date, i.e. when the last spouse dies or finally sells the assets. Because of this provision, it may be advantageous to place in non-registered accounts investments that the surviving spouse, or his/her financial advisor, will be comfortable holding after the death of the first spouse. This will allow the spousal rollover option to be actually utilized. If instead the appreciated securities are sold, there will be no choice but to pay taxes on capital gains immediately.

Registered accounts
Funds from registered accounts, such as RRSPs, RRIFs and TFSAs, can also be transferred to a surviving spouse in a tax-efficient manner. In these cases, the transfers can be made in kind or in cash, so there is no need to worry about whether the surviving spouse will be comfortable to continue holding specific investments.

RRSPs and RRIFs
Upon death, for tax purposes, the general rule is that your RRSP or RIFF is considered to have been liquidated at fair market value, and this amount will be included as income on your final tax return. However, RRSPs and RRIFs can be transferred ("rolled-over") to a surviving spouse or common-law partner. This defers taxation to a later date, when the surviving spouses makes withdrawals or dies. Note that RRSP rollovers are not always the best option.

TFSAs
After death, TFSA assets can be transferred to your spouse or estate tax-free. So as is the case for RRSPs/RRIFs, for tax planning purposes, there is no need to worry about whether your surviving spouse (or estate) will be comfortable to continue holding specific investments.

What's the issue?
Canadian residents (who are not US citizens) may be subject to US estate tax if they die owning certain US assets, such as shares of US corporations, US real estate and US business assets. If you are a non-resident from the US point of view but have more than 60,000 USD worth of "U.S. situs property" upon death, your executor will have to file a US estate tax return (even if no tax ends up being payable).

The Canada-U.S. income tax convention ("treaty") provides some relief for Canadians, who benefit from an exemption similar to that available to US citizens and residents. . This means that under applicable legislation, Canadian residents will have a US estate tax liability only if their worldwide assets are valued at more than $11.7 million (as of May 2021). These amounts change regularly. A US estate tax return will still need to be filed though.

Filing the US estate tax return
This filing must be done by the executor within 9 months of death and typically requires professional help. It involves "disclosing detailed information about all worldwide assets of the decedant and providing their U.S.-dollar values (determined according to U.S. tax principles). The relevant IRS forms include 706-NA, 8833 and 8971.

Eliminating or lowering your liability
Canadian investors may be able to mitigate their US estate tax exposure by holding Canadian domiciled index funds and exchange-traded funds (ETFs) for their US equity exposure. This is applicable also to ETFs investing in international equities or emerging markets equities: if you buy them on US exchanges, you are probably increasing your US estate tax exposure, but if you buy them on Canadian exchanges, you are probably not.

Vanguard Canada's explanation is that "the investment product (such as an ETF) is generally opaque". So an ETF listed on a Canadian exchange "with an investment mandate based on U.S. stock indexes allows investment in the U.S. stock market without triggering U.S. federal estate tax because the investor is deemed to be investing in a Canadian situs asset -- the ETF -- rather than looking through to the location of the assets in the underlying portfolio of the ETF".

Foreign withholding taxes
Foreign withholding taxes are a somewhat complex and confusing topic. In the context of asset location decisions, keep in mind that Canadian taxes are likely to have a much more significant impact on long-term after-tax investment returns than foreign withholding taxes. Therefore, withholding taxes may be more a consideration for product choices than for asset location decisions.

Some foreign countries apply a withholding tax to payments, such as dividends or interest, paid to non-residents. The amount of tax withheld, if any, is specified by the foreign country’s tax laws. However, Canada has tax treaties in place with numerous countries that may supersede those foreign tax laws. For example, US tax legislation generally requires a 30% withholding on US-sourced dividends paid to “non-resident aliens”, but the Canada-US tax treaty reduces that withholding to 15% for Canadian residents.

Foreign tax paid may be recoverable through a foreign tax credit claimed against the normal Canadian tax payable, but only to a limit of 15%. If the withholding tax were 30%, only half of that can be claimed as a foreign tax credit, with the excess being deductible on line 232 of the tax return.

