Home Economy The swap scheme that led to a forty-fold increase in one woman’s...

The swap scheme that led to a forty-fold increase in one woman’s TFSA


By the end of 2009, one taxpayer’s initial TFSA contribution of $5,000 was worth $205,795 thanks to swap transactions.Brent Lewin/Bloomberg

Our beloved TFSA will soon celebrate its tenth anniversary with an increase in the annual dollar limit to $6,000, beginning Jan. 1, 2019. While most of us simply use our TFSA to save for retirement or, perhaps for shorter-term goals such as a down payment on a home, the opportunity for abuse of the tax-free nature of the TFSA has been there from Day One.

Over the past decade, the government has introduced a variety of anti-avoidance rules meant to stop taxpayers from enjoying an inappropriate “advantage” from their TFSAs. On Oct. 1, the Canada Revenue Agency published an extensive Folio going through what’s known as the “advantage rules” for registered plans and providing examples of how the anti-avoidance rules work.

If you fall afoul of the rules, you can face a 100 per cent penalty tax on the fair market value of any advantage you receive that is related to a registered plan. Earlier this year, a taxpayer attempted to challenge the constitutionality of the advantage tax, characterizing the 100 per cent tax rate as “a confiscation of property.” Not surprisingly, that argument failed, with the court finding that the 100 per cent advantage tax “fell within a valid TFSA scheme of taxation within a valid (Tax Act).”


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