Government Benefits

# Understanding the OAS clawback

Updated July 2016

A client asked me recently whether he should be concerned about keeping his income low in his 64th year, because he understood that the Old Age Security clawback was based on his income in the previous year. I’ve been asked this question before, so I thought it might be a good subject for this month’s article.

## What income is the OAS clawback based on?

The OAS clawback is officially known as the OAS recovery tax, and as my client suspected, the clawback for any payment year (from July to June) is “normally” based on your net income as reported on your tax return for the previous calendar year.

I say that it’s normally based on income for the previous calendar year, because there is a provision in the Income Tax Act that allows the clawback to be based on your income for the current calendar year, if your income in the current calendar year will be substantially lower than it was in the previous calendar year.

If this is your situation, you must complete and submit form T1213(OAS) to the Canada Revenue Agency (CRA). A copy of this form is available using the CRA weblink at the end of this article.

Here is a chart that depicts the normal clawback periods and the income thresholds.

 Clawback period Normal income year Minimum income threshold Maximum income threshold July 2015 – June 2016 2014 \$71,592 \$116,103 July 2016 – June 2017 2015 \$72,809 \$118,055 July 2017 – June 2018 2016 \$73,756 \$119,512

## How is the amount of the OAS clawback calculated?

Whichever year’s income is being used, the clawback is basically calculated as 15% of the amount by which your income exceeds the yearly minimum income threshold up to the point that your OAS is fully recovered (usually at the level of the maximum income threshold). Let’s use an example to see how this calculation works.

If Joan’s net income for 2015 was \$85,000; that exceeds the 2015 minimum income threshold by \$12,191 and her clawback would be 15% of that amount, which is \$1,828.65 annually or \$152.39 monthly for the period of July 2016 through June 2017. This means that instead of receiving her full basic OAS of \$573.37 monthly, Joan’s OAS after the clawback will be only \$420.98 monthly (\$573.37 minus \$152.39).

## What happens if Joan’s 2016 income is below the clawback threshold?

As mentioned above, if Joan’s income for 2016 will be significantly lower than her 2015 income, she has the option to ask CRA to calculate the clawback based on her 2016 income instead. Regardless of whether she does that, though, the important calculation occurs when Joan completes her income tax return for 2016.

At that time, she will calculate her “Social benefits (OAS) repayment tax” on line 235 of her 2016 income tax return. This calculation will use her actual 2016 income and the 2016 clawback threshold amount of \$73,756. Her actual OAS repayment tax for 2016 will be 15% of the amount (if any) by which her 2016 exceeds \$73,756.

If Joan’s 2016 income is less than the 2016 threshold amount of \$73,756, any amounts that were clawed back from July 2016 through December 2016 will be refunded to her when she files her 2016 income tax return. The same thing will happen for amounts clawed back from January 2017 through June 2017, when she files her 2017 income tax return.

## Summary

Although the clawback is normally based on your income from the previous calendar year, you can request that the clawback be based on your current income if it is significantly lower.

Although the clawback is normally based on your income from the previous calendar year, that is really just the estimated amount of your OAS repayment tax and the actual OAS repayment tax will be based on your income from the current year and using the current threshold amount.

## Conclusion

There is no reason to be concerned about keeping your income low in your 64th year in order to avoid the OAS clawback.

1. Curt

So Joan, given the relatively high threshold, the opportunity to income split for many Canadians, the source of the funding, and the intent of the supplement, I firmly believe spending so much time looking for ways to dodge the Social Benefit Repayment Tax is ridiculous. I strongly suspect the taxes being paid on income placing you in such an enviable position as to worry about this tax are at a significantly favourable rate already.

To me, it is like looking for a bigger plate before joining the line at a church pot luck. Reduce the taxes on what you earn, not on what you are given.

• Doug Runchey

Curt

Just to clarify, I’m talking about the OAS being clawed back, not the GIS. Some people believe that they’ve earned the OAS by paying taxes in Canada for at least 40 years.