If the foreign income would not ordinarily be taxable in Canada, such as foreign dividends earned within a registered plan, the tax is not recoverable and is forever lost. Again, tax treaties may in some cases supercede this general rule. Under the Canada-US tax treaty, dividends and interest paid into an RRSP or RRIF from a US source are exempt from US withholding. In order to qualify for these US tax exemptions or reductions, Form W-8BEN (pdf) must be filled out and filed with your brokerage. Note that the exemption does not extend to RESPs or TFSAs, thus high-yielding US stocks or US-based ETFs are better held elsewhere than in an RESP or TFSA. Also note that using a Canadian based mutual fund to invest in US stocks would result in US tax being withheld, even in an RRSP or RRIF - in such a case the foreign tax would not be recoverable for a registered account, but would be for a taxable account. For a Canadian mutual fund, the capital gains inclusion rate applies on distributions from foreign stocks. For US-based ETFs, capital gain distributions are taxed as income.

There is some debate about whether to hold US-based ETFs versus Canadian-based ETFs that invest in the US. In both instances, the withholding tax can be claimed against income in a taxable account. A U.S. based ETF would also be exempt from withholding tax in a registered account, but not a Canadian-domiciled ETF investing in the US.

When investing outside North America, the following considerations apply:
 * a Canadian domiciled mutual fund will have paid withholding taxes to foreign governments, on the income it has received from foreign securities. The mutual fund will distribute the net amount; if the unitholders have the fund in a non-registered account, they will receive a tax slip including the foreign tax paid by the fund, which in most cases is fully recoverable from the CRA;
 * a non-Canadian mutual fund (e.g., U.S. based ETF) investing in EAFE securities will have also paid withholding taxes to foreign governments, on the income it received from foreign securities. Such a mutual fund / ETF will not issue information to a Canadian resident about foreign tax credits. In addition, there will be another level of tax withheld by the fund / ETF's country of residence (e.g., USA); as mentioned in the above paragraph, this latter tax is not applicable if the US based fund is held in a retirement account (but does apply to a TFSA), and this second level of tax may be recoverable from the CRA for a non-registered account.

The consequence of these issues is that US-based ETFs that hold non-US stocks have an additional irrecoverable tax burden that raises the effective management expense ratio (MER), and may negate any nominal MER advantage. Morevover, Canadian-based ETFs that are wraps of US based ETFs will also have this irrecoverable foreign tax burden. Are you confused? The external links below should help. Also, Justin Bender has calculated the "total cost" of several Canadian-domiciled ETFs investing in international stocks, showing the effect of the two layers of withholding taxes.

Another consideration about foreign withholding taxes deals with holding foreign securities in an incorporated Canadian controlled private corporation (CCPC). Although the withholding tax is theoretically recoverable from the regular tax payable by the corporation, the intricacies of CCPC taxation lead, in most cases, to about three-quarters of the foreign tax credit being lost, thus any high-paying foreign securities that attract foreign withholding taxes are better held outside the corporation.

Is asset location worth it?
Relative to holding the same asset mix across all accounts, asset location strategies have been estimated to potentially add on the order of 0.07-0.3% per year in after-tax returns, depending on the methodology of the study. Seven basis points on a $50k portfolio is $35 a year in potential extra returns, which for most people, will clearly not be worth the added complexity. However if the investor uses the more optimistic 30 basis points estimate on a $500k portfolio, the $1.5k a year in potential extra return might justify the effort. Note that given the uncertainties involved in obtaining these estimates, there is no guarantee that the actual extra after-tax return, relative to holding the same asset mix across all accounts, will actually be positive. One critic of asset location strategies argues that calculations in which such strategies come out ahead typically ignore downside risk.

Holding the same asset allocation accross all accounts, perhaps using asset allocation ETFs, is also a lot simpler to execute:

For those who want to try the hard way, read on!

