Chapter 10. RDSP Canada Disability Savings Bond

10.1.1 Annual bond rates

The Canada Disability Savings Act (CDSA) sets out the amount of bond that may be paid into an RDSP. The bond is a payment of up to $1,000 each calendar year, depending on a beneficiary's family income.

The Canada Revenue Agency (CRA) indexes the family income thresholds annually. January is used to set the bond rate in a given calendar year.

For a child born in a month other than December or new immigrants, the CDSA stipulates that if eligibility for a Child Benefit is not determined for January. The applicable income is from the first month of the calendar year when the Canada Child Benefit (CCB) eligibility is established. This ensure that the appropriate income is used for grant calculation.

The amount of bond paid is calculated as outlined in the table 1.

Note:

• Phase out income: The income level above which the annual amount of CDSB payable begins to decrease
• First threshold: Income levels indexed annually

When reached or exceeded the annual amount of CDSB, payable is nil.

For current income levels, refer to the CRA tax bracket thresholds table. The table provides information about tax bracket thresholds for the last 4 tax years.

10.1.2 Bond income thresholds

The CRA indexes the income thresholds annually. The income thresholds used to establish the bond income thresholds for the current and previous years can be found on the CRA's Tax bracket thresholds and by referring to the Canada Disability Savings Program (CDSP) InfoBulletins.

10.1.2.1 Under the minimum threshold

Example 1

In 2023, Marc becomes Disability tax credit (DTC) eligible and opens an RDSP. With a family income of $19,000, which is below $34,863, the Government deposits $1,000 into the RDSP.

10.1.2.2 Between the minimum and maximum thresholds

Example 2

In 2023, the beneficiary's family income is $40,000. A bond of $722.21 will be deposited into the account (assuming there is no carry forward).

In this example, the bond formula is applied.

$1,000 - [$1,000 x (A - B) / (C - B)]

Where:

A = $40,000 family income

B = $34,863 phase out income

C = $53,359 first threshold

$1,000 − [$1000 x ($40,000 − $34,863) / ($53,359 − $34,863)]
= $1,000 − [$1000 x $5,137 / $18,496]
= $1,000 − [$1,000 × .2777]
= $1,000 − $277.79
= $722.21

10.1.2.3 No income information available

Example 3

Paul has just turned 18 and is both the holder and the beneficiary of the newly opened RDSP. Paul has never filed income tax returns as they had no income to report. No bond will be paid if there is no income tax return filed since there is no way to verify if the family income is within the required minimum and maximum amounts.

10.2.1 Criteria

The beneficiary must:

• apply for the bond on or before December 31 of the year they turn 49
• be a resident of Canada at the time of the initial application and immediately before the bond is paid
• be eligible for the DTC the year for which the bond is paid
• have a valid social insurance number (SIN)
• not be deceased

10.2.2 Conditions

10.2.2.1 Conditions for the holder:

• open an RDSP
• ensure a grant and bond application form is completed and check the appropriate boxes
• provide the signed form directly to the financial institution on or before December 31 of the year the beneficiary turns 49 years of age
• have a valid SIN or business number (BN)

10.2.2.2 Conditions for the beneficiary:

• until the calendar year the beneficiary turns 18, the income of the primary caregiver (PCG) is used for income purposes
• they must have filed their taxes and applied for the CCB
• starting from the beneficiary's 19th year onward:
  • their own income is used
  • they need to begin filing their personal income tax return from the year they turned 17
• if up to 18 years of age:
  • have parents or guardians who have filed their taxes for the past 2 years
  • applied for the CCB for the current year and up to the year the beneficiary turns 18

10.2.2.3 Conditions for the financial institution:

• ensure information in the application form is complete
• submit the information electronically for processing to ESDC
• complete any required action as a result of processing with ESDC (example: correct SIN numbers and add missing information)
• receive and distribute bond payments to the appropriate RDSP
• provide a statement of account to the holder

10.2.3 Beneficiary and family income

Family income is validated with information held by the CRA based on filed income tax returns.

The income data of the second preceding tax year is used to establish the bond amount. This is because the CRA will not have finished processing the immediately preceding year's tax data until the second half of the year. Therefore, the only assessed income data available will be of the second preceding taxation year. For example, the tax data used in January 2023 will be from 2021. It is also important to note that the determination of a beneficiary's family income will differ, depending on their age.

Eligibility for the bond can only be verified for beneficiaries where the personal income tax returns for the past 2 years have been filed for everyone whose income is used to determine "family income."

10.2.3.1 For a beneficiary at the age of majority

Beginning in the calendar year, the beneficiary turns 19 until the end of the calendar year the beneficiary turns 49, the beneficiary's family income is based on their income plus their spouse's income. This remains true whether or not the adult beneficiary is a dependant of a parent/guardian.

To ensure the beneficiary's eligibility for the maximum bond amount can be verified, beneficiaries must file personal income tax returns from the year in which they turn 17. They must continue to file for all future taxation years, regardless as to whether they have income to report. The parent's or guardian's family income will be used for when the beneficiary was 18 years of age or under.

10.2.3.2 For a beneficiary under the age of majority

From birth to December 31 of the year a beneficiary turns 18, a beneficiary's family income is based on the income information used to determine the CCB for that beneficiary. To determine the amount of the bond to be paid in that year, income information from the PCG is used. Normally this is the person who receives the CCB closest to January. January is usually used to set the bond amount in a given calendar year.

For a child born during a specific year (but not in December) or a new immigrant, the CDSA provides that if there was no determination of eligibility for a CCB for January, the income to be used is that for the first month of the calendar year in which eligibility for the CCB is established.

A child born in December would not receive the CCB until January 1 of the next calendar year. To allow eligible families to receive bond for the birth year, the CDSA uses the family income that is used by the CCB determination made in January of the following year and applies this retroactively to the birth year.

