The ORS (Old Age Security) clawback and GIS (Guaranteed Income Supplement ) are rules in Canada that impact the benefits received by seniors.
OAS and GIS Clawback Rules
To be eligible for OAS, an individual must be at least 65 years old a Canadian or legal resident and He or She has been living in Canada for 10 years since turning 18. You can receive your First Old Age Security pension payments the month after you turn 65. You can receive a higher amount for each month you decide to delay your first payment.
In Canada, the Old Age Security clawback also known as the OAS Pension recovery tax is a gradual reduction in OAS benefits when a retiree’s income exceeds a certain threshold. The GIS is an additional monthly payment that a retiree can receive once they qualify for the OAS pension. The GIS allowance and allowance for the Survivor benefits are Tax free.
OAS Clawback
It is also known as the OAS recovery Tax, this is a gradual reduction in OAS benefits when an individual`s income exceeds a certain approach. The recovery tax is 15% meaning that for every dollar of income above the threshold. For example, in 2023, the threshold was $86,912.
2024: The government starts clawing back OAS benefits when your income reaches $ 90,997.2. The maximum income threshold is $148,065 for those aged 65 to 74 and $153,771 for those aged 75 and over. The recovery tax is deducted from your monthly OAS cheques in the following year. You can Spread out your deductions over your 12 monthly pension payments. And you can claim the amount on line 43700 of your return for that year.
Old Age Security pension recovery tax
If your net world income exceeds the threshold amount ($86,912 for 2023), you need to repay part of your entire OAS pension. You must pay the recovery tax if
- Your annual net world income is more than $ 86,912 for 2023 in Canadian dollars, and
- you live in a country where the non-resident tax on Canadian pensions is 25%or more.
The Guaranteed Income Supplement is an additional monthly payment that a retiree can receive once they qualify for the OAS pension. The GIS Allow for the Survivor benefits are tax-free
Return of Income form-
In January, you will receive an Old Age Security Return of Income form that you must fill out and NR4 Old Age Security information slip to use when you fill out.
GIS Clawback
The annual GIS benefits are reduced, or clawed back, by 50 for every dollar of annual income the person has in retirement, including C/QPP and income from Registered Retirements Savings plans and other savings. OAS benefits are not included in GIS clawback.
- The clawback rate can be as high as 50%to 75%.
- The amount of GIS a recipient receives is adjusted automatically after they file their most recent tax return.
- GIS recipients can earn up to a certain amount without affecting their GIS pension.
- To be eligible for the GIS, you must be 65 years old, receive the Old Age Security pension, and be a permanent resident of Canada.
- You may get benefits if your income is below $22,056 if you are single, widowed, or divorced.
- The GIS amount is calculated based on income for the past calendar year. As an example, GIS payments for July 2023 through June 2024 would be based on 2022 income.
- If you have a loss in income in the current tax year, you may be able to ask for a recalculation. A provision under the GIS allows your payment to be recalculated based on your current year`s income.
Just because you start receiving GIS payments doesn’t mean you will always be eligible. you may stop getting your GIS payments if-
- You don’t submit your Income Tax and Benefit Return to the Canada Revenue Agency by April 30; in addition, if you do not submit information about your last year’s net income.
- You live outside of Canada for more than six months in a row.
- Your net income exceeds the maximum annual income threshold
- You serve time in federal prison for a sentence of two years or more then longer
- You pass away
Maximum payments and income thresholds:
- Age 65 to 74 Maximum monthly payment amount $727.67 To receive the OAS your annual net world income in 2023 must be less than $148,451.
- Age 75 and over Maximum monthly payments amount to $800.44 To receive the OAS your annual net world income in 2023 must be Less than $154,196.
- If you are 75 years old or will be 75 years old in June 2024, you will get an automatic 10% increase in your Old Age Security pension starting in July 2024.
- The 10% increase in the maximum ORS pension rate will not affect the calculation of your Guaranteed Income Supplement (GIS)
- If your income is higher than $90,997(2023), you will have to repay part of your entire Old Age Security pension.
- If you are already over 65, we may be able to give you a payment for up to a maximum of 11 months from the date we receive your application. If you delay receiving your Old Age Security payments during the postponement period.
- After age 70, there is no advantage in delaying your first payments. You lose benefits.
Conclusion
The goal of OAS and GIS is to provide a basic amount of income from the government, to prevent abuse of this benefit there are many clawbacks designed to prevent seniors from accessing more benefits than allowed. If you are eligible or already received an OAS pension, it`s worth checking if you are eligible to receive the GIS payment.
