Warning – Could Your TFSA be Taxed?
Since their inception in the 2008 budget, Tax-Free Savings Accounts (TFSA) have become extremely popular investment vehicles as no income taxes are paid on the income earned by the investments within these funds. However, in certain circumstances that may be challenged by the CRA. In particular, Income Tax Act states that if a “business” is carried on inside of a TFSA than that income is taxable. To date, the CRA has not specified what constitutes ‘carrying on a business’; however, we have heard that they are starting to target active traders and those that make speculative investments.
We believe that the government is targeting TFSA’s as an estimated that $1.3 billion in income tax revenue will be lost by the government in 2015 and that figure could increase to $15 billion annually in the next 40 to 50 years.
Presently, we understand that the CRA is only targeting active and speculative transactions and although most TFSA holders are not involved in active/speculative investing, we believe it is important to monitor the Government’s activity in this regard as it could foreshadow a shift in policy that may increase your tax bill.