• Curt

Hello Doug,

That is exactly right, the OAS is from the same pot as GIS, just at a higher income threshold. I believe a person either receives GIS or not, there is no incremental reduction as is the intention of what is commonly referred to as “clawback”. The repayment is only the collection of what a person is (was) not entitled to in the first place…. an over payment. The same twists and turns are done at the lower income levels to ensure the GIS is still collected is no less prevalent. Like I said… a bigger plate at a church pot luck.

• Doug Runchey

Curt

I won’t debate your bigger plate metaphor, but I do want to point out that eligibility for GIS is not based on an all or nothing criteria.

The maximum GIS is paid if you have no income aside from OAS at all, and it is reduced on a step basis at 50 cents on the dollar (for the most part.

2. Tim

Does the OAS clawback kick in on pension income before or after the pension splitting provision? In other words, if my eligible pension is \$70,000 and after spiltting pension (ie. \$35,000) with spouse, does the clawback begin at the \$70,000 or \$35,000 mark. I also have other income sources (RRIF and Canada Pension), that put my aggregate income at about \$95,000. Thank you.

• Doug Runchey

Tim

The clawback is based on your “net income before adjustments”, which is line 234 on your income tax return. If you transfer \$35,000 of your pension income to your spouse, that occurs before line 234 and would reduce or eliminate your clawback amount.

3. Paul Rastas

Doug, I am afraid you are misunderstanding the OAS clawback. The quantum of the clawback, or the “repayment tax” is ALWAYS based on the current year income. In fact, the amount of the clawback always appears on the current tax return as an additional CURRENT tax payable.
It is only the next years WITHOLDING TAX that is determined by the prior year income level. And you are correct here, that the amount of witholding can be reduced by application to CRA if the next year income will be less than the prior year. In any case, the July to December reduction of the OAS is not the “clawback” which was already taken on the prior return. The July to December reduction of the OAS benefit is merely a result of an increased witholding tax for which you get 100% credit on the next filing.

• Doug Runchey

Paul

You’re not disagreeing with anything that I’m saying, other than what the term “clawback” refers to.

I believe most people use clawback to describe how much their OAS will be reduced by (what you’re calling the witholding tax).

The point I was trying to make, is that the amount of the reduction (my clawback – your withholding tax) is irrelevant, and the important thing is the repayment tax calculation, which is always based on current year income.

4. Richard Remillard

I got turned down when I requested a lower OAS Recovery Tax based on anticipated lower 2015 earnings. The form letter response I got was indecipherable and I quote, ” …your estimated total tax payable is greater than your total tax deducted for the 2015 tax year. Ypur request to change your OAS Recovery Tax would increase the tax balance owing when you file your return for the year. For this reason, we cannot grant your request.” Can anyone translate this into comprehensible english? This form response does not mention income in 2015 at all. Thanks, RR

• Doug Runchey

Richard

I can’t help with explaining the letter, but I can assure you that if the current withhold amount (based on your 2013 income) exceeds the tax payable (based on your 2015 income), you will get a refund.

• Alec Watson

What happens if I am turning 64 on December 22?

• Doug Runchey

Hi Alec – I don’t understand what your question is?

5. Richard Remillard

If ‘withhold amount’ means the same as ‘tax payable’ , ‘clawback’ and ‘recovery tax’, then it looks like I’ll have to wait til I file my 2015 tax return. If my 2015 income is below the recovery tax threshold, then I will get either a full or partial refund. regards, RR

• Doug Runchey

Richard

Those terms do all basically mean the same thing, and I agree that it will be the “Social benefits (OAS) repayment tax” calculation on your 2015 income tax return that determines whether you get a refund or not.

6. mike

Doug,if you are healthy, can afford to wait and wish to avoid the clawback for as long as possible would it wise to delay applying for OAP until you turn 70? Although there is no clawback of CPP, would it also be worthwhile to hold off applying for CPP until age 70? I realize that these benefits increase if you delay applying for them but is it enough to compensate for the delay? Thank you. Mike

• Doug Runchey

Mike

As far as OAS is concerned, if you’re subject to the clawback that’s a good reason to consider delaying your application for OAS until your other income decreases or until you turn 70.