Tax-efficient asset allocation
Two asset location tables are presented in this section. The first table has more detail on fixed income investments and different types of Canadian equities, and was compiled before TFSAs became a factor, so "Registered account" mostly means RRSP or RRIF. It is taken from Shakespeare's Primer (with permission of the author).


 * {| class="wikitable"

! Asset class ! Non-registered account ! Registered account
 * +Tax-Efficient Asset Allocation
 * Canadian Common shares or ETFs ||Usually best||OK
 * Canadian Preferred shares ||Yes ||No
 * Tax-Deferred Canadian REITs/Trusts ||OK||If necessary (e.g. for RRIF)
 * Income Trusts with Low Tax Deferral ||If necessary ||Yes
 * Canadian Stripped Bond ||No ||Yes
 * Canadian nominal Bond ||If necessary ||Yes
 * Canadian Real Return Bonds ||No ||Yes
 * US/Foreign Equity (high-dividend, low-growth) ||If necessary ||Yes
 * US/Foreign Equity (low-dividend, high-growth) ||Usually best ||OK
 * US/Foreign Normal Bond ||If necessary ||Yes
 * US/Foreign Stripped Bond ||No ||Yes
 * US TIPS Bond ||No ||Yes
 * }
 * Canadian Real Return Bonds ||No ||Yes
 * US/Foreign Equity (high-dividend, low-growth) ||If necessary ||Yes
 * US/Foreign Equity (low-dividend, high-growth) ||Usually best ||OK
 * US/Foreign Normal Bond ||If necessary ||Yes
 * US/Foreign Stripped Bond ||No ||Yes
 * US TIPS Bond ||No ||Yes
 * }
 * US/Foreign Stripped Bond ||No ||Yes
 * US TIPS Bond ||No ||Yes
 * }
 * US TIPS Bond ||No ||Yes
 * }

The second table (simplified from ) distinguishes US stocks from international stocks, integrates TFSAs, but has less detail on different fixed income categories.

Building a tax-efficient portfolio
Once a portfolio design is decided upon, perhaps with the help of an investment policy statement (IPS), the investor will be tasked with placing the components in a tax-efficient manner. Some examples will be used to show the process.

RRSP versus non-registered
The first four examples assume that an investor can only invest in a RRSP (or RRIF) and a non-registered account. We are voluntarily ignoring TFSAs for these four examples.

The general approach is that the RRSP (or RRIF) is filled first in reducing order of tax rate, with what's left going to the non-registered account.

Example 1. The four-component portfolio
The first example will be based on a four-component index portfolio. The investor decides on an asset allocation of 40% Canadian bonds, 20% Canadian equities, 20% US equities, and 20% international equities. His investment room is 50% non-registered and 50% RRSP.

Since bonds are taxed at the highest marginal rate, all of the bond component is assigned to the RRSP, following the conventional wisdom. This leaves 10% of the portfolio as RRSP room. Since Canadian equities have a dividend tax credit and international equities have foreign tax withheld that can be credited against Canadian tax, one way to assign the remaining RRSP room is to fill it with 10% US equities, which are not taxed in an RRSP. His portfolio could therefore be as follows:


 * 40% Canadian bonds - all in RRSP
 * 20% US equities - split between RRSP (10%) and non-registered account (10%)
 * 20% international equities - all in non-registered account
 * 20% Canadian equities - all in non-registered account

Another solution would be to shelter the international equities first, since they have a higher current dividend yield than US equities, and therefore attract heavier Canadian taxes on foreign dividends in a non-registered account :


 * 40% Canadian bonds - all in RRSP
 * 20% international equities - split between RRSP (10%) and non-registered account (10%)
 * 20% US equities - all in non-registered account
 * 20% Canadian equities - all in non-registered account

One comment on proposals where all the bonds are in the RRSP is that because the government owns part of the RRSP (taxes will be due upon withdrawal), the pre-tax asset allocation and the after-tax allocations are not the same. Specifically here, the post-tax bond allocation would be less than 40%, since all bonds are in the RRSP. This extra risk may not be noticeable during the accumulation phase.

