Registered Disability Savings Plan
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Registered Disability Savings Plan RC4460(E) Rev. 18
Is this guide for you?
Use this guide if you want information about registered Benefit package, and which you may need to fill out
disability savings plans (RDSPs). This guide has your income tax and benefit return.
information which is not in the General Income Tax and
Our publications and personalized correspondence are
available in braille, large print, e-text, or MP3 for those
who have a visual impairment. For more information
go to canada.ca/cra-multiple-formats or call 1-800-959-8281.
La version française de ce guide est intitulée Régime enregistré d’épargne-invalidité
Unless otherwise stated, all legislative references are to the Income Tax Act and the Income Tax Regulations.
canada.ca/taxesWhat’s new?
Qualifying plan holders spouse or common-law partner) to open an RDSP for the
individual as the plan holder. Budget 2018 extends this
Where the capacity of an adult individual to enter into a measure until the end of 2023. A qualifying family member
contract is in doubt, and the adult individual does not have who becomes a plan holder before the end of 2023 could
a legal representative in place, a temporary federal measure remain the plan holder after 2023.
exists to allow a qualifying family member (a parent,
canada.ca/taxesTable of contents
Page Page
Definitions ............................................................................ 5 Anti-Avoidance Rules for RDSP ........................................ 15
Tax payable on prohibited investments ........................ 15
Chapter 1 – What is a registered disability savings
Tax payable on non-qualified investments................... 15
plan? ................................................................ 6
Refund of taxes paid on non-qualified or
What is a Canada disability savings grant? ..................... 6
prohibited investments ................................................ 16
What is a Canada disability savings bond? ..................... 6
How to claim a refund ..................................................... 16
Who can become a beneficiary of an RDSP? ................... 7
Obligations of the RDSP issuer ....................................... 16
How do you open an RDSP? .............................................. 7
Tax payable on an advantage.......................................... 16
Who can open an RDSP? ..................................................... 7
Tax payable for inadequate consideration .................... 16
Can the holder of an RDSP be changed? .......................... 8
Tax payable on use of property as security .................. 16
Who can contribute to an RDSP? ....................................... 8
Waiver of liability or cancellation .................................. 17
What is the contribution limit for RDSPs? ....................... 9
What types of payments are made from an RDSP? ....... 9 Online services ..................................................................... 18
Repayments under the CDSA ............................................ 9 My Account ............................................................................ 18
LDAP formula....................................................................... 9 Sign up for online mail ......................................................... 18
Non-taxable portion of a DAP ........................................... 10 MyCRA mobile app .............................................................. 18
What is a specified disability savings plan (SDSP)? ....... 10 Electronic payments ............................................................. 18
When does an RDSP become an SDSP? ........................... 10
For more information .......................................................... 19
When does a plan stop being an SDSP? ........................... 10
What if you need help? ........................................................ 19
Additional rules if the RDSP is a primarily
Direct deposit......................................................................... 19
government-assisted plan (PGAP) in the year ............ 11
Forms and publications ....................................................... 19
How are payments from an RDSP reported? .................. 11
Electronic mailing lists ......................................................... 19
Transfers ................................................................................ 11
Tax Information Phone Service (TIPS) .............................. 19
Rollovers ................................................................................ 11
Teletypewriter (TTY) users ................................................. 19
What happens if the beneficiary is no longer eligible
Service-related complaints .................................................. 19
for the DTC? ...................................................................... 12
Formal disputes (objections and appeals)..................... 19
What happens if the beneficiary dies? .............................. 13
Reprisal complaints .......................................................... 19
When do grants and bonds have to be repaid? ............... 13
Due dates ................................................................................ 19
Proportional repayment rule .............................................. 13
Cancel or waive penalties or interest ................................. 19
Chapter 2 – Tax payable ..................................................... 14
Related forms and publications........................................ 20
Tax payable on DAPs .......................................................... 14
4 canada.ca/taxesDefinitions corporations, depending on the circumstances. For more
information, see Income Tax Folio S1-F5-C1, Related
This section provides a general definition of the technical Persons and Dealing at Arm’s length.
terms that we use in this guide.
Non-qualified investment – Any property that is not a
Adjusted family net income – this is your family net qualified investment for the RDSP trust. For more
income minus any universal child care benefit (UCCB), information, see Income Tax Folio S3-F10-C1, Qualified
Canada child benefit and registered disability savings plan Investments – RRSPs, RESPs, RRIFs, RDSPs and TFSAs.
(RDSP) income received plus any UCCB, Canada child
Prohibited investment – this is property to which the
benefit and RDSP amounts repaid.
RDSP holder is closely connected. It includes:
Advantage – an advantage is any benefit or debt that is
■ a debt of the holder
conditional on the existence of the RDSP, subject to certain
exceptions for normal investment activities and ■ a debt or share of, or an interest in, a corporation, trust or
conventional incentive programs. partnership in which the holder has a significant interest
(generally a 10% or greater interest, taking into account
An advantage also includes any benefit that is an increase
non-arm’s length holdings)
in the total fair market value (FMV) of the property of the
RDSP that is reasonably attributable to any one of the ■ a debt or share of, or an interest in, a corporation, trust,
following: or partnership with which the holder does not deal at
arm’s length
■ a transaction or event (or series) that would not have
occurred in a normal commercial or investment context A prohibited investment does not include a mortgage loan
between arm’s length parties acting prudently, that is insured by the Canada Mortgage and Housing
knowledgeably, and willingly, and one of the main Corporation or by an approved private insurer. It also does
purposes of which is to benefit from the tax-exempt not include certain investment funds and certain widely
status of the RDSP held investments that reflect a low risk of self-dealing. For
more information, see Income Tax Folio S3-F10-C2,
■ a payment received in substitution for a payment for
Prohibited Investments – RRSPs, RESPs, RRIFs, RDSPs and
services rendered by the holder (or non-arm’s length
TFSAs.
person) or for a return on investment on non-registered
property Qualified investment – An acceptable investment for an
RDSP, including money, guaranteed investment
■ a swap transaction
certificates, government and corporate bonds, mutual
■ specified non-qualified investment income that has not funds, and securities listed on a designated stock exchange.
been paid from the RDSP within 90 days of the holder For more information, see Income Tax Folio S3-F10-C1,
receiving a notice from CRA requiring removal Qualified Investments – RRSPs, RESPs, RRIFs, RDSPs, and
TFSAs.
