Tax Free Savings Account

Saving for that new car, new boat or toy just got easier!

We are pleased to advise of a new way to save money starting January 2009, with the introduction of the Tax Free Savings Account (TFSA).

Introduced by the Government of Canada in the 2008 Budget, this type of account will allow you to save or invest money without paying tax on the income it earns, and you can also withdraw it tax free. With this new savings vehicle, you can sit back, relax, and watch your savings account grow faster.

To help you understand the TFSA better, we've put together some basic information about how it can benefit you. It is based on measures announced in the 2008 Federal Government budget on February 26, 2008, which recently became legislation. We will continue to update you as more information becomes available.

Eligibility

To be eligible for a TFSA, you must:

• Be at least 18 years old
• Hold a valid Social Insurance Number
• Be a Canadian resident

Contributions

You will be able to contribute up to $5,000 a year into your Tax Free Savings Account (this amount will increase in the future to take inflation into account). This $5,000 limit is in addition to any RRSP contribution limit you may have. Unused contribution room will be carried forward indefinitely. Unlike an RRSP, any money you contribute to a TFSA will not be tax-deductible. While the funds are in the TFSA, any income or capital gains earned in the account will not be taxed. Most investments that can currently be held in an RRSP will also be eligible for a TFSA. We will be glad to help you establish the appropriate portfolio management strategy to meet your savings goals.

Withdrawals

You will be able to withdraw funds at any time, for any reason. The withdrawal will not be subject to income tax. The amount withdrawn from a TFSA can be returned to it at a later date, without reducing your contribution room.

Other features

TFSAs will not affect your eligibility for federal income-tested benefits, such as the Canada Child Tax Benefit and the Guaranteed Income Supplement. You will have the option of transfering your TFSA assets to your spouse or common-law partner upon death without any impact on the survivor's existing contribution room.

Is a TFSA right for me?

Yes! Whether you already have savings accounts or investments, or you want to create them, a TFSA is a bonus for Canadians from all income levels.

Growth

You will be able to accumulate savings faster since income and capital gains earned within the TFSA are tax-free.

Example for illustrative purposes only. It assumes that the account holder has an annual income of $50,000 and contributes $5,000 each year for 15 years with an annual return of 6%. Investment income is 40% interest,30% Dividends and 30% capital gains. Contributions occur in the middle of the year.

Flexibility

Unlike an RRSP or RESP, a TFSA is designed to help you save for any financial goal at any point in the future - a car, home renovations, starting a new business or just for a rainy day.

You do not have to contribute the maximum of $5,000 every year, as the unused contribution room can be carried forward to future years.

Retirement

The Tax Free Savings Account is a great alternative savings vehicle when your RRSP contributions have been maximized. If you do not immediately need your RRIF mandatory withdrawals, we suggest you contribute them to a TFSA for continued growth.

Future

A TFSA encourages you to start saving early to meet the demands of the future without having to worry about taxes on your earnings and withdrawals. For more information about the TSFA, or to set up an appointment to discuss your savings strategy please feel free to contact our office.