Example 2. Adding real estate investment trusts
In the second example, a four-component portfolio is modified by adding exposure to Canadian REITs, either for greater income or for portfolio diversification. The desired asset allocation is 40% Bonds, 20% US equities, 20% foreign equities, 15% Canadian equities (all of the previous based on broad indexes), and 5% REITs. The REITs offer a blend of tax-advantaged income (due primarily to Return of Capital, which reduces the ACB and defers tax) and fully-taxable income.

If the investor is still accumulating his portfolio and does not need the REIT income, he may wish to place them in his RRSP to avoid current tax, forgoing the tax advantage of the Return of Capital. In this case, again with 50% in an RRSP, his asset allocation would be as follows:


 * 40% broad bond index - all in RRSP
 * 5% REITs - all in RRSP
 * 20% US equities - split between RRSP (5%) and non-registered account (15%)
 * 20% international equities - all in non-registered account
 * 15% Canadian equities - all in non-registered account

However, if the investor is now in withdrawal mode, and wishes to use the REIT income for living expenses, he may instead prefer to have the REITs in his non-registered account, replacing the RRSP content as before with US equities. On the other hand, once the RRSP has been converted to an RRIF and mandatory minimum withdrawals are required, placing REITs within the RRIF will produce cash flow to meet the minimum withdrawals.

Since investments cannot be switched from a non-registered account to a registered account without incurring a tax liability on embedded capital gains, it is important that the investor plan ahead in deciding his portfolio allocation, including the possibility of incurring future taxes.

Example 3. Preferred shares and high yield bonds
In the third example, preferred shares and high-yield bonds are added to the four-component portfolio. This investor, who is retired, has limited RRSP room and has decided to use preferred shares in his non-registered account to boost income in a tax-advantaged way via the dividend tax credit. His final asset allocation is 40% in a broad bond index, 10% in a high yield bond fund, 10% in Canadian preferred shares, 10% in broad Canadian equities, 15% in broad US equities, and 15% in in international equities. His RRSP room is again 50%.

His most tax-efficient asset allocation would be as follows, placing the high-yield bonds (which have the highest tax rate) in the RRSP first:


 * 10% high yield bonds - all in RRSP
 * 40% broad bond Index - all in RRSP
 * 10% preferred shares - all in non-registered account
 * 15% US equities - all in non-registered account
 * 15% international equities - all in non-registered account
 * 10% Canadian equities - all in non-registered account

Example 4. Limited RRSP room
In this example, we will assume the investor wishes to have a 50:50 bond:equity mix, based on the FPX balanced four-component portfolio, but has even more limited RRSP room (25% of the portfolio). In this case, he will use a GIC ladder for part of the non-registered bond allocation. This avoids the tax disadvantages of premium bonds. Preferred shares will again be used for the remaining part of the "fixed income" allocation. The RRSP room is first filled to its entirety with a bond fund or ETF. Everything else must go in the non-registered account:


 * 25% broad bond index - all in RRSP
 * 15% 5-year GIC ladder - all in non-registered account
 * 10% preferred sharesNote 1 - all in non-registered account
 * 10% US equities - all in non-registered account
 * 15% international equities - all in non-registered account
 * 25% Canadian equities - all in non-registered account

Adding TFSAs to the mix
With each passing year, cumulative TFSA contribution room grows and these accounts are becoming increasingly important for retirement saving. The following examples therefore add TFSAs into the mix.

Example 5: TFSA versus RRSP
Suppose an investor has half her retirement portfolio in a TFSA and half in a RRSP. There is no need to use a non-registered account then. Again, assume a four component portfolio with 40% Canadian bonds, 20% Canadian equities, 20% US equities, and 20% international equities. What is the optimal asset location? This can only be known in retrospect, but consider the following principles:
 * asset classes with the highest expected growth rates should go into the TFSA first, because there is no tax due upon withdrawal; this typically means placing stocks in the TFSA
 * among the different equity regions, there is no way to know in advance which will perform best

Based on this, one reasonable solution (among others) would be:
 * RRSP, 40% Canadian bonds and 10% stocks (1/3 each Canadian, US, International)
 * TFSA, 50% stocks (1/3 each Canadian, US, International)

There could be an attempt to further optimize this solution by taking into account factors such as personalized marginal tax rates, different expected returns for different equity regions, and foreign withholding taxes, but things get speculative and complicated in a hurry.