As for CPP, the increase of 0.7% for every month of delay is a pretty good incentive all on its own.

7. Dave

I agree that waiting to age 70 for OAS is wise if you’re in clawback territory or beyond. Maybe then its time to pass assests /income onto the next generation and thereby reduce your income below the clawback territory amount.

Not sure about waiting to take CPP at 70 (142% of age 65 amount). The payback then gets pushed out to age 82 and the bigger amount could if OAS clawback was an issue work against you.

8. Janet

Hello Doug, I started collecting CPP a year ago at age 64 (\$10,000)and am currently employed making approx. \$34,000. I’m considering deferring OAS until I stop working at age 68 but am not sure if this would be beneficial since I’m in a lower tax bracket.

• Doug Runchey

Janet

If you’re not in the OAS clawback range and tax brackets aren’t an issue, the only advantage to deferring your OAS is that it will increase by 0.6% per month (7.2% per year) if you don’t apply at age 65. Read this other article for more details: https://retirehappy.ca/voluntary-deferral-of-oas/

9. Dao

Hi Doug Runchey,
I have a question about Medical Expense. For Ontario Healthy Renovation, my father in law is over 65 so he is qualified for that benefit Renovation house Senior. But his wife make income higher than him, will Benefit Renovation is better go to her tax? or still go in her husband tax? for Software H&R block that benefit will go his wife, but TurboTax it will go to her husband. Her husband in come 18,000. His wife income is 90,000 include CPP.

10. Irene

Please help me understand the OAS clawback. Here’s my situation. I’m 61, was planning to work till my Oct 64th birthday plus 2.5 months (get Dec bonus from employer). My work income is \$82200 per year plus \$20000 per year interest income for age 63 and 64. The \$20k is taxed heavily. So:
1. if I apply for OAS when I’m 64 to get the payments on becoming 65, my income will be over \$100,000 so I will have clawback to about 50% of my OAS
2. my income will drop to \$20k interest income and \$12,000 annuity income (taxable) when I turn 65 (excluding a low CPP which I claimed at 60 and because I’m an immigrant).

Should I apply for OAS on turning 64 and apply for lower OAS clawback at the same time – knowing that I’ll stop work 2.5 months after my Oct birthday?

If I get clawed back in the first year, does the amount stay low forever, so will the OAS payment go up again depending on my lower income?

If I get clawed back, then they get my tax returns and see the lower income, will they give me the difference that they deducted from the OAS amount for the months that are owing to me since I turned 65?

Thank you so much – this is all so confusing.

• Doug Runchey

Irene – OAS is payable the month following your 65th birthday at the earliest. Yes, if the amount clawed back exceeds your tax owing, you will get a refund when you file your tax return. No, your clawback amount won’t stay at the higher amount forever. It will be adjusted yearly based on your income.

11. Irene

Thanks Doug! Will withdrawals from my RRSP (some locked-in) and TFSA after age 65 count as “income”?

• Doug Runchey

Irene – RRSP withdrawals do count as income, but TFSA withdrawals don’t count as income.

12. Dave

Irene

Congratulations you have appear to have done very well since immigrating to Canada.

You indicate that you have 20000 per year in interest income. This suggests to me that you have saved a large amount of money probably more than 1 million. I applaud you. Based on your information – if you were to invest this in eligible Canadian dividends you could likely double this 20000 and pay little or no taxes on it and depending on your total income, still have no OAS clawback. You would also likely have the benefit of the dividend income increasing each year.

I avoid interest income and am in my 60’s also.

13. bettie andrews

Excellent analysis , I was enlightened by the specifics – Does someone know where I could acquire a blank Form 1256 gains and losses pdf 2013 document to type on ?

14. RB

Doug … is the clawback applied to each person individually or is it applied to a combined (ie: both spouses) family income? Point being to a strategy keeping both wife and my income below the threshold of clawback …

Thanks

• Doug Runchey

RB – The OAS clawback is based on individual income, not family income.