An advantage also includes a registered plan strip, or any
benefit that is income or a capital gain that is reasonably RDSP holder – the plan holder is the person who opens the
attributable to one of the following: RDSP and makes or authorizes contributions on behalf of
the beneficiary.
■ a prohibited investment
Registered plan strip – the amount of a reduction in the
■ an artificial diversion of an amount away from the RDSP FMV of property of the RDSP, if the value is reduced as
For more information on advantages, see Income Tax part of a transaction or event (or series) for which one of the
Folio S3-F10-C3, Advantages – RRSPs, RESPs, RRIFs, main purposes is to enable the holder (or non-arm’s length
RDSPs and TFSAs. person) to obtain a benefit in respect of the property of the
RDSP or to obtain a benefit as a result of the reduction.
Arm’s length – refers to a relationship or a transaction Exceptions are provided for plan distributions that are
between persons who act in their separate interests. For included in income, or specifically excluded from income
more information on Arm’s length, see Income Tax (such as a tax-deferred transfer between plans). For more
Folio S1-F5-C1, Related Persons and Dealing at Arm’s information on a registered plan strip, see Income Tax
length. Folio S3-F10-C3, Advantages – RRSPs, RESPs, RRIFs,
Fair market value (FMV) – usually the highest dollar value RDSPs and TFSAs.
you can get for your property in an open and unrestricted Specified non-qualified investment income – income
market, between a willing buyer and a willing seller who (excluding the dividend gross-up), or a capital gain that is
are acting independently of each other. For more reasonably attributable, directly or indirectly, to an amount
information on the valuation of securities of closely held that is taxable for any RDSP of the holder (for example,
corporations, see Information Circular IC89-3, Policy subsequent generation income earned on non-qualified
Statement on Business Equity Valuations. investment income or on income from a business carried on
Non-arm’s length – generally refers to a relationship or by an RDSP).
transaction between persons who are related to each other. Swap transaction – this is any transfer of property between
However, a non-arm’s length relationship might also exist the RDSP and its holder (or non-arm's length person).
between unrelated individuals, partnerships or Exceptions are provided for contributions to and
distributions from the RDSP, purchase and sale
canada.ca/taxes 5transactions between the RDSP and another RDSP of the The amount of the grant is based on the beneficiary’s
holder, and transactions relating to insured mortgages. For adjusted family net income as follows:
more information on swap transactions and applicable
transitional rules, see Income Tax Folio S3-F10-C3, Beneficiary’s
Advantages – RRSPs, RESPs, RRIFs, RDSPs and TFSAs. adjusted family Grant Maximum
net income
Chapter 1 – What is a registered $93,208* or less
disability savings plan? $3 for every $1
on the first $500 $1,500
contributed
A registered disability savings plan (RDSP) is a savings
plan intended to help parents and others save for the $2 for every $1
on the next $1,000 $2,000
long-term financial security of a person who is eligible for contributed
the disability tax credit (DTC). more than
Contributions to an RDSP are not tax deductible and can be $93,208*
made until the end of the year in which the beneficiary $1 for every $1
turns 59. Contributions that are withdrawn are not on the first $1,000 $1,000
contributed
included as income to the beneficiary when paid out of an
RDSP. However, the Canada disability savings grant * The beneficiary adjusted family net income thresholds
(grant), the Canada disability savings bond (bond), are indexed each year to inflation. The income thresholds
investment income earned in the plan, and the proceeds shown are for 2018.
from rollovers are included in the beneficiary’s income for
tax purposes when paid out of the RDSP. For more What is a Canada disability savings
information on RDSPs, go to canada.ca/registered-plans-
administrators.
bond?
The bond is an amount paid by the Government of Canada
What is a Canada disability savings directly into an RDSP. The government will pay a bond of
up to $1,000 a year to low-income Canadians with
grant? disabilities. No contributions have to be made to get the
The grant is an amount that the Government of Canada bond. The lifetime bond limit is $20,000. A bond can be
pays into an RDSP. The government will pay a matching paid into an RDSP until the year in which the beneficiary
grant of 300%, 200%, or 100%, depending on the turns 49.
beneficiary’s adjusted family net income and the amount The amount of the bond is based on the beneficiary’s
contributed. The beneficiary’s adjusted family net income is adjusted family net income as follows:
calculated as follows:
■ From birth to December 31 of the year the beneficiary Beneficiary’s adjusted
turns 18, the beneficiary’s adjusted family net income is Bond
family net income
based on the income information used to determine the
Canada child benefit (CCB) for that beneficiary. $30,450* or less (or if the
holder is a public $1,000
■ Beginning the year the beneficiary turns 19 until the institution)
RDSP is closed, the beneficiary’s adjusted family net
income is based on their income plus their spouse’s, or Part of the $1,000 based
common-law partner’s income. Between $30,450* and on the formula in the
$46,605* Canada Disability
■ If the beneficiary is under the care of a department, Savings Act
agency, or institution for at least one month in the year,
the adjusted family net income is based on the allowance more than $46,605* No bond is paid
payable to the department, agency, or institution under * The beneficiary adjusted family net income thresholds
the Children’s Special Allowances Act. are indexed each year to inflation. The income thresholds
An RDSP can get a maximum of $3,500 in matching grants shown are for 2018.
in one year and up to $70,000 over the beneficiary’s To qualify for the bond or to earn a grant, the beneficiary
lifetime. A beneficiary’s RDSP can receive a grant on must file income tax and benefit returns for the past two
contributions made until December 31 of the year in which years and all future taxation years when they have an
the beneficiary turns 49. RDSP.