Investors should keep in mind that because RRSP withdrawals are taxed whereas TFSA withdrawals are not, the after-tax asset allocation of a RRSP+TFSA portfolio differs from the pre-tax asset allocation. Specifically, if all of the bonds are in the RRSP, the after-tax allocation is less than 40% bonds while stocks are greater than 60%. However, during accumulation, the investor will not feel the difference: "ignorance can be bliss".

Example 6: three accounts
We now look at the same four component portfolio with 40% Canadian bonds, 20% Canadian equities, 20% US equities, and 20% international equities, but this time spread over a RRSP, a TFSA and a non-registered account, each accounting for a third of the total portfolio.

Again the main factor driving asset location decisions is that the TFSA is the best account for stocks, since they have a larger expected return than bonds. The next best place for stocks in the non-registered account, because capital gains are taxed more favorably than interest. Using these principles alone would yield:
 * 40% Canadian bonds: 33% in RRSP and 7% in non-registered account
 * 20% Canadian stocks: 11% in TFSA and 9% in non-registered
 * 20% US stocks: 11% in TFSA and 9% in non-registered
 * 20% International stocks: 11% in TFSA and 9% in non-registered
 * (totals for each account don't add up to 33.3% due to rounding)

Another possibility where the traditional advice of placing Canadian equities in the non-registered account has been followed would be:
 * 40% Canadian bonds: 33% in RRSP and 7% in non-registered account
 * 20% Canadian stocks: all in non-registered account
 * 20% US stocks: 17% in TFSA and 3% in non-registered
 * 20% International stocks: 17% in TFSA and 3% in non-registered
 * (totals for each account don't add up to 33.3% due to rounding)

However it is not clear that the "Canadian equities in the non-registered account" rule-of-thumb is universally applicable, since the ideal positioning of the equity asset classes for a certain investor may depend on personalized marginal tax rates, current dividend yields of the different equity indices, and provincial taxes on dividends. The optimization also depends of future rates of returns, which can't be known in advance.

Foreign withholding taxes could also be considered, but again, things get complicated in a hurry.

A simple alternative for examples 5 and 6 would be to invest in a single asset allocation ETF with a balanced profile (a.k.a. a "balanced ETF") in each of the accounts. This solution has a somewhat higher MER and may be less tax-efficient, but it requires no rebalancing across multiple accounts, no specific decision about asset location, and achieves a post-tax asset allocation identical to the originally intended pre-tax asset allocation.

Example 7: six accounts
Spouses can consider all of their retirement accounts as a single portfolio for asset allocation and asset location purposes. The more financially inclined spouse might eventually manage six accounts (two TFSAs, two RRSPs and two non-registered accounts). It may be tempting to go for the perfect asset location plan. It may even be tempting to buy individual stocks in the non-registered accounts to try beating the Canadian index and/or to take advantage of potential tax loss harvesting opportunities. But what would happen to this 'perfect' plan if the spouse currently managing the accounts dies or becomes incompetent? Would the surviving spouse be able and willing to learn to manage a relatively complex portfolio? Or would the securities in both non-registered accounts potentially be sold and replaced by something simpler (or different, if using a random advisor), with potential net capital gains implications? The taxes related to these untimely capital gains could outweigh any potential tax savings from the 'perfect' asset location plan.

