Canada Revenue Agency clarifies timeline of new TFSA limit

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The Canada Revenue Agency has issued a formal statement confirming that Canadians can immediately contribute to the new limit for tax-free savings accounts, a move that comes three days after the measure was announced in Tuesday's budget.

The Conservative government's 2015 budget announced that the maximum annual contribution would be increased from $5,500 to $10,000, but Canadians have been asking financial institutions and Members of Parliament to clear up when they can start making the extra contributions.

The budget was targeted to please voters just like Doug Higgins, a 73-year-old retiree who says he is not happy with the mixed messages he received this week from the government as to when he can start making extra contributions.

Finance Minister Joe Oliver's parliamentary office replied to him via -email Thursday that he should wait until the budget bill is passed. Yet the finance minister's official spokesperson had said this week that Canadians can start contributing "immediately."

"It's frustrating that one hand doesn't know what the other hand is doing," said Mr. Higgins, a resident of Grafton, Ontario. "It seems to me that if they're going to announce a change like this, they should be very, very clear as to when you can do it and they simply haven't been clear for the public."

On Friday afternoon, Finance and the CRA issued a joint statement from Revenue Minister Kerry-Lynne Findlay and Mr. Oliver confirming the government's approach.

"This proposed measure is subject to parliamentary approval. Consistent with its standard practice, the CRA is administering this measure on the basis of the budget announcement. Financial institutions may immediately allow existing and new account holders to contribute up to the proposed maximum," said the statement.

The budget's TFSA announcement has attracted the most political reaction in the House of Commons, partly because of controversial remarks made by Mr. Oliver in a budget day television interview. Mr. Oliver dismissed concerns from the Parliamentary Budget Officer and others that the measure could shrink government revenues over time.

"I heard that by 2080 we may have a problem," Mr. Oliver told the CBC. "Well, why don't we leave that to Prime Minister Stephen Harper's granddaughter to solve that problem."

The government's decision to immediately administer the tax cut is also raising concerns. NDP finance critic Nathan Cullen said his party is working on a question of privilege to the Speaker as to the appropriateness of the government's approach.

Mr. Cullen said MPs are receiving e-mails from Canadians who are "totally confused" over the issue.

"We do have some concerns as to whether they're misleading Canadians or misrepresenting what the best course of action is when it comes to these things," he said. "We're contemplating a way to engage the Speaker."

The government argues that because it has already introduced a Ways and Means motion related to the budget, it can proceed with administering the measure.

That view appears to be on solid procedural ground, according to the House of Commons rule book. It notes that it is "the long-standing practice of Canadian governments to put tax-measures into effect" as soon as the notice is tabled, "even though it may be months, if not years, before the implementing legislation is actually passed by Parliament."

Rob Walsh, the former law clerk of the House of Commons, said it is an "unclear question" that he would like to see the Speaker address.

"The better practice, frankly, would be to wait until the damn thing is passed by the House. That's clarity," he said.

Mr. Walsh noted that while it would be safe for the CRA to assume the budget bill will pass before the fall election given that the Conservatives have a Parliamentary majority, it would be a different situation if there was a minority Parliament.

Financial institutions including TD Canada Trust, CIBC, Scotiabank, Bank of Montreal and Royal Bank of Canada have all confirmed they are allowing clients to contribute the new proposed limit to their TFSA.

Dave Nugent, chief compliance officer at Wealthsimple Financial Inc., said clients need to be aware that the policy could change.

"It is proposed legislation so technically the TFSA limit could get reversed but as long as clients are made aware of that component we see this as something we can immediately act on and are already seeing a number of clients increasing their contribution," Mr. Nugent told The Globe this week.

Mr. Higgins, the man who was told by Mr. Oliver's office to wait until the budget bill is passed, said the TFSA increase is good for him but he is concerned about the longer term impact.

"By 2080 it may not be as good," he said. "This is going to be an issue 30 years from now, 40 years from now, when all investment income could in fact be outside the tax realm."

Mr. Higgins said both he and his wife plan to contribute the new maximum of $10,000 per year – but not until the budget bill is passed.

With a report from Clare O'Hara