Will a $11,000 TFSA Limit Balance the Senate Spending Scandal?

I have a relative who says “Don’t vote: it only encourages them,” but I still vote in every election, generally for a candidate who doesn’t win. So I watch and listen to the news when elections are looming but more for the entertainment value than out of any belief that it’s easy to change the course of the country with a simple ballot. I thought it was interesting timing how an “official rumour” of an increase in the TFSA contribution limit surfaced at the same time as the Mike Duffy trial started.

We Will Not Touch Income Trusts

Is anyone else out there old enough to remember hearing the Conservative party promise that during the electioneering in the winter of 2005/2006?

Then, after the Conservatives won the election, on Hallowe’en in 2006 the federal Finance Minister Jim Flaherty reversed that decision and imposed a new tax system on income trusts’ distributions. It stopped BCE from converting Bell Canada into an income trust and forced many other companies to change back to more conventional business structures. Real Estate Income Trusts, REITS, were one of the few businesses not affected by the changes.

This change had a huge impact on many Canadian seniors. They had bought into income trusts because the distributions were very generous and provided much needed income at a time when the returns from fixed income products were not great. Many of these seniors felt betrayed that the same party which had promised to leave the trusts alone almost immediately changed its mind and government policy. The decision cost them real income dollars.

So Will the Government Double the TFSA Contribution Limit?

One way that TFSAs are better, currently, than RRSPs is that they are a predictable amount of money for retirement. While there is no tax refund for contributing to a TFSA, there is also no tax due when making a withdrawal from a TFSA. So if a person is planning for retirement, they don’t have to guess what their tax rate will be in retirement and apply that rate against their expected income from their RRSP/RRIFs.

So for some people, the attraction of a higher TFSA limit is that they can decide to invest for retirement in their TFSA instead of in their RRSP if they don’t have enough money to max out both.

There are, currently, some other benefits to TFSA income versus RRIF income. For example, TFSA income does not affect OAS payments.

The Conservative federal government has not actually announced a plan to double the TFSA contribution limit to $11 000. All we know at this point is that “sources” claim it is likely.

But even if the intention to double the limit is announced, can we count on it happening?

I saw what happened to income trusts. I won’t believe it until the bill is passed by the Senate and read into law by the GG.

What’s Happening With the Senate?

Meanwhile, the trial of Senator Mike Duffy has begun.

Regardless of the actual charges, he is accused of spending taxpayer money for personal expenses while acting as a Senator. He says this is not true.

What the trial and discussions around the charges are revealing is just what types of expenses have been charged in recent years by Senators. And also just how far a political party may decide to go to avoid negative publicity.

I have no idea whether the Conservative party did anything wrong when they provided a large amount of money to Mike Duffy to pay back some expenses he had charged as a Senator. But I do find it interesting listening to more informed sources discuss the topic.

Regardless of whether Mr. Duffy is found guilty or innocent, his trial is stirring up a lot of sediment and it will be interesting to see if the Conservative party can emerge from the swirling waters unstained by mud.

It’s also interesting to see what, if anything, they announce in the hope that the media will start discussing it instead of discussing the Senate.

Perhaps it’s just a coincidence that there’s “talk” about TFSA limits at the same time as there is talk about Mike Duffy.

It doesn’t seem that coincidental to me, though.


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What do you think? Will we be hearing about a variety of interesting financial and tax topics from the federal government parties while the Senate Scandal is trying to stay in the central spotlight?

2 thoughts on “Will a $11,000 TFSA Limit Balance the Senate Spending Scandal?

  1. Do you know if I can put $4500.00 into my TFSA today to max if out to $10000.00 for year 2015 that was announced today in budget ?

    • I’m waiting for the budget to pass and get royal assent. Given that the Conservatives have a majority it should pass with no problems but I would rather wait a few weeks than get stuck with a penalty if something goes wrong. Your choice may vary!

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