Category Archives: Finances

Investing in the AAT770 Daily High Interest Savings Account Fund, HISA, for BMO InvestorLine RRSP, TFSA and Other Accounts

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Sometimes you have cash sitting around in your investment account. You may be waiting for a market pullback. You may be waiting for fixed income rates to improve before locking in for a longer term. You may need to make a withdrawal from your RRIF or your TFSA soon and need to keep the money handy in cash. Till recently, that meant getting no interest at BMO InvestorLine, or getting a very low interest rate if you could risk locking the money in for 30 days in a cashable GIC with a minimum $10,000 investment. Or, if you had $25,000 or more, you could have purchased units of a high interest savings account fund such as ATL5000. Now, in April 2013, BMO InvestorLine is offering a new choice in daily high interest savings accounts with a somewhat better minimum.

A Vote of Thanks to a Reader for Highlighting this New Option

I’d just like to publicly thank John who pointed out this new option is available. It is much appreciated both by me and I’m sure by other readers!

Investing in BMO AAT High Interest Savings Account Funds

The new offering is two funds:

  • AAT770 the BMO AAT CAD High Interest Savings Account
  • AAT780 the BMO AAT USD High Interest Savings Account

Each fund has a value of 1.00 dollars per unit. AAT770 is Canadian dollars. AAT780 is US dollars.

What is the “High” Interest Offered on These Funds?

“High” in these days of record low interest rates is a bit of a stretch.

UPDATE: On October 3, 2017, AAT770 is paying 0.95% and AAT780 is paying 0.5%.
UPDATE: On March 18, 2017 AAT770 is paying 0.75% and AAT780 is paying 0.5%.
UPDATE: On January 29, 2014 AAT770 is paying 1.25% and AAT780 is paying 0.25%.
UPDATE: On November 2013, AAT770 is paying 1.25% and AAT780 is paying 0.20%.

The rates offered as of April 11, 2013 are: AAT770, 1.27% on Canadian dollar investments;AAT780, 0.25% on US dollar investments.

What is the Minimum Investment Required to Buy Units in AAT770 or AAT780?

For both funds, the minimum initial purchase is $5,000. Subsequent purchases can be $500 or more. UPDATE: 2017 10 03, minimum purchase is $1 000 and subsequent purchases can be $50 or more.

While I haven’t tested it yet, I expect to find that you must keep a minimum balance of $5,000 (UPDATE now $1000) per fund. With the old $25,000 minimum funds like ATL5000, if you tried to sell a few units and drop below a holding of $25,000 it would refuse the transaction, telling you to either sell all or none.

I will test this minimum in the future, but first I have to buy some!
[UPDATE: As of April 2013 when I tried a partial sell that would take my balance below $5000 the system would not let me enter the order. It said I had to keep a balance of $5000 or sell all.]

I have tested whether the system will let you purchase less than $5000. It won’t.

NOTE: Although a $5,000 minimum is much better than the previous $25,000 minimum required by InvestorLine, it’s still quite high. You can invest in ATL5000 with a $1000 minimum at CIBC. UPDATE: As of 2017 10 03 you can also invest in AAT770 with a minimum of $1 000.

Is There an Early Redemption Fee for AAT770 or AAT780?

As with ATL5000 there should not be an early redemption fee. I will also be testing this in future.
[Update: As of April, 2013 I redeemed all units in my RRSP account. There was no fee deducted from my account either for the buy or the sell. I redeemed fewer than 7 days after purchasing.]

However, with any daily interest product the interest is calculated daily but paid monthly. So if you redeem all of your units before the interest is paid for that month, you will forfeit that interest. This is similar to withdrawing all of your money and closing a daily interest bank account. (I hope to test the options Cash and Reinvest, however. Perhaps you can still get your interest paid out to your cash account even if you sell all of your units before month end. I will report on that if and when I get a test done.)

[Update: To my amazement, when I did a test redemption in April 2013, they actually paid out the interest accrued during the very short time (less than 1 month) that the money was invested. Apparently I’ve been wrong about this and I apologize to BMO InvestorLine for my misguided thinking.]

Is There a Commission or Fee to Buy AAT770 or AAT780?

There does not appear to be any fee or commission to purchase these units. The fund is described as “No Load” on the purchase order screen. I will be testing this, too.
[Update: I did a purchase and sale within a few days of each other and was not charged any fees in April 2013.]

What Next?
I’m off to test the product with a buy and, after it settles, a sell. I also want to make a buy and hold it to see how the interest gets paid.

