The Canada Revenue Agency (CRA) was reminded by a taxpayer recipient of the Old Age Security pension (OAS) about a perceived lack of fairness when required to include the dividends received at a grossed-up amount when calculating net income rather than only including the actual amount of dividends received. The taxpayer felt this was unfair because their net income was used to calculate the reduction his or her OAS.

In their response the CRA confirmed the grossed-up but not the actual amount of dividends had to be included in an individual’s adjusted income to determine if his or her OAS was clawed back. For 2018, any adjusted income over $75,910 would trigger a clawback of the taxpayer’s OAS.

The CRA went on to confirm the Agency had no discretion to calculate the adjusted income with actual instead of grossed-up dividends. The CRA noted that only the Department of Finance, not the CRA, had the means to update the legislation to use actual instead of grossed-up dividends to calculate an individual’s OAS clawback.

In most instances with proper tax planning an individual may reduce the effect of the OAS clawback without affecting their cash needs.