15. Steven

I’m still confused about the “clawback”. Is the \$ amount clawed back actually considered income tax paid, just as any other quarterly remittance would be? Will I receive a tax slip showing this amount? If so, then isn’t it just a withholding tax, which will be reconciled on the Notice of Assessment. In that case, I don’t see the reason to be concerned about manipulating one’s income to avoid it.

• Doug Runchey

Steven – You’re not confused. You’re 100% correct!

16. Paul Rastas, CPA, CA, CFP

Well, not 100%. The “clawback” actually has two components.
First, in the year you have excessive income the 15% “clawback” is added to your tax bill and essentially becomes an additional tax, not a withholding, not creditable and not refundable.
In the second year, your monthly OAS benefit is reduced by a second corresponding “clawback” amount which is actually a withholding tax exactly as described by Steven, and is potentially refundable or creditable against tax owing in the year.

17. Jane G.

My partner has been getting his OAS for five years since at that time it was take it or lose it. After the last adjustment in July he now gets \$20.23/mo. He is now 70 and is retiring in January/17. He filled in the T1213(OAS) for 2017 but it was denied. They said, “based on the information submitted, your estimated total tax payable is greater than your total tax deducted for the 2017 tax year. Please note that any amount withheld from your OAS monthly payment is tax. Therefore, when you file your income tax return, you may claim these amounts on line 437 as tax deducted, for the year the amounts were withheld. These taxes deducted will then serve to either directly increase your refund ir decrease your valance owing.” We thought this was clawback, not tax. How can we tell for sure? Is there any way yo get this reduced when he retires?

• Doug Runchey

The clawback is a tax withhold based on estimated tax payable, and it will be refunded if his actual 2017 income is lower.

18. Ron Lupack

I think you guys are all a bunch of idiots !!!
I was promised my OAS from all the taxes I paid over my lifetime and this is not an “entitlement” but a Pension !!
Its a serious breach of promise by the gangsters in Ottawa.
Secondly, which much to my dismay, no one seems to notice is that this “net income” you refer to, happens to include “grossed up dividends” !! For you idiots who never do your own income tax returns, this is income which I never get or see but in fact is taxed for my the corporations from which I receive the dividends.. So I’m being taxed on income I don’t get and in fact this is serious “double tax” actually..

19. Dave

Ron Lupack, Yes it includes grossed up dividends but if you had received the same actual dollar amount of money in interest income you are still better off with dividends in the OAS clawback situation… because of the tax credit involved in the calculation. I suggest you go to your tax software, read your T5’s and do some “what if’s”. You may be doing your own taxes but based on your statement “So I’m being taxed on income I don’t get and in fact this is serious “double tax” actually.” you don’t understand dividends and why the tax calculation is structured as it is. You may find it helpful to have someone knowlegible do your taxes next year!

See http://www.Taxtips.ca …. Article on OAS clawback dividends versus interest income.

I understand your feeling of entitlement with OAS and the frustration regarding the clawback provisions, but no one contributing to this website blog made those decisions. Do you understand that? It certainly doesn’t warrant a rant calling others idiots, who are voluntarily sharing their knowledge trying to help others understand these retirement issues.

20. Dave

BC – 2016 tax calculation (Single) (Taxtips.ca calculator)

\$70000 actual dividends plus \$6800 OAS = \$76800. After tax and clawback = \$68849

\$70000 interest income plus \$6800 OAS = \$76800. After tax and clawback = \$60702.

Result \$8147 more net income with dividends than same dollar amount of interest.

21. Fred

I have a fairly significant LIRA which I will need to convert to a LIF next year. The LIF provisions allow for “unlocking” up to 50% of the LIF and depositing/transferring the unlocked funds to a RRIF. The reason to consider this is to remove the “maximum withdrawal” provisions which are inherent in the LIF, but not an RRIF.

