OTTAWA  (01 January 2009)  –  “As of today, people in Vegreville-Wainwright and throughout Canada can start watching their savings grow, tax free,” states Member of Parliament, Leon Benoit.

“The Tax Free Savings Account (TFSA) provides people with a powerful incentive to save for anything they want,” said Benoit. “The TFSA is the single most important personal savings vehicle since the introduction of the RRSP in the 1950’s.”

The TFSA, announced by the Conservative government in Budget 2008, is the first account of its kind in Canadian history. This is how it works: 

• First, Canadians can contribute up to $5,000 every year to a registered Tax Free Savings Account, plus carry forward any unused room to future years;
• Second, the investment income, including capital gains, earned in the plan will be exempt from any tax, even when withdrawn;
• Third, Canadians can withdraw from the account at any time without restriction. Better yet, there are no restrictions on what they can save for; and
• Finally, the full amount of withdrawals may be re-contributed to their Tax-Free Savings Account in the future, to ensure no loss in a person’s total savings room.

“If we are to help individuals and families prepare for the long-term, we must ensure they have the right incentives to save for the future,” said Benoit. “An RRSP is primarily designed for retirement, but in many ways, a TFSA is like an RRSP for everything else in your life.”

To make it easier for lower and modest income Canadians to save there are no claw backs. Neither the income or capital gains earned in a Tax-Free Savings Account nor the withdrawals from it will affect eligibility for federal income-tested benefits, such as the Guaranteed Income Supplement.

Within the Account Canadians will be generally permitted to hold the same investments as an RRSP.
“I encourage everyone to see the potential of this new initiative by visiting the Tax Free Savings Account calculator on the Finance web site at: www.budget.gc.ca,” said Benoit.