My TFSA contributions grow, without my having to pay taxes on the growth they experience.
Is this benefit likely to continue indefinitely, or will I at some point be required to pay these taxes?
asked Mar 21 '14 at 0:24
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The TFSA is called a "Tax Free Savings Account". If you're asking about a hypothetical change in tax laws, yes, there's always a risk. Yet, hypothetical questions of the variety "What if ____ happened?" are generally off-topic here. Could you be less hypothetical and more specific with your question? – Chris W. Rea Mar 21 '14 at 0:31
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oh, so the tax free portion is guaranteed by law (that much hasn't been obvious to me)? how much of a guarantee does the law provide, and how easy is it to change? could a new government decide that TFSAs were a bad idea and completely (and retroactively) revoke any/all tax protection they provide – blueberryfields Mar 21 '14 at 1:26
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Bear in mind that if a government wanted to retroactively tax TFSAs, this becomes harder the longer they are around as you'd have to remember that dead people would have to have updated tax returns as well as the living which isn't necessarily that likely to happen to my mind. – JB King Mar 21 '14 at 3:08
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@blueberryfields Yes, a new government can change the laws. That is what governments do. Yet, they also want to get re-elected, and are unlikely to do anything so unpopular as what you suggest unless there were good reason (one would hope). – Chris W. Rea Mar 21 '14 at 3:33
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@ChrisW.Rea Remember the BC HST fiasco? – Canadian Luke Mar 21 '14 at 15:43
After reading the comments in your question you should ask under what scenarios is there likely to be a change. Keep in mind that people have about a trillion $ of unused RRSP room. For the vast majority of Canadians that would be a better investment anyway.
The most likely thing I see is that the OAS/GIS system will change if people start accumulating large amounts in the TFSA and retiring early to use up the RRSPs before age 67 or 71. At that point their TFSA withdrawals won't affect the amount of OAS/GIS received. This could mean essentially paying welfare to millionaires. Look for a means test on social security programs in a decade or so.
