Guaranteed Income Supplement

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Retirement planning
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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.[1] 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[2]:

  • 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 (lines 115 and 116). (Foreign pension includes situations when there is a tax treaty with the country your pension is from)
  • 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 taxable dividends
  • net income from any rental properties
  • any employment income above $5000
  • other income from other sources such as workers' compensation payments, alimony, etc.
  • other deductions, such as union dues, RRSP deduction, moving expenses and other employment expenses.

The following income is exempted from being included as income for GIS income tested benefits [2]:

  • Old Age Security (OAS) pension
  • Guaranteed Income Supplement (GIS)
  • Allowance and the Allowance for the Survivor
  • Employment income below $5000
  • Canada Pension Plan or Quebec Pension Plan contributions and your Employment Insurance premiums
  • Deductions, such as union dues, RRSP deduction, moving expenses and other employment expenses

Benefit payment amounts

The Service Canada webpage is your best resource to determine expected benefit payment amounts, based on the income considered for GIS.[3]

The GIS benefit payment amounts are reviewed quarterly and are indexed to the Consumer Price Index[3]. Your monthly payments will not go down if the cost of living goes down.[4]

If you choose to delay receiving OAS after 65 years old to receive an higher OAS amount, it won't increase your monthly GIS payment amount.

For example, as of July 2017, the monthly maximum in GIS payment for a single person is $840.86 per month, if there is zero income considered for GIS[5].

The following would be eligible to receive GIS in 2017, based on 2016 income[6]:

  • single persons with total income less than $17,544.
  • married/common-law couple, both OAS pensioners, with combined total income less than $23,184
  • OAS pensioners whose spouse/common-law partner is not receiving OAS, with combined annual income less than $42,048

Each $2 of income reduces GIS by $1.

Service Canada has a Old Age Security Benefits Estimator where you enter your age and other information to get an estimate of OAS and any GIS.

T4A(OAS) tax slip

Benefits received from the Old Age Security program, including the Guaranteed Income Supplement and the Allowance, are reported on your T4A(OAS) tax slip.[7][note 1] It is reported as income, but it is deducted later on your tax return so is not included in Taxable Income.[8][6][9]

Information for couples

As of January 1, 2017, for couples where one of you receives the GIS and the other person receives the Allowance, if you are forced to live apart for reasons beyond your control (such as a requirement for long-term care), you may be eligible to receive higher benefits based on your individual income, as is currently the case for couples where both spouses or partners receive the GIS.

To be eligible, you must advise Service Canada in writing by submitting the Statement – Spouses or Common-law Partners Living apart for Reasons Beyond their Control explaining your living situation, and indicating the date that you and your spouse or common-law partner were first forced to live apart.[10]

GIS payment date

GIS is paid monthly. Government of Canada has a benefits payment calendar online [11]

If you have signed up for direct deposit, payments will be automatically deposited in your bank account on these dates.

Applying for the Guaranteed Income Supplement

You must apply in writing for the Guaranteed Income Supplement[1] using the Guaranteed Income Supplement or Statement of Income for the Allowance or Allowance for the Survivor application form (ISP3025).[12] Send the form to the nearest Service Canada office.

If you were automatically enrolled in the OAS pension, you should apply for your GIS three months before your 65th birthday.[13]

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.

Service Canada will inform you in writing whether your application was approved or not, or whether additional information or documentation is required to make a decision on your application.

Phone number for Guaranteed Income Supplement

If you have any questions regarding GIS, you can call Service Canada 1-800-277-9914.[14]

The hours of operation are 8:30 a.m. to 4:30 p.m. EST, Monday to Friday.

You can complete the following tasks by calling:

  • Request assistance to locate or download applications online
  • Confirm status of application
  • Apply or update direct deposit
  • Request benefit letters, statutory declarations, personal access codes and tax slips
  • Input or cancel voluntary tax withholds
  • Report when a payment was not received to open an investigation and receive a duplicate
  • Cancel benefits in the case of death

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.[1]

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 by mail 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, based on last year's income.

  • If your income from last year is too high to qualify for GIS, you will not get GIS starting in July of current year. The letter will specify that your payment will be stopped.
  • If your income is lower in the future due to a reduction or cessation of pension income (in such cases, Service Canada can calculate your GIS by estimating your income for the current year instead of using last year’s income), you can contact Service Canada [1].

Your GIS payment will also be stopped if you leave Canada for more than six consecutive months.[1]. If you do stay outside Canada for longer than six months, you can re-apply when you return to live in Canada[4].

Maximizing benefits

See also: Retirement on a low 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 at least 50 cents. In 2022 each dollar of income between $2040 and $9480 reduces GIS by 75 cents. This extra reduction zone is due to the GIS top-up, first introduced in 2011 and then increased in 2016.[15] 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[16]
  • 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.
  • Interest
  • 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.

Notes

  1. ^ Tax slips are generally received by the end of February. See: Tax Slips, from the CRA.

See also

References

  1. ^ a b c d e Guaranteed Income Supplement - Service Canada, viewed July 25, 2017.
  2. ^ a b Guaranteed Income Supplement - Your application, viewed January 8, 2023.
  3. ^ a b Old Age Security payment amounts, viewed July 25, 2017.
  4. ^ a b Answers 4 Seniors, viewed July 26, 2017.
  5. ^ [https://www.canada.ca/content/dam/canada/employment-social-development/migration/documents/assets/portfolio/docs/en/cpp/oas/sv-oas-jul-sept-2017.pdf Table of Benefit Amounts July to September 2017], viewed July 25, 2017.
  6. ^ a b TaxTips.ca - Guaranteed income supplement (GIS), viewed July 25, 2017.
  7. ^ T4A(OAS), Statement of Old Age Security, viewed July 25, 2017.
  8. ^ Line 146 - Net federal supplements, viewed July 25, 2017.
  9. ^ Line 260 - Taxable income, viewed July 25, 2017.
  10. ^ Guaranteed Income Supplement – While on GIS, viewed July 26, 2017.
  11. ^ Benefits payment calendar, Viewed July 25, 2017.
  12. ^ Form Detail ISP3025, viewed July 26, 2017.
  13. ^ Guaranteed Income Supplement – Eligibility, viewed July 26, 2017.
  14. ^ Contact Old Age Security, viewed July 26, 2017.
  15. ^ "Take-up rate of the Guaranteed Income Supplement: findings from tax and program administrative data". Canada.ca. January 2018. Retrieved January 7, 2023.
  16. ^ Canada Revenue Agency, Impact on your government benefits and credits, viewed July 25, 2017.

Further reading

External links

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