As I understand it, the 50% withdrawal is shown as income, but depositing to an RRIF offsets makes the transaction “tax neutral”. However, if this is indeed shown as income, would this not impact OAS Clawback calculations?

• Dave

Fred

The clawback threshold rate is based on line 234 of the tax form.

I found this online:

“To unlock up to 50% of your LIF you must first transfer all of your LIF into a Restricted Life Income Fund (RLIF). From your RLIF you then transfer the unlocked portion into an RRSP (if you are 71 years of age or younger) or an RRIF.”

The RRSP deduction is before line 234 (its line 208) so it should not impact the OAS clawback calculations.

… Get some independent tax advice to be sure.

22. Garry

I hope this question doesn’t appear foolish or naive. Clawback or
its euphamism, tax recovery, is based on net income before adjustments.

Is net income before or after tax is calculated.

I guess you now see why I let a professional do my taxes.

• Doug Runchey

Garry – Net income is before tax is calculated.

23. Joyce

In June of 2015 we received a letter from CRA indicating that the full amount of my husbands OSA would be applied to OASTax Recovery. Because our income will be much much lower in 2016 we asked for a reduction of the OAS revovery amount. In August we received a letter indicating”we are pleased to inform you that we have approved your request to reduce your OAS recovery tax”. We assumed that the OAS cheque would start coming again. It hasn’t and after numerous calls to CRA and Service Canada, Service Canada indicated that they had not been notified so it was still all being applied to OAS tax recovery. Can you try to explain to me what is going on…

• Doug Runchey

Hi Joyce – Have you given a copy of CRA’s letter to Service Canada? I can’t explain why there appears to be a disconnect between the two departments, but the good news is that your husband should receive a refund of his over-deducted OAS when he files his 2016 tax return.

• Joyce

Thankyou so much for your reply. If only 1 of the 10 people I talked to at CRA yesterday would have told me that. They were to busy blaming Service Canada. You asked if I had shared the letter with Service Canada and yes, he had me read it out to him yesterday. That’s when he told me that CRA had never put a stop to the O AS being applied to recovery tax.

24. Brian Williams

Hello, This tax year (2016) because of a capital gain (sale of a property), our income was pushed over the threshold, and some OAS was required to be repaid through our income tax returns. It was a unique situation and next year will not see our income over the limit. I know that we can file t1213 to request no reduction in the OAS; but if we do not submit the t1213, my understanding is that the reduction is reflected as income tax paid for the appropriate year; and that the OAS will eventually rise to its proper level in a year or two, based on our future returns. In effect, we lose nothing, since the excess reduction will positively affect taxes owing or refundable on those subsequent returns.

• Doug Runchey

Hi Brian – You are 100% correct in your analysis!

• Brian Williams

Thanks for that confirmation. I’ll not bother with the t1213 since I manage our income such that we are always in an owing situation (usually, a few hundred dollars) which will be reduced by the additional tax ‘credit’ that we will see in the relevant years. I do find it interesting that I could not find this ‘feature’ well explained anywhere, even on any government site.

• Stephen Iley

If someone turns 65 in October and has an income significantly above the clawback threshold in that year, are they better to defer receipt of OAS two months until January and file the T1213 along with their application to avoid a claw back based on the prior years earnings OR should they apply to receive the benefit at age 65 and pay the clawback on the first two months benefit at tax time and then file the T1213 to ensure the full benefit thereafter? It seems to me the only argument for deferring two months (even if the entire benefit is clawed back for two months) would be if you receive a higher benefit as a result. Would a two month deferral until the next tax year actually result in a higher benefit?

• Doug Runchey

Hi Stephen – Yes, a two-month deferral would increase the OAS amount by 1.2% which seems like a good idea to me.

25. Raj

Hello Doug,

I turned 65 in October last year (2016), and my income was in excess of \$ 130,000. This year (2017) my income is less than \$ 40,000. Service Canada has just sent me a letter informing me that they have approved my OAS application and will start paying me my OAS from November last year. As my income in 2016 was well above the threshold, for the period July 2017 to June 2018, I guess they will clawback my full OAS.