6 canada.ca/taxesCarry forward of unused grant and bond Who can become a beneficiary of an
Before the end of the year you turn 49 years of age, you can RDSP?
carry forward up to 10 years of unused grant and bond
You can designate an individual as beneficiary if the
entitlements to future years, as long as you met the
individual:
eligibility requirements during the carry-forward years
(for example, if you were eligible for the disability tax ■ is eligible for the DTC
credit and you were a Canadian resident). If an RDSP was
opened: ■ has a valid social insurance number (SIN)
■ in 2018, the carry forward period would be from 2008 ■ is a resident of Canada when the plan is entered into and
(the year RDSPs became available) to 2018 ■ is under the age of 60 (a plan can be opened for an
■ in 2020, the carry forward period would be from 2010 to individual until the end of the year in which they
2019 turn 59). The age limit does not apply when a
beneficiary’s RDSP is opened as a result of a transfer
The grant and bond will be paid on unused entitlements from the beneficiary’s former RDSP
up to an annual maximum of $10,500 for the grant and
$11,000 for the bond. A beneficiary can only have one RDSP at any given time,
although this RDSP can have several plan holders
Employment and Social Development Canada (ESDC) throughout its existence, and it can have more than one
administers the grant and the bond programs. ESDC bases plan holder at any given time.
the amount of the grant and bond that are available for any
particular year on the beneficiary’s family income, as well Notes
as on matching rates. A person is eligible for the DTC only if a medical
practitioner (which includes a nurse practitioner)
certifies on Form T2201, Disability Tax Credit Certificate,
Example that the individual has a severe and prolonged
Let us take Roger for example: impairment in physical or mental functions. This form
■ He is a person with a disability. must also be approved by the CRA and the person must
be deemed to be eligible for the DTC. To get Form T2201,
■ His income has been less than $15,000 each year since go to canada.ca/disability-tax-credit or call
2008. 1-800-959-8281.
■ He has been eligible for the disability tax credit (DTC) The holder does not have to be a resident of Canada.
each year since 2008. However, the beneficiary must be a resident of Canada
when the plan is opened and when each contribution is
■ He is not, and has never been, a holder or beneficiary of
made to the plan. RDSP payments can only be made to
an RDSP.
the beneficiary (or to the beneficiary’s estate after the
■ He has reached the age of majority and is contractually beneficiary’s death). Contributors will not be entitled to
competent to enter into a plan. a refund of their contributions.
In August 2018, Roger opens an RDSP. Although opened in For more information, go to canada.ca/disability-tax-credit
2018, Roger’s plan has accumulated grant and bond or see Guide RC4064, Disability – Related Information.
entitlements over the past 10 years, going back to 2008
when RDSPs became available. How do you open an RDSP?
The following is a breakdown of Roger’s accumulated grant To open an RDSP, a person who qualifies to be a holder of
and bond entitlements. the plan must contact a participating financial institution
■ $1,500 in grant entitlements per year at the 300% that offers RDSPs. These financial institutions are known
matching rate ($1,500 × 10 years for a total of $15,000) as RDSP issuers.
■ $2,000 in grant entitlements per year at the 200% rate Note
($2,000 × 10 years for a total of $20,000) The plan holder is the person who opens the RDSP
and makes or authorizes contributions on behalf of
■ $1,000 in bond entitlements per year ($1,000 × 10 years the beneficiary. As long as conditions are met, there can
for a total of $10,000) be more than one plan holder at any time.
Upon application for his bond, his RDSP will receive
$10,000 in accumulated bond entitlements. Who can open an RDSP?
After the RDSP is opened, with Roger’s written consent, his The beneficiary is under the age of majority
family contributes $800 to his RDSP in October 2018, for If the beneficiary is under the age of majority, a qualifying
which his RDSP receives $2,400 ($800 × 300%) as a grant. person can open an RDSP for the beneficiary and become a
Roger carries forward $12,600 ($15,000 - $2,400) in unused holder if that person is any of the following:
grant entitlement at the 300% rate and still carries $20,000 in ■ a legal parent of the beneficiary
unused grant entitlement at the 200% rate.
canada.ca/taxes 7■ a guardian, tutor, or curator of the beneficiary, or another The beneficiary has reached the age of
individual who is legally authorized to act for the majority but is not contractually competent to
beneficiary enter into a plan
■ a public department, agency, or institution that is legally An individual who is eligible to be a beneficiary of an
authorized to act for the beneficiary RDSP, (but for whom a plan has not yet been opened) may
have reached the age of majority but may not be
The beneficiary has reached the age of contractually competent to enter into a plan.
majority and is contractually competent to A qualifying person, who is legally authorized to act for the
enter into a plan beneficiary, under the provincial legislation, can open an
If the beneficiary has reached the age of majority and is RDSP for the individual and become a holder.
contractually competent to enter into a plan the beneficiary
can open an RDSP for themselves. Can the holder of an RDSP be
If the legal parent(s), at the time the plan is established, changed?
are holders of a pre-existing RDSP for the adult beneficiary,
When a plan is opened by a beneficiary’s legal parent(s),
the legal parent(s) could remain holder(s) of the new plan.
the legal parent(s) can continue as the holder(s) of the plan
The adult beneficiary could also be added as a joint holder
after the beneficiary reaches the age of majority. When the
along their parents.
beneficiary reaches the age of majority and is contractually
competent to enter into a plan, the beneficiary can be added
The beneficiary has reached the age of to the RDSP as a joint holder.
majority but their contractual competency to
The beneficiary is the only one who can be a holder of the
enter into a plan is in doubt plan once they have reached the age of majority and is
The ability for a “qualifying family member” (QFM) to contractually competent to enter into a plan. If a plan is
open a plan under these rules applies as of June 29, 2012 opened by somebody other than the beneficiary or the
and ends on December 31, 2023. beneficiary’s legal parent(s), that person or body must be
removed as a holder of the plan when the beneficiary
A QFM includes a spouse, common-law partner, or parent
reaches the age of majority.
of an individual.
A holder who is not the beneficiary of the plan does not
Note
have to be a resident of Canada, but must have a valid SIN
The spouse or common-law partner is not eligible for
or a business number (for public institutions, departments,
this measure if they are living apart from the beneficiary
and agencies) to open the plan.
due to a breakdown in their marriage or partnership.