10.2.4 Shared custody

Since July 2011, divorced or separated parents that share the custody of a child, or children would both be able to receive and share the CCB and credits for those children throughout the year.

There could be 2 different income levels for a beneficiary under the age of 18 (one for each PCG) during the calendar year. The CDSP system will use the income level that is the most advantageous for the beneficiary to determine the bond entitlements.

10.2.4.1 2 key players

In the context of shared custody, there are 2 key players the:

• PCG
• qualified dependant

10.2.4.1.1 Primary care giver

In respect of a qualified dependant, a PCG:

• resides with the qualified dependant
• is a parent of the qualified dependant who:
  • is the parent who primarily fulfils the responsibility for the care and upbringing of the qualified dependant and is not a shared custody parent in respect of the qualified dependant
  • is a shared-custody parent in respect of the qualified dependant

Note: A shared-custody parent is an individual who is one of the 2 parents of the qualified dependant who:

• is not a cohabiting spouse or common-law partner of the other
• resides with the qualified dependant on an equal or near equal basis
• primarily fulfils the responsibility for the care and upbringing of the qualified dependant when residing with the qualified dependant

10.2.4.1.2 Qualified dependant

A qualified dependant is a person who:

• has not attained the age of majority
• is the child of a PCG or is under their care or the care of their spouse
• resides with the PCG

10.2.5 Beneficiary's residency

A beneficiary who moves out of Canada may not be considered a Canadian resident for the time they are out of the country. In this case, the beneficiary will not be eligible for the bond for the years they did not meet residency requirements.

The CRA is responsible for determining the residency status for a particular year. Information on the PCG is used to determine the residency of a beneficiary under the age of 18.

It is the holder's responsibility to inform the financial institution of any changes in the beneficiary's residency status.

Note: A holder, who is not the beneficiary, does not have to be a resident of Canada. The beneficiary must be a resident at the time the application for bond is made as well as the period immediately preceding the payment of the bond.

If the beneficiary's parents are with a diplomatic mission or in the Canadian Forces, the family members are still considered to be Canadian residents. The children are, therefore, eligible for the bond.

10.2.6 Canada Child Benefit

For a beneficiary who has not yet reached the age of majority (and for beneficiaries celebrating their 18^th birthday in a calendar year), ESDC validates the beneficiary's information against the CRA CCB database. This includes verifying that the PCG has applied for the CCB at the time they filed their last tax return.

The CCB is a tax-free monthly payment made to eligible families to help them with the cost of raising children under the age of 18. The CCB may include the Child Disability Benefit, a monthly benefit for families who care for a child who is eligible for the DTC.

10.2.7 Beneficiary under care: income

If a beneficiary under the age of majority (including beneficiaries celebrating their 18^th birthday) is under the care of a department, agency, or institution which is eligible for payments under the Children's Special Allowances Act for at least one month in the calendar year, the bond entitlement for that year will be $1,000.

A payment made under the Children's Special Allowances Act is a tax-free monthly payment, made to an organization for a child who is under the age of 18 and under their care. These payments may include the Child Disability Benefit, a monthly benefit for agencies who care for a child who is approved for the DTC.

10.2.8 Consent from Primary care giver

When beneficiaries over the age of 18 open an RDSP, they will need to obtain the consent from PCGs to obtain the data used to determine:

• DTC-eligibility
• Canadian residency
• family income for when they were 18 years of age and under

For example: A 21-year-old beneficiary who opens an RDSP may carry forward bond from previous years if they obtain the consent from the PCGs for each of those years. This would make it possible to verify DTC-eligibility, Canadian residency, and family income for the previous 10 years.

For ESDC to pay bonds, PCGs must consent to the sharing of their personal information between:

• ESDC
• the CRA
• the financial institution for the administration (which may include policy analysis, research, and evaluation) of the:
  • CDSA
  • Canada Disability Savings Regulations
  • Income Tax Act

Specifically, the information collected from the PCG is used to verify the beneficiary's eligibility for the DTC, residency status and family income.

If there are different PCGs (or organizations), ESDC will use the PCG(s) information that is most beneficial to the beneficiary.

10.3.1 Timetable

The carry forward provision of bond entitlements came into effect on January 1, 2011, and payments began in 2012. The bonds are generally paid in February of the same calendar year as entitlement or when the bond is applied for (whichever comes first).

10.3.1.1 Eligibility

To access unused bond entitlements, the beneficiary must meet the following eligibility criteria:

• is a Canadian resident and was a Canadian resident in the year of entitlement
• has a valid SIN
• is eligible for the DTC and was eligible for the DTC in the year of entitlement
• applies for the bond on or before December 31 of the year the beneficiary turns 49

10.3.1.2 Bond entitlements and limits

The bond amount will be the same as the one that would have applied if the request had been made in the year in which the bond was earned.

10.3.2 Bond and carry forward calculations

The maximum lifetime bond limit is $20,000 per beneficiary. The maximum annual amount that can be carried forward and paid into an RDSP is $11,000.

Example 1 (without carry forward)

A beneficiary's family income is $17,000 in 2022. Since the beneficiary's family income is under the threshold of $32,797, for 2022, he will receive a bond of $1,000.

Example 2 (with carry forward)

Caroline was born in 1983. Caroline opened a plan in 2023 after being approved for DTC at the age of 40. Caroline's DTC-eligibility was back dated to 2018.

Caroline's income has always been below the threshold indexed annually by the CRA.

All the bond entitlements for 2018 to 2023 will be paid to Caroline. Caroline would attract $6,000 in bonds.

Note: The bond availability is based on the income tax year, 2 years prior. For example in 2018, the bond amount is based on Caroline's 2016 income tax return.