As I understand, here are my options:

If I choose to do nothing, Service Canada will pay me back the clawback once my 2017 tax return has been assessed.

Alternatively, I could file T1213(OAS) and ask that there should be no clawback as my 2017 income is a less than the threshold.

Am I right?

Thank you

Raj

• Doug Runchey

Hi Raj – I agree with those two options, except that with the first option you will get the refund from CRA as part of processing your 2017 tax return and it won’t involve Service Canada at all.

• Raj

Thank you, Doug!

26. Greg

Hi Doug,
My question is does the claw back occure on my OAS cheque or on my other government pension cheque, miiltrary?

• Doug Runchey

Hi Greg – The clawback only affects your OAS cheque.

27. Suzanne Staunton

They stop my husband AOS plus ask him to make instalment of 2035. September 15 and another December 15 why?

• Doug Runchey

Hi Suzanne – You’d have to ask Revenue Canada why they took that action.

28. John Davis

Hi Doug,

Would I be correct that I could complete the T1213OAS anytime after July of the current year, (2017) so I can get the reduction starting June of the following year? (2018)

Thanks

• Doug

Hi John

Your June 2018 clawback would normally be based on your 2016 income, so if you want it based on your 2017 income instead, submitting the T1213OAS now would make sense to me. It will affect the clawback for that one month only though, so I’m not sure that I would even bother. From July 2017 thru June 2018, the clawback would normally be based on your 2017 income. By my reading of the form, you can’t submit the T1213 OAS for that period until after your 2017 income tax form has been assessed by RCT.

29. Connie

30. Ken

Is the maximum OAS eligible income based on combined income for married couples?

• Doug Runchey

Hi Ken – No, for OAS clawback purposes it is the income of each individual that counts, not the combined income for a couple.

31. Eddie

Hi Doug
Regarding :There is no reason to be concerned about keeping your income low in your 64th year in order to avoid the OAS clawback.
For example if i’m turn 65 on January 2020 and selected to receive OAS . In this case should i keep my income below the claw back threshold in 2019 to avoid the claw back because my birthday is at beginning of the year.
Thanks

• Doug Runchey

Hi Eddie – I think you’re missing my main point, which is that there’s no real reason to worry about the OAS clawback at all. The clawback is just the estimated tax based on your previous year’s income. It’s the OAS repayment tax that you should try to reduce/avoid, and that’s always based on your current-year income.

In your case though, the clawback for the period from Jan 2020 thru June 2020 will be based on your 2018 income and your 2019 income will be used to determine the clawback for July 2020 thru June 2021. If you want to avoid the clawback completely, you would have to keep both your 2018 and your 2019 incomes below the clawback thresholds. Then again, as long as your 2020 and subsequent year’s income is below the threshold, any OAS that is clawed back based on your 2018 or 2019 income would be refunded at tax time, so why worry about it???

32. Ian MacMillan

I am having trouble determining if OAS recovery tax/clawback is actually a tax increase or is It just a withholding tax that is just collecting taxes you would have to pay anyway at a later date. Pension splitting can affect the receiver’s OAS payments but if it is just the early collection of taxes you will have to pay anyway I don’t really care. If the tax advantage of splitting has to be compared with the OAS reduction, then it becomes relevant. Can someone clarify this. I have talked with CRA but their replies don’t make me feel like I get a confident answer.

• Doug Runchey

Hi Ian the OAS recovery tax/clawback is just a withholding tax, and the Social benefits (OAS) repayment tax is the actual tax that is truly relevant. If your question is whether you can use the pension income splitting provision to reduce your net income and avoid the Social benefits (OAS) repayment tax, the answer is “Yes”. And by lowering your net income you could also avoid the OAS recovery tax/clawback in the following year(s).