If the guardian, tutor, public department, or any other
The QFM measure cannot be used if the beneficiary is
qualifying person or body (with the exception of a
currently the beneficiary of an existing RDSP or if a
qualifying family member) is no longer qualified to be a
qualifying person is authorized to act on behalf of the
holder (for example they are no longer the legal guardian
beneficiary.
or have died), they must be removed from the plan as
A QFM can open an RDSP for the individual and become a holder. In such a case, the following can be added to the
holder if, after reasonable inquiry, it is the opinion of the plan as a holder’s successor or assignee:
RDSP issuer, that an adult individual’s contractual
■ the beneficiary (provided that the beneficiary has
competency to enter into a plan is in doubt.
reached the age of majority and is contractually
A QFM is no longer qualified to be a holder if any of the competent)
following apply:
■ the beneficiary’s estate
■ in the issuer’s opinion, after reasonable inquiry, the
■ any other person or body who is already a holder
beneficiary’s contractual competence to enter into a plan
(for example, two legal parents enter into an RDSP plan
is no longer in doubt and the beneficiary notifies the
together and one parent passes away; the other parent
issuer that they choose to become the plan holder
would receive the deceased parent’s rights and become
■ the beneficiary is determined to be contractually the sole holder of the plan)
competent by a competent tribunal or other authority
■ a legal parent of the beneficiary and was previously a
under provincial law and the beneficiary chooses to
holder of the plan
replace the QFM as the plan holder
■ a qualifying person at the time the rights are acquired
■ a legal representative is later named in respect of the
beneficiary, the legal representative will then replace the
QFM as the plan holder Who can contribute to an RDSP?
The RDSP issuer will be required to notify the individual if Anyone can contribute to an RDSP with the written
the individual becomes a beneficiary under an RDSP permission of the plan holder. For more information, see
opened according to these rules. “Who can open an RDSP?” on the previous page.
8 canada.ca/taxesWhat is the contribution limit for Note
If an RDSP is a SDSP, payments must start being paid
RDSPs? from the plan before the end of the calendar year
There is no annual limit on amounts that can be contributed following the year in which the plan last became an
to an RDSP of a particular beneficiary in a given year. SDSP.
However, the overall lifetime limit for a particular
beneficiary is $200,000 (all previous contributions and A specified year is the calendar year in which a licensed
rollovers that have been made to an RDSP of a particular medical doctor or a nurse practitioner certifies in writing
beneficiary will reduce this amount). Contributions are that the beneficiary will not live longer than five years, and
permitted until the end of the year in which the beneficiary includes each of the five calendar years following the year
turns 59. of certification. A year will not qualify as a specified year
unless the medical certificate has been provided to the
Note issuer in or before the year in question. For example, if a
Amounts directly transferred from one beneficiary’s doctor makes such a certification in 2017, but the issuer is
RDSP to another RDSP for the same beneficiary do not not provided with the certification until 2018, only the
count toward the $200,000 overall contribution limit. years from 2018 to 2022 are specified years for the RDSP.
If the RDSP is an SDSP, the specified year includes each
What types of payments are made following calendar year.
from an RDSP?
There are three types of payments made from an RDSP: Repayments under the CDSA
■ disability assistance payments (DAPs) (these include Under the CDSA, the assistance holdback amount is
lifetime disability assistance payments (LDAPs) generally required to be repaid to ESDC if any DAP is paid
from the RDSP.
■ direct transfers to another RDSP for the same beneficiary
(for more information, see “Transfers” on page 11) The assistance holdback amount is defined in the
Canada Disability Savings Regulations. In general terms, it
■ repayments under the Canada Disability Savings Act is the total amount of bond and grant paid into the RDSP
(CDSA) or a designated provincial program within the last 10-year period, less any part of that amount
A DAP is any payment from an RDSP to the beneficiary or that has been repaid to ESDC.
to their estate after their death. It is a singular payment that As of January 1, 2014, an amount that is three times the
can be requested at any time and may consist of amount of the DAP, up to a maximum of the assistance
contributions, grant, bond, proceeds from rollovers and holdback amount, is required to be repaid to ESDC if any
income earned in the account. DAP is paid from the RDSP.
Only the beneficiary or the beneficiary’s estate will be
permitted to receive DAPs from the RDSP. LDAP formula
Note There is no limit on the amount of DAPs or LDAPs payable
A DAP is not permitted if, after the payment, the FMV of to the beneficiary in a specified year (if the plan is not an
the property held by the RDSP would be less than the SDSP). However, in all cases a DAP is not permitted if, after
assistance holdback amount for the RDSP. For more the payment, the FMV of the property held by the RDSP
information, see “Repayments under the CDSA” on this would be less than the assistance holdback amount for the
page. RDSP.
The RDSP issuer may allow the RDSP holder to request The total amount of the LDAP paid in the year cannot be
DAPs to be made to a beneficiary that are separate from more than the amount calculated using the following
LDAPs (as described below). Contact a participating issuer formula:
to determine if it offers plans that allow an RDSP holder to
A ÷ (B + 3 – C) + D
request these types of payments from a plan.
where:
If the RDSP is a specified disability savings plan (SDSP)
(as described on the next page), withdrawals can be made A = the FMV of the property held in the plan at the
from the plan in the year of certification and each beginning of the year, (excluding the value of locked-in
subsequent year without triggering the repayment of the annuity contracts held by the plan trust)
assistance holdback amount.
B = the greater of 80 and the age of the beneficiary at
LDAPs are disability assistance payments (DAPs) that, the beginning of the calendar year
once started, must be paid at least annually until either the
plan is terminated or the beneficiary has died. These C = the actual age of the beneficiary at the beginning of
payments must begin by the end of the year in which the the calendar year
beneficiary turns 60 and, unless the year is a specified year D = the total of all periodic payments paid, or deemed to
(as described below), are subject to an annual withdrawal have been paid, under certain locked-in annuity
limit determined by the formula described on this page. contracts, to the plan trust in the calendar year, if
applicable
canada.ca/taxes 9Non-taxable portion of a DAP What is a specified disability savings
The non-taxable portion of a DAP made to a beneficiary plan (SDSP)?
from an RDSP is the lesser of: A specified disability savings plan (SDSP) is a measure to
■ the DAP provide beneficiaries who have shortened life expectancy
with greater flexibility to access their savings from an
■ the amount determined by the formula: RDSP. Withdrawals from an SDSP will not trigger a
A×B÷C+D repayment of the assistance holdback amount as long as the
sum of the taxable portions of all withdrawals made in the
where: year does not exceed $10,000 (unless the LDAP formula
A = the amount of the DAP result requires a greater amount to be paid). However, once
the election is made, no more contributions can be made to
B = the amount by which the total contributions made to the plan and the plan will not be entitled to any new grant
any RDSP of the beneficiary exceeds the total or bond. Furthermore, beneficiaries will not be entitled to
non-taxable portion of all DAPs previously made from carry forward any grant or bond for those years under this
any RDSP of the beneficiary (if this formula were read plan.
