Break RRSP and pay OSAP

[ruthless29]

Hi there. My father (Canadian citizen living abroad) has about $10,000 in his RRSP to spare. He wants to reduce mine and my sister's financial burden and wants to pay off $5000 each towards our OSAP.

Is there a lot of tax or fees for the pre-mature withdrawal of the RRSP? or is there some sort of exemption for paying off OSAP?

Thank you.

[joe1487]

No. The cash-out of the $10,000 in RRSPs will be included in your father's income.

[Wonderdollar]

Hi there. My father (Canadian citizen living abroad) has about $10,000 in his RRSP to spare. He wants to reduce mine and my sister's financial burden and wants to pay off $5000 each towards our OSAP.

Is there a lot of tax or fees for the pre-mature withdrawal of the RRSP? or is there some sort of exemption for paying off OSAP?

Thank you.

There would be tax withheld by the bank on your Dad's RRSP withdrawal.

The tax amount withheld would depend on your dad's current residency (for tax purposes) situation. You mentioned that your Dad lives abroad. Is he a Non-Resident for tax purposes here in Canada or he files Canadian Tax Return and declares his world wide income? The total withdrawal of $10,000 would be his income and based on his world wide income he may get whole or part of the tax withheld back.

If he is considered a resident for tax purposes then his tax with held amount would be 10% in he withdraws up to $5000 and would be 20% if he withdraws whole $10,000.

However, If he is Non Resident for tax purpose than most likely the bank would withhold a 25% tax on RRSP withdrawal.

Follow this link http://www.cra-arc.gc.ca/tax/nonresidents/individuals/nonres-e.html

[iluvmikeharris]

Aside from the withholding tax, depending on the account setup and type of securities, there could be either fees:

-administrative penalty
-deferred sales charge (load) if recently purchased mutual funds