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RRSP Contribution with Settlement Money. Not Living or Making Income In Canada

967 views 5 replies 3 participants last post by  Numbersman61 
#1 ·
Hello,

Canadian Citizen living in New Zealand for the last 2 years, since January 2020 and have not made income in Canada since leaving. August 2021 I received a payout of ~$25k for an ICBC (BC Auto Insurer) incident. The money is now in my Canadian account and would like to put into my RRSP's which I currently already have going and invested.

2021 RRSP Deduction Limit is ~47k.

Would like to know if I dump this money in my RRSP's will I have to file taxes for this year now? Also, what's the likely outcome of my taxes if I do have to file, refund or additional payment? Given I haven't been making income in Canada.

The settlement money was not taxed, I thought part of the deal with RRSP's is that you're lowering your tax bracket by moving income into RRSP's, then paying when you take it out later ideally after retirement. However my income is $0 and I will be putting ~25k into an RRSP? How do I lower that tax bracket? What happens if I want to take this specific ~25k settlement money out before retirement if it wasn’t taxed?

I think I'm ok to do this, just want to know my particular implications.

Cannot place into TFSA as I am no longer a Canadian Tax Resident.

Regards,
 
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#2 ·
it Makes no sense to invest in RRSP since you won’t receive a tax deduction. Since you are a non resident of Canada, it will be difficult to invest through a Canadian brokerage account. If you wish to keep the funds in Canadian dollars, your options are limited. High interest savings accounts, GIC’s or investing in Canadian equities using a non Canadian broker. Macquarie Group has offices in New Zealand and Canada so you may be able to use them to purchase CanadIan investment products.
 
#6 ·
Yes. The income in an RRSP is sheltered but when the funds are withdrawn, the entire amount withdrawn (including cost of GIC plus investment income) is taxed. Since the individual is a non resident, no deduction was available to him for the contribution to the RRSP. It makes no sense for the individual to contribute $35,000 to an RRSP if he can’t obtain a deduction.
 
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