without reference to variable D below)
C = the amount by which the FMV of the property held When does an RDSP become an
by the RDSP before the DAP is greater than the SDSP?
assistance holdback amount for the plan
The RDSP becomes an SDSP when:
D = the amount in respect of which a holder of the plan
■ a licensed medical doctor or a nurse practitioner certifies
pays the tax payable on an advantage described on
in writing that the beneficiary of an RDSP is, in their
page 16, unless this tax is waived, cancelled or
professional opinion, unlikely to survive more than five
refunded or has previously been included in the non-
years
taxable portion of a DAP made to the beneficiary
■ the holder of the RDSP elects in prescribed form
Example and provides the election, along with the medical
Linda earned more than $93,208 in 2018 and is the sole certification, to the issuer of the RDSP and
provider for her spouse Paul, who is 40 years old. She starts ■ ESDC receives notification of the election from the issuer
contributing to his RDSP in 2018 and Linda contributes
$10,000 annually to Paul’s RDSP for 20 years. The
contributions made are eligible for the grant at a rate When does a plan stop being an
of 100% of the contributions made in the particular year, up SDSP?
to a maximum of $1,000 annually (see the chart on page 6). A plan stops being an SDSP if any of the following occur:
Paul is not eligible for the bond.
■ ESDC receives notification from the issuer of the
After 20 years, the FMV of the RDSP is $261,448. Since plan that the holder elects to have the plan stop being
Paul will be 60 years old in 2038, the grant can be paid an SDSP
on the contributions from 2018 to 2027 (until he turns 49).
Contributions can be made to the plan up until the end of ■ the total of the taxable portion of the DAPs made from
the year in which Paul turns 59. No DAPs were paid from the plan in the year while it was an SDSP exceeded
the RDSP since the RDSP was set up. $10,000 (unless the LDAP formula result requires a
greater amount to be paid). For more information, see the
Therefore, in 2038, the amount that Paul can receive is last bullet of this section)
$10,893.67 calculated by the LDAP formula, which
is A ÷ (B + 3 - C) + D: ■ a contribution, bond, or grant is paid into the plan
$261,448 ÷ (80 + 3 - 59) + $0 ■ an amount is paid into the plan from a designated
$261,448 ÷ 24 provincial program
$10,893.67
■ the plan is terminated
The non-taxable portion of the LDAP is $8,333.33 and is
■ the plan stops being an RDSP
calculated by the second formula described on this page:
■ it is the beginning of the first calendar year throughout
$10,893.67 × $200,000 ÷ $261,448
which the beneficiary under the plan is no longer eligible
Variable B is $200,000 because no DAPs were made for the DTC
before 2038.
■ payments have not begun to be paid before the end of the
Variable C is $261,448 because no assistance holdback particular calendar year following the year in which the
amount exists since the last grant was paid into the RDSP plan last became an SDSP
more than 10 years ago.
■ an RESP rollover is made
10 canada.ca/taxes■ the total amount of DAPs made from the plan to the Transfers
beneficiary in the calendar year is less than the amount
An amount can be transferred from one RDSP to another
determined by the LDAP formula or an amount equal to
RDSP only under the following conditions:
the FMV of the property in the plan, whichever is the
lesser ■ the transfer must be made directly from a beneficiary’s
current RDSP to a new RDSP for the same beneficiary
Note
The holder must wait 24 months after the plan stopped ■ a transfer can only be made if all holders of the current
being an SDSP before making a new election. RDSP agree to the transfer
■ all funds must be transferred from the current RDSP
Additional rules if the RDSP is a to the new RDSP
primarily government-assisted plan ■ the current RDSP must be terminated immediately
(PGAP) in the year following the transfer
An RDSP becomes a PGAP in a year when the total of all ■ where the beneficiary has attained 59 years of age before
government grant and bond payments made into any of the the year in which the transfer takes place, the issuer of
beneficiary’s RDSPs in the previous years is more than the the new plan agrees to pay any DAPs required to be
total of all private contributions made to any of the made under the plan
beneficiary’s RDSPs in the previous years.
Generally, in a PGAP year (other than a specified year), the Rollovers
DAPs (including LDAPs) must not exceed the greater of the Rolling over retirement savings property on a
LDAP formula and 10% of the FMV of the plan assets at the
beginning of the year. Certain DAPs made following, and tax-deferred basis to an RDSP
as a consequence of, a transfer of property from another The maximum rollover amount into an RDSP is $200,000.
RDSP of the beneficiary do not count toward this limit on All contributions and rollover amounts made to any RDSP
DAPs. of a beneficiary will reduce this amount. A grant will not be
paid into the RDSP on amounts that are rolled over.
In any year where the beneficiary is over the age of 59, the
LDAP will not be more than the LDAP formula. In a PGAP For deaths occurring after March 3, 2010, the RDSP rules
year, the combination of LDAPs and DAPs must not exceed allow for a rollover of a deceased individual’s registered
the greater of the LDAP formula and 10% of the FMV of the retirement savings plan (RRSP) proceeds to an RDSP of the
plan assets at the beginning of the year. deceased individual’s financially dependent child or
grandchild with an impairment in physical or mental
When the beneficiary turns 28 (or any later age up to, and functions. For more information, see “Eligible individual”
including, the age of 58) during the calendar year, the on the next page.
beneficiary has the right to direct that DAPs be paid to him
or her at any time in that year if, after payment, the FMV of These rollover rules also apply to:
the property in the RDSP is not less than the assistance
■ registered retirement income fund (RRIF) proceeds
holdback amount for the RDSP. The DAP that can be paid
under these circumstances cannot be more than the ■ certain lump-sum amounts paid from registered pension
calculated allowable amount. With the exception of plans plans (RPPs) and specified pension plans (SPPs)
where the beneficiary is over the age of 59, a DAP made in
■ pooled registered pension plans (PRPPs) proceeds
any other year may require that the assistance holdback
amount be repaid to ESDC.