• Paul Rastas CPA, CA, CFP

Hi Ian,
To be clear, the OAS recovery tax/clawback is a two part process. Professional accountants and tax preparers refer to both parts of the process as the ‘OAS clawback’, hence the confusion.
1) If your net income (line 236 of your tax return) is in excess of the threshold amount (currently approx. \$76,000) the clawback is invoked, and an additional ‘tax’ of 15% of your excess income will appear on line 422 ‘Social benefits repayment’ which will be included in the ‘Total Payable’ line 435. This is a non-refundable current year ‘tax’ due to income in excess of the threshold amount. It is not quite as bad as it sounds, as the same amount is allowed as a deduction on line 235 ‘Social benefits repayment’ with the result that the net cost of the 15% clawback is only approximately 10% of the excess income. In short, it is actually a ‘tax increase’ as you say.
2) The second part of the process begins in July of the following year, after your tax return has been processed. CRA takes the position that if you were subject to the clawback last year, you will likely be subject again this year. Accordingly they will deduct a similar amount from your OAS payments for the next 12 months commencing July. These amounts however are just as you say, a ‘withholding tax’ to be applied against tax you may owe in the future. The withheld amounts are applied as a credit to your future taxes owing and are fully refundable if future income is lower and less tax is payable. Again, this part is merely an installment, and not a ‘tax’ per se, but it but does impact on current cash flow.
Hopefully this clears some of the fog.

33. Terri

My 2018 income was inflated one-time due to severence. Therefore my OAS was completely clawed back for 2018. Can I appeal this? I’m worried my 2019 OAS will be ‘zero’ if they base it on 2018 income.

Now without a job at age 70, I depend on CPP and OAS to live.

Is there anything I can do?

• Doug Runchey

Hi Terri – If your severance payment in 2018 resulted in your 2018 net income exceeding the maximum clawback threshold (approx. \$120,000) then you would owe the entire 2018 OAS amount to Revenue Canada when you complete your 2018 income tax return. You may or may not have the right to appeal this decision, but I don’t see any basis for such an appeal anymore than trying to appeal your marginal tax rate.

If they start withholding your OAS effective July 2019 based on your 2018 income however, you definitely have the right to request them to reduce that clawback amount by completing form T1213(OAS). If that is denied you may or may not have the right to appeal that decision, but if your 2019 income is below the minimum income threshold for 2019 (approx. \$76,000), you will definitely receive a refund of any OAS payments withheld for 2019, when you complete your 2019 income tax return.

34. Mark

Hi Doug, thank you so much for the information, great article. I hope this question doesn’t make me look like too much of a fool but as the old adage goes, the only dumb question is the one you don’t ask.

The thing I am struggling with is the individual who has deferred receiving OAS until 70 years of age. Because they are now receiving 36% more OAS, and with the recovery tax being 15% of the difference between net income before adjustments and the minimum OAS threshold, it seems that their OAS would require a higher threshold or recovery tax percentage to be reduced to zero. At least that is what my calculations are showing me. Am I way off base here?

Thanks Doug!

• Doug Runchey

Hi Mark – You’re correct that the increased OAS amount will cause a change in the OAS recovery tax, but it’s not the percentage that changes it’s the maximum clawback threshold. The minimum clawback threshold and the 15% recovery rate are legislated amounts, whereas the maximum clawback threshold is simply a calculated figure that would be lower if the person is only receiving a partial OAS pension and it will be higher for a person who is receiving a full OAS pension increased by 36% due to voluntary deferral.

35. Rohini Herbert

Could you please explain this? When my husband applied for his pension benefits, when he turned 65 in 2017, he had been in Canada for 20 years. He has been receiving his CPP and OAS since August 2017 while continuing to work at his regular job. His annual income for 2017 (salary + pension income) was approximately \$63,000. His OAS monthly amount is only \$200. Why is this so? Shouldn’t the OAS be calculated on the basis of 20/40 = 50% of the maximum amount (\$583 for 2017), which would be \$290 or so? Why was \$90 taken from his OAS when his earnings were far less than the maximum earnings? whether this was “clawback” or tax withhold, there was no refund with tax assessment for 2017 in 2018.

• Doug Runchey

Hi Rohini – I have no answer for you based on the information that you have provided. I suggest that he contact Service Canada at 1-800-277-9914 to get an explanation.