If this is a plausible scenario in your household, and assuming you can do this now without triggering significant capital gains (i.e., it's not too late), consider placing all non-registered assets into balanced ETFs. In several decades, they will likely be worth much more than their cost base. Because balanced ETFs among the simplest ways to manage a portfolio, they increase the odds that the surviving spouse can actually hold on to them after your demise, perhaps backed by general financial planning advice from a fee-only planner. Or the non-registered balanced ETF positions could be transferred to an AUM-% type advisor comfortable with ETFs, which again would avoid selling the securities in the non-registered accounts.

The other four accounts (two TFSAs and two RRSPs) could also be all invested into balanced ETFs, or managed using one ETF per asset class as shown in example 5.

Tax-adjusted asset allocation
An argument can be made for applying an adjustment factor depending on the tax status of the account where each asset is located. Basically, this takes into consideration that part of the money in each account, or growth thereof, eventually must be paid to Canada Revenue Agency.

Here are some adjustment factor guidelines for various types of accounts:
 * TFSA 1.00 (no adjustment)
 * RESP 1.00 (no adjustment -- in most cases)
 * RRSP / RRIF and similar
 * 0.75 if small to medium
 * 0.60 if large to gargantuan
 * Non-registered personal
 * 0.80 if buy and hold for decades
 * 0.90 otherwise
 * Non-registered corporate (CCPC)
 * 0.70 if buy and hold for decades
 * 0.85 otherwise

For a US perspective on this topic, see Tax-Adjusted Asset Allocation.

Asset location and tax-efficient investing

 * Canadian Couch Potato, Put Your Assets in Their Place, a general explanation of the asset location concept and of tax-efficient investing, March 5, 2010.
 * Canadian Couch Potato, Managing Multiple Family Accounts, August 13, 2014.
 * Tax-efficient investing, part 1 | Advisor.ca, April 18, 2012.
 * Tax-efficient Investing: Part 2 | Advisor.ca, April 18, 2012.
 * PWL Capital (Justin Bender), Asset Location: Tax Savings Through More Organized Living, August 22, 2017
 * Canadian Portfolio Manager blog (Justin Bender), Asset Location in a Post-Tax World: TFSAs vs. RRSPs, June 11, 2018
 * Canadian Portfolio Manager blog (Justin Bender), Asset Location in a Post-Tax World: RRSPs vs. Taxable Accounts, June 29, 2018
 * Canadian Portfolio Manager blog (Justin Bender), Asset Location Across Canada: Some Rules Are Made To Be Broken, August 28, 2017
 * Canadian Portfolio Manager blog (Justin Bender), Asset Location – Part 1: Key Concepts, 2021
 * Canadian Portfolio Manager blog (Justin Bender), Asset Location: Part 2 – The Ludicrous Strategy, 2021
 * Canadian Portfolio Manager blog (Justin Bender), Asset Location: Part 3 – The Plaid Strategy, 2022
 * Canadian Portfolio Manager blog (Justin Bender), Asset Location: Part 2 – The Ludicrous Strategy, 2021
 * Canadian Portfolio Manager blog (Justin Bender), Asset Location: Part 3 – The Plaid Strategy, 2022

Foreign withholding taxes

 * Canadian Couch Potato, Foreign Withholding Tax Explained, September 17, 2012.
 * Canadian Couch Potato, Foreign Withholding Tax: Which Fund Goes Where?, September 20, 2012.
 * Canadian Couch Potato, The True Cost of Foreign Withholding Taxes, February 20, 2014.
 * Canadian Couch Potato, The Wrong Way to Think About Withholding Taxes, a follow-up on The True Cost of Foreign Withholding Taxes above, January 30, 2015.
 * PWL Capital, Foreign Withholding Taxes, February, 2014.
 * PWL Capital, Foreign Withholding Tax Calculator 2020: an Excel spreadsheet with the withholding taxes applicable to specific ETFs in TFSAs, RRSPs and non-registered accounts
 * Canadian Portfolio Manager Blog (Justin Bender), Part I: Foreign Withholding Taxes for Equity ETFs, January 2020
 * Canadian Portfolio Manager Blog (Justin Bender), Part II: Foreign Withholding Taxes for Global Equity, Global Bond, and Asset Allocation ETFs, January 2020