RDSP rollover reporting
How are payments from an RDSP The retirement savings rollover transaction must be
documented using Form RC4625, Rollover to a Registered
reported? Disability Savings Plan (RDSP) Under Paragraph 60(m) or
Proceeds from rollover amounts as well as the grant, bond the form provided by the RDSP issuer. A tax slip will be
and investment income earned in the plan are included in issued (for example, T4A, T4RSP, or T4RIF). The amount of
the beneficiary’s income for tax purposes when they are the retirement savings rollover is reported and deducted on
paid out of the RDSP. RDSP issuers report the taxable the eligible individual’s income tax and benefit return. In
portions of the payments from the plan in box 131, located some cases, the amount may also need to be reported and
in the “Other information” area of a T4A slip and send two deducted in the deceased individual’s final return.
copies of the slip to the beneficiary or the beneficiary’s legal
For more information on how rollovers should be reported,
representative. The beneficiary has to include this amount
see “Transfers to registered disability savings plans” in
as income on line 125 of their income tax and benefit return
Guide T4040, RRSP and Other Registered Plans for
for the year in which they receive it.
Retirement.
For more information on the taxable portion of the
Notes
payments see “Tax payable on DAPs” on page 14.
These rules apply to retirement savings rollovers only.
Education savings rollovers are recorded on
Form RC435, Rollover from a Registered Education
Savings Plan to a Registered Disability Savings Plan or
canada.ca/taxes 11another form provided by the RESP promoter. Tax slips to be repaid to ESDC and the RESP terminated by the end
are not issued for education savings rollovers. of February of the year after the year during which the
rollover is made.
RDSP issuers may produce and use their own method of
documentation for education savings rollovers. The RESP rollover to an RDSP:
The retirement savings rollover to an RDSP: ■ will be considered a private contribution for the purpose
of determining whether the RDSP is a PGAP, but will not
■ will be considered a private contribution for the purpose
be eligible for grants
of determining whether the RDSP is a PGAP, but will not
be eligible for grants ■ will be included in the taxable portions of RDSP
withdrawals made to the beneficiary
■ will be included in the taxable portions of RDSP
withdrawals made to the beneficiary ■ may not exceed, and will reduce the RDSP contribution
lifetime limit.
■ may not exceed, and will reduce the RDSP contribution
lifetime limit An RESP rollover cannot be made if the beneficiary meets
one of the following conditions:
Eligible individual ■ is not eligible for the DTC
An eligible individual is a child or grandchild of a deceased
■ has died
annuitant under an RRSP or RRIF, or of a deceased member
of an RPP or SPP or PRPP, who was financially dependent ■ is over 59 years of age in the year of the contribution or
on the deceased for support, at the time of the deceased’s
death, by reason of an impairment in physical or mental ■ is not a resident of Canada
functions. The eligible individual must also be the An RESP rollover cannot be made if:
beneficiary under the RDSP into which the eligible
proceeds will be paid. ■ it will cause the $200,000 contribution limit to be
exceeded or
Rolling over RESP property on a tax-deferred ■ the RDSP holder has not provided their consent to the
basis to an RDSP rollover
Rollovers can be made from an RESP to an RDSP. In
general terms, a subscriber of an RESP that allows What happens if the beneficiary is no
accumulated income payments and a holder of an RDSP longer eligible for the DTC?
may jointly elect to rollover an accumulated income
payment under the RESP to the RDSP if, at the time of the Unless an election is filed with the issuer, the RDSP must
election, the RESP beneficiary is also the beneficiary under be terminated and all amounts paid out of the plan by
the RDSP. December 31 of the year following the first calendar year
throughout which the beneficiary is no longer considered
To qualify for an RESP rollover, the beneficiary must meet to have a severe or prolonged impairment in physical or
the existing age and residency requirements in relation to mental functions that made him or her eligible for the DTC.
RDSP contributions. As well, one of the following Any funds remaining in the RDSP after any required
conditions must be met: repayments of government grant and bond will be paid to
■ the beneficiary is, or will be, unable to pursue the beneficiary. The taxable portions of the DAP will be
post-secondary education because they have a severe and included in the income of the beneficiary in the year the
prolonged mental impairment or payment is made to the beneficiary.
■ the RESP has been in existence for more than 35 years or A beneficiary who stops being eligible for the DTC, might,
due to the nature of their medical condition, be eligible
■ the RESP has been in existence for at least 10 years, each again for the DTC for some later year. Since
beneficiary under the RESP has reached 21 years of age January 1, 2014, subject to Election conditions discussed
and is not eligible to receive educational assistance below, an election may be made if the RDSP holder wishes
payments to postpone closing the plan. In these circumstances,
contribution room and repaid grants and bonds are not
An RESP rollover over to an RDSP will not be subject to
restored.
regular income tax or the additional 20% tax, for more
information, see Form T1172, Additional Tax on
Accumulated Income Payments from RESPs. The RESP Election
promoter must send Form RC435, Rollover from a The RDSP plan holder will be required to:
Registered Education Savings Plan to a Registered
Disability Savings Plan to the RDSP issuer and keep a copy ■ have a licensed medical doctor or a nurse practitioner
of it on file. This will satisfy the RESP promoter’s certify in writing that the beneficiary will likely become
requirement to file the election with CRA. eligible for the DTC at some point in the future
When an RESP rollover occurs, contributions in the RESP ■ make an election to keep the plan open by providing the
will be returned to the subscriber on a tax-free basis. As medical certificate to the issuer
well, Canada education savings grants (CESGs) and The RDSP issuer will then be required to notify ESDC that
Canada learning bonds (CLBs) in the RESP will be required the election has been made. The election must be made on
12 canada.ca/taxesor before December 31st of the year following the first year When do grants and bonds have to be
for which the beneficiary is no longer eligible for the DTC.
repaid?
