The government requires that Old Age Security (OAS) be repaid at a rate equal to 15 per cent of net income in excess of $63,511. Basically, if a person received the maximum OAS of $5,952 in 2007, all of it must be repaid if their 2007 net income is equal to or greater than approximately $103,000.
If your income is sufficient to force repayment of OAS each year, you should talk to your Chartered Accountant about restructuring your income. In the simplest of circumstances, they may simply advise you to take advantage of new pension income splitting rules to move some of your eligible pension income to your spouse.
In more complex circumstances, they may suggest setting up an investment holding company for you. The company would report some of the income you would otherwise report on your personal tax return. If done correctly, your personal income may be lowered enough for you to retain 100 per cent of your OAS. At $5,952 per year (adjusted for inflation), the benefits can quickly add up. There are other benefits and costs to consider. So, don't try this on your own.
Information for Tax Tips is provided as a public service by the Chartered Accountants of British Columbia.