36. Terry

Hi Doug,

not sure why my previous post was not there but my question was that I have lived in Canada for 10 years now and I am just past 65. I have low income and wish to apply for both OAS and GIS. My niece told me that I should be eligible for the full amount of both benefits but I wonder my OAS should be pro-rated as 10/40, so why can I be entitled the full amount please?

• Doug Runchey

Hi Terry – In the wisdom of the federal government, they feel that of someone is receiving only a partial OAS but they have no other income their GIS will be increased so that they receive the same total OAS/GIS as someone who has lived in Canada their whole lifetime. Here is a link to an article that I wrote on this issue: https://retirehappy.ca/receiving-partial-oas-pension-affects-gis-amounts/

• Terry

Hi Doug,

Great explanation of my situation and especially the article you attached that you wrote. Thanks!

By the way, where can I find that information from the Service Canada website or any of its publications please?

• Doug Runchey

Hi Terry – Service Canada doesn’t publish this information, at least not anywhere that I’ve seen. You’d have to read the OAS Act and Regulations.

• Terry

Hi Doug,

After studying your article attached to the link, I have a question: I understand your first example about the concept of top-up being applied to Peter, but I am not too convinced about the second example. we know that GIS will be recovered for a pensioner who has other income and Peter (and many immigrants) fall in-scope. Now that Peter still gets a top-up, does it mean all pensioners with less than 40 years, in general, should also get one? Or, where does CRA draw the line (i.e., income threshold) to differentiate between people who still require a top-up and who don’t? Not to forget, in Peter’s second example, his income is already high enough to take his entire GIS from him, but CRA still grants him a top-up?

• Doug Runchey

Hi Terry – The top-up is applied at zero income and it remains intact until the person reaches the maximum income threshold, where it starts to disappear at the rate of 50% of income in excess of the maximum threshold.

• Terry

So that means as long as a retiree gets the full GIS, then he will also get the full OAS until clawback kicks in?

• Doug Runchey

Hi Terry – No, he doesn’t get full OAS; he gets extra GIS equivalent to the full OAS.

37. Terry

Hi Doug, thanks for clarifying the concept. Thus with the increased maximum income threshold due to the top-up, a retiree gets deducted the ‘normal way’, i.e., 50%, once this threshold is exceeded, and there is no such thing as ‘denial of full OAS’ as per my previous message, right?

• Doug Runchey

Hi Terry – I’m not sure how many different ways I can say this. You will just get your partial OAS but your GIS will be increased (topped-up) to make your total OAS/GIS payment equivalent to what you would receive if you received the full OAS, but you will NOT be paid the full OAS.

• Terry

Thanks Doug.

38. Fred

This not specifically an OAS question, although related as I am trying to ensure we avoid the clawback down the road.
My wife will shortly be turning 65. She has some money in RRSP and LIRA. I am thinking she should start withdrawals sooner rather than wait till age 70 to try and spread out income. If she does that, is there any downside to just making RRSP withdrawals while she can rather than converting the RRSP to a RIF? The only ones I can think of are (i) the \$2K Pension Credit (which she will get anyways as we split my pension) and (ii) the withholding tax for RRSP withdrawals.

39. Cathy bluteau

I am 59 and in 2019 was layed off. I received Employment Insurance Benefits for 2019 and 1 month in 2020. Because Employment Insurance was not enough to cover my basic expenses I withdrew from my RRSP retirement income.
When filing my 2019 tax return, they want to recovery 30% of my Employment Insurance benefits.
Can I apply the same principles you discuss for the OAS and base my income on 2020 so that I do not have to repay the 7000.00 recovery of my EI benefits.
How can I have to repay when my only other source of income was my retirement money?

• Doug Runchey

Hi Cathy – The principle that I discuss is that the clawback of current-year OAS benefits can be based on current-year income instead of prior-year income. What you’re trying to do is to use your current-year income to calculate your prior-year taxes, and I don’t think that will ever work.