An election will generally be valid until the end of the
10-Year Repayment Rule
fourth calendar year following the first full calendar year
for which a beneficiary is no longer eligible for the DTC. If any of the following events occur, all government
grants and bonds paid into the plan during the preceding
The RDSP must be terminated by: 10 years before the event must be repaid to the Government
■ the end of the year following the first year for which of Canada. Repayments are required when:
there is no longer a valid election or ■ the RDSP is terminated
■ the end of the year following the 5th year where there is ■ the plan ceases to be a RDSP
no longer a continuous eligibility for the DTC
■ prior to 2014, a DAP is made from the plan
If a beneficiary becomes eligible for the DTC while an
election is valid, the usual RDSP rules will apply ■ prior to 2014, the beneficiary stops being eligible for the
commencing with the year for which the beneficiary DTC
becomes eligible. ■ since January 1, 2014, the beneficiary stops being eligible
for the DTC and an election to extend the period for
Results of an election when the beneficiary is which an RDSP may remain open is not filed by the plan
no longer eligible for the DTC holder
Where an election is made, the following rules will apply ■ where a valid election to keep an RDSP open expires or
commencing with the first year for which the beneficiary is
DTC-ineligible: ■ the beneficiary dies
■ no contributions to the RDSP will be permitted, To ensure the funds in an RDSP are available to meet
including the rollover of RESP investment income; potential obligations under the 10-year repayment rule,
however, a rollover of proceeds from a deceased RDSP issuers must set aside an “assistance holdback
individual’s RRSP or RRIF to the RDSP of a financially amount” equal to the total grant and bond paid into the
dependent infirm child or grandchild will still be RDSP in the preceding 10 years less any grant and bond
permitted already repaid in respect of that 10-year period. When one
of the events described above occurs, the required
■ no new grant, bond, or designated provincial payments repayment is equal to the amount of the assistance
will be paid into the RDSP holdback amount immediately preceding the event.
■ no new entitlements will be generated for the purpose of Note
the carry forward of grants and bonds Repayments of amounts that were previously included
■ withdrawals from the RDSP will be permitted and will as income are tax deductible and reported on line 232 of
be subject to the proportional repayment rule and the the Income Tax and Benefit Return.
maximum and minimum withdrawal rules A beneficiary with a life expectancy of five years or less will
■ if a beneficiary dies after an election has been made, the be allowed annual RDSP withdrawals of up to $10,000 in
former 10-year repayment rule will apply taxable plan savings, as well as a pro-rated amount of plan
contributions, without having to repay the grants or bonds
Note paid into the plan in the preceding 10 years. These rules
The assistance holdback amount will be equal to the only apply when an election to be an SDSP has been filed
amount of the assistance holdback amount immediately with the RDSP issuer by the holder of the RDSP and the
preceding the moment the beneficiary is no longer issuer has notified ESDC of the election.
eligible for the DTC less any subsequent repayments.
A rule applies for withdrawals made from an RDSP
For more information on how much the repayment will be, after 2013. This rule replaces the 10-year repayment rule
contact the issuer of your RDSP or go to ESDC at esdc.gc.ca. only for RDSP withdrawals. The former 10-year repayment
rule will continue to apply where the RDSP is terminated or
What happens if the beneficiary dies? deregistered, the RDSP beneficiary stops being eligible for
the DTC without filing an election or the RDSP beneficiary
The RDSP must be closed and all amounts remaining in dies.
the plan must be paid out to the beneficiary’s estate by
December 31st of the year following the calendar year in
which the beneficiary dies. Any funds remaining in the Proportional repayment rule
RDSP, after any required repayment of government grants As of 2014, the proportional repayment rule applies on the
and bonds will be paid to the estate. If a DAP had been event where an amount is withdrawn from the RDSP. The
made and the beneficiary is deceased, the taxable portion proportional repayment rule will require that, for each $1
of the DAP must be included in the income of the withdrawn from an RDSP, $3 of any grants or bonds paid
beneficiary’s estate in the tax year in which the payment is into the plan in the 10 years preceding the withdrawal be
made. repaid, up to a maximum of the assistance holdback
amount. Repayments will be attributed to the grants or
bonds that make up the assistance holdback amount based
canada.ca/taxes 13on the order in which they were paid into the RDSP, $11,809 + DA of $8,235) in taxable DAPs and LDAPs before
beginning with the oldest amounts. For more information the RDSP issuer has to withhold income tax at source. For
on how much the repayment will be, contact the issuer of the 2017 tax year, this amount was $19,748.
your RDSP or go to ESDC at esdc.gc.ca.
Withholding threshold
Example
Jeff opens an RDSP in 2013 and contributes $1,500 to his Year 2018 2017
plan annually, being eligible for the maximum grant
Federal Basic Personal
($3,500) for each year. In 2018, the assistance holdback $11,809 $11,635
Amount (BPA)
amount for his plan equals $21,000.
In 2018, he withdraws $600 from his RDSP. Under the Federal Disability
$8,235 $8,113
10-year repayment rule, the entire assistance holdback Amount (DA)
amount ($21,000) would have to be repaid. Under the
Total $20,044 $19,748
proportional repayment rule, $1,800 of the assistance
holdback amount will be repaid (approximately 9% of the
repayment required under the former 10-year repayment Once this amount is reached, income tax must be deducted
rule). The $1,800 repayment will come from the grants paid from the taxable portion of all remaining payments in the
into his RDSP in 2013 and the plan’s assistance holdback year using the lump-sum tax withholding rate displayed
amount will be reduced to $19,200. below.
Note
NRTCs are adjusted annually to allow for inflation and
Chapter 2 – Tax payable other factors.
The taxable portion of a beneficiary’s DAPs and LDAPs are
Tax payable on DAPs the total of:
When a DAP is made from an RDSP, the part of the ■ the Canada disability savings grants
payment that includes proceeds from a rolled over amount,
the grants and bonds paid into the plan, and all investment ■ the Canada disability savings bonds
income earned in the RDSP, such as interest, is taxable. ■ the investment income earned in the plan, such as
That part of the payment is included in the income of the interest
beneficiary for the year in which the payment is made. If ■ proceeds from rollovers of other plans (RRSPs or RESPs
the beneficiary is deceased when the payment is made, the for example)
amount is included in the income of the beneficiary’s estate
for the year of the payment. Note
Individual or private contributions, or an amount in
Note respect of which a holder of the plan pays the advantage
The taxable portion (or RDSP income) is excluded from tax described on page 16 (unless this tax is waived,
income when calculating various income-tested benefits, cancelled or refunded, or has previously been included
such as the GST/HST credit, the Canada child benefit in the non-taxable portion of a DAP made to the
(CCB), and the Working income tax benefit (WITB). It is beneficiary) are not taxable.
also excluded when calculating the social benefit RDSP issuers will use the lump-sum withholding rate that
repayment and the refundable medical expense corresponds to the:
supplement.