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PLEASE share your experiences with high interest savings accounts at InvestorLine or other online brokerages. One reader already brought this new option to light through a comment. Your thoughts may be equally useful to other investors.

Can I Claim a Charitable Tax Deduction Credit for a Donation Made Outside of Canada?

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We help a lot of Canadian charities because we were both raised to believe that if you have you should share. One thing we quickly learned is that we can donate more to Canadian charities at the same total cost to us if we claim the donation on our income taxes. We also donate to some international charities. (And yes, despite what Pearson airport and Canada Post believe, the USA is actually *international!*) In the past, we haven’t bothered too much with the receipts for those foreign donations because we believed that they were not necessary for filing our Canadian income taxes. When I read the tax forms more carefully this year, though, I was left wondering if we could claim donations made outside of Canada to get a tax deduction.

What the CRA Says on Schedule 9 Donations and Gifts

This was the wording on Schedule 9 that caught my eye

“Donations made to the United Nations, its agencies, and certain charitable organizations outside Canada” (line 334)

The amount you enter on this new line 334 is added directly into your “Total eligible amount of charitable donations and government gifts” just like your gifts to registered Canadian charities.

So can you donate to international charities and claim it on your Canadian taxes? Which charitable organizations outside Canada are included in “certain?”

Which are the “Certain Charitable Organizations Outside Canada” and Which Aren’t?

I went hunting on the CRA website to find out if the health and children’s charities we donate to internationally are “claimable.” Here’s what I found:

Did the Queen Give it the Royal Nod on Behalf of Canada?

I found at http://www.cra-arc.gc.ca/chrts-gvng/qlfd-dns/qd-lstngs/gftsfrmhrmjsty-lst-eng.html
that

“A listed charitable organization outside Canada that has received a gift from Her Majesty in right of Canada is a qualified donee until 24 months from the date of the gift.”

A list of which gifts Queen Elizabeth II has made within the required time period is provided. For the 2012 taxation year, these include

  • Education Africa, in South Africa
  • The Rhodes Trust, in the United Kingdom
  • the Aga Khan Foundation, in Switzerland
  • and several others

The list is certainly not long!

Did One of Our Politicians Go to Uni There

At http://www.cra-arc.gc.ca/chrts-gvng/qlfd-dns/qd-lstngs/prscrbdnvrsts-lst-eng.html there is a list of international universities to which you can donate and claim the expense on your Schedule 9.

(Donations to most Canadian universities are also eligible. You can check by looking up the name of the university on the CRA website at http://www.cra-arc.gc.ca/chrts-gvng/lstngs/menu-eng.html.)

So if you want to contribute to the University of Tartu, rest assured you can get back a portion of your contribution. (or donate more at no additional total cost to yourself) Or to the Maharishi University of Management, which I’m sure you know is in Iowa.

Gifts to the United Nations and Its Agencies Qualify Too

I could not find a specific list of United Nations agencies on the CRA website, so you might have to contact the CRA to determine if an agency is approved.

What Other International Gifts Can be Claimed on Schedule 9?

At this time, the UN and its agencies, foreign universities, and the organizations favoured by Queen Elizabeth II on Canada’s behalf are the only ones qualified. So our donations to help children in other countries and with world health issues are not eligible.

Still, if you did donate to one of those select few organizations, you should be sure to report your claim on Schedule 9. Assuming you have taxes to pay, you will be able to reduce them using the associated credit. Then you can use the money you didn’t have to pay in taxes to contribute more to the same or another charitable effort, at no additional total cost to yourself!

Do You Work Primarily in the USA or Internationally?

This information is intended for average Canadians who work in Canada, generally donate in Canada and pay taxes only in Canada. It appears that there may some other eligible donations that apply only in very specific circumstances, particularly for Canadians who work in the US (or other countries) and are paid in US dollars (or other currencies). If that describes you, you may want to talk to an accountant about which contributions to US (or international) charities you may be able to claim.

If you read the comments, below, you will find a very useful and detailed description of one case in which a taxpayer could claim donations made to US charities based on income earned in US dollars.

I don’t feel qualified to judge which international (including American) charities would qualify for this tax break in Canada. I’d recommend you look for a tax accountant who specializes in Canadians working abroad if you have a substantial donation that you wish to claim. (It’s possible that in that case you should be getting advance authorization from the CRA before submitting the claim.)

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Do you maximize your claims to charity using Schedule 9? Any tips or issues you’d like to report? Please share your experiences with a comment.