# Sick leave payout



## dadaswell (Jan 6, 2016)

So...I get a sick leave payout when I retire this year. And, I have room in my RSP to put it there.

Question is: If I put it all in my RSP in 2016, how long do I have to wait to withdraw it? I am assuming I can draw out as much as I want in 2017 onward.

Someone at work said if I withdraw in 2017, CRA may accuse me of tax avoidance, and tax me at the rate I would have paid if it didn't go into the 2016 RSP in the first place. 

My taxable income will be significantly lower in 2017. And, I can use pension income splitting of my defined benefit pension income with spouse in 2017.

Can't find anything about fast turnaround RSP deposits and withdrawals like this in my internet searches.
Can anyone help?


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## naysmitj (Sep 16, 2014)

Does not seem to be a documented avoidance.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ntvdnc/menu-eng.html


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## Eclectic12 (Oct 20, 2010)

I don't see how "deposit this year to RRSP, withdraw next year from RRSP" can be tax avoidance. There would have to be some other factor like trying to skip reporting the RRSP withdrawal next year as income on one's tax return.

The whole point of the RRSP is to deposit today, withdraw in the future ... so what is being suggested fits the rules AFAICT.


Either the co-worker is wrong or the situation the co-worker is describing is missing some sort of step/detail that is the tax avoidance step.


Cheers


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## RBull (Jan 20, 2013)

^+1
I think I answered the same in your other thread dadaswell. A known primary benefit and strategy of an RRSP is to make contributions at a higher tax rate than you will pay when you withdraw. This is not tax avoidance- it is tax reduction-the main goal of an RRSP. Accordingly I can find no rules that contradict this even in a consecutive year scenario like you're planning. 

Your stated overall 2016/2017 plan looks like an excellent one. 

There's lots of water cooler advice that's plain wrong. If you are concerned I would simply make contact with CRA directly. Very simple to get the answer from the horses mouth.


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## dadaswell (Jan 6, 2016)

Thanks folks...that is what I thought...that I could withdraw the next year. And, yes RBull, looking back I see that you did address this. Sorry for the repeat...my head is swimming with all of the financial decisions we need to make in the next year or so. 

And you are right about water cooler advice...but I always check out what I hear. But, it's often the water cooler that gets me thinking...LOL! Could be the person I was speaking to was thinking about a spousal RSP contribution...in that case I believe you shouldn't withdraw right away.

http://blog.taxresource.ca/withdrawing-from-a-spousal-rrsp/


Everyone here is really a tremendous help to me....THANK YOU! I wish I had found this board years ago!!


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## Spudd (Oct 11, 2011)

Yes, for sure, with a spousal you need to wait 3 years.


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## Eclectic12 (Oct 20, 2010)

The spouse's income in 2019 is unknown so any advantage compared to the OP's 2017 income is unknown. The key to waiting the three years is whether there is going to be a lower income for the spouse in 2019 than the OP in 2017.


Where one is focused on what is known ... there is no difference between using the OP's RRSP or a spousal RRSP then withdrawing in 2017, AFAICT.

If the OP puts a set amount into the spouse's RRSP in 2016 then the spouse withdraws up to the same amount in 2017. Being less than the waiting period means the full amount is attributed back to the OP in 2017 (i.e. same as using one's own RRSP).




Cheers


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