■ total taxable portion of all LDAPs expected to be paid in
Tax deduction at source the year, or
RDSP issuers will have to withhold income tax at source ■ taxable portion of each individual DAP when requested
once the taxable portion of a beneficiary’s DAPs and The lump-sum withholding rates are:
LDAPs exceed the total of the two non-refundable tax
credits (NRTCs), the basic personal amount (BPA) and the ■ 10% (5% for Quebec) on amounts up to and including
disability amount (DA). $5,000
NRTCs help to reduce a taxpayer’s total income tax liability ■ 20% (10% for Quebec) on amounts over $5,000, and up to
at the end of the year. There are many federal and $15,000
provincial NRTCs that individuals may be eligible to claim
■ 30% (15% for Quebec) on amounts over $15,000
when filing their personal income tax and benefit returns.
However, only the federal BPA ($11,809 in 2018) and Note
federal DA ($8,235 in 2018) are to be used to calculate the The above rates are a blend of the federal and provincial
taxable income from which to withhold income tax at rates. The Quebec rates represent only the federal rates.
source. This is because all RDSP beneficiaries are eligible For more information on the provincial rates for the
for these two NRTCs. province of Quebec, go to finances.gouv.qc.ca and see
section 1.3 of Information Bulletin 2015-4.
Using the chart on this page, with the 2018 tax year for
example, a beneficiary can receive up to $20,044 (BPA of
14 canada.ca/taxesinvestments and advantages described below. Where two
Example (LDAP) or more holders of an RDSP are jointly liable to pay such a
Joey received an LDAP of $3,500 per month from his RDSP tax only one form needs to be filed on behalf of all the
in 2018 or $42,000 ($3,500 × 12) for the year. The taxable holders that are liable for the tax.
portion of each monthly LDAP was $2,000 for a yearly total
of $24,000 ($2,000 × 12). The lump-sum withholding rate on Tax payable on prohibited investments
$24,000 is 30%.
After March 22, 2017, if the RDSP trust acquires a
Joey’s RDSP issuer reduced the total BPA and DA ($20,044) prohibited investment or if previously acquired property
by the taxable part of each LDAP as it was paid and by the becomes prohibited, the investment will be subject to a
end of September, $18,000 ($2,000 × 9) of the $20,044 had special tax equal to 50% of the fair market value (FMV) of
been used. the investment, and the holder must file Form RC339,
Individual Return for Certain Taxes for RRSPS, RRIFs,
In October, his RDSP issuer reduced the remaining BPA
RESPs or RDSPs.
and DA of $2,044 ($20,044 - $18,000) by the taxable portion
of his LDAP of $2,000, leaving $44 of BPA and DA The tax is refundable in certain circumstances. For more
remaining to be used in November. No income tax was information, see “Refund of taxes paid on non-qualified or
deducted for October. prohibited investments” on page 16.
Joey had $586.80 in income tax deducted from his If the prohibited investment ceases to be a prohibited
November LDAP, calculated as ([2,000 - 44] × 30%). The investment while it is held by the RDSP trust, the RDSP
amount of income tax deducted in December is trust is considered to have disposed of and immediately re-
$600 ($2000 × 30%). acquired the property at its FMV.
In summary, in 2018, Joey received $42,000 in LDAPs and The holder is also liable for the 100% advantage tax on
had $1,186.80 in income tax deducted (no income tax income earned and capital gains realized on prohibited
deducted in October, $586.80 for November and $600 in investments.
December.
The 100% advantage tax applies to income earned, and the
Example (DAP) portion of any realized capital gain that accrued, after
Using the previous example, Joey received a DAP of March 22, 2017, regardless of when the prohibited
$10,000 at the end of July. The taxable portion of that DAP investment generating the income or gain was acquired.
was $6,000. The lump-sum withholding rate on $6,000 is
20%. Note
If an investment is both a non-qualified investment and
Remember that Joey’s RDSP issuer reduced the total BPA a prohibited investment, it is treated as a prohibited
and DA ($20,044) by the taxable portion of each LDAP investment only.
when they were paid.
For more information, see Income Tax Folio S3–F10–C2,
For July, the BPA and DA remaining is $8,044 of which Prohibited Investments – RRSPs, RESPs, RRIFs, RDSPs and
$2,000 is used for the LDAP and $6,000 is used for the DAP. TFSAs.
After paying Joey his July LDAP, $20,000
([$2,000 × 7] + $6,000) of the $20,044 had been used. Tax payable on non-qualified investments
Since Joey’s remaining BPA and DA in July is If the RDSP trust acquired a non-qualified investment after
$44 ($20,044 - $20,000), his RDSP issuer deducted no income March 22, 2017, or if a previously acquired property
tax. becomes a non-qualified investment after March 22, 2017,
the investment will be subject to a special tax. The tax is
Joey had $586.80 ([$2,000 - $44] × 30%) in income tax
equal to 50% of the FMV of the property at the time that it
deducted from his August LDAP. From September to
was acquired or that it became non-qualified, and the
December, the income tax deducted from his LDAPs is $600
holder must file Form RC339, Individual Return for Certain
each month.
Taxes for RRSPs, RRIFs, RESPs or RDSPs, with a payment
In summary, in 2018, Joey received $42,000 in LDAPs and for any balance due, no later than June 30 following the end
had $2,986.80 in income tax deducted. He also received a of the calendar year.
DAP of $10,000 with no income tax deducted.
If the RDSP holder is liable for taxes on non-qualified
investments for transactions occurring on or before
March 22, 2017, the holder must file Form RC4532,
Anti-Avoidance Rules for RDSP Individual Tax Return for Registered Disability Savings
Effective March 22, 2017, the anti-avoidance rules Plan (RDSP), with a payment for any balance no later than
governing registered plans have been extended to RDSPs. 90 days following the end of the calendar year.
The rules provide for a special tax on certain advantages The tax is refundable in certain circumstances. For more
that unduly exploit the tax attributes of an RDSP, as well as information, see “Refund of taxes paid on non-qualified or
special taxes on prohibited investments and on prohibited investments” on page 16.
non-qualified investments. Each person who is a holder is also liable for the 100%
Each person who is a holder of an RDSP is jointly liable for advantage tax on specified non-qualified investment
the taxes on prohibited investments, non-qualified income if this income is not withdrawn promptly.
canada.ca/taxes 15You can also read
