InfoCapsule 10: Contributions
From: Employment and Social Development Canada
Disclaimer: RESP promoters
The information contained on this page is technical in nature. It is intended for Registered Education Savings Plan (RESP) and Canada Education Savings Program promoters. For general information, visit the RESP page.
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A PDF version of the InfoCapsules for RESP providers is available on the index page.
List of acronyms
- CESG
- Canada Education Savings Grant
- EAP
- Educational assistance payment
- ESDC
- Employment and Social Development Canada
- RESP
- Registered Education Savings Plan
Preface
A contribution is an amount deposited into a Registered Education Savings Plan (RESP) by a subscriber, in respect of a beneficiary, that may be eligible to attract the Canada Education Savings Grant (CESG).
Contributions
- Belong to the subscriber
- Are non-tax deductible
- Are not part of an educational assistance payment (EAP)
- Have a lifetime limit of $50,000 per beneficiary
An assisted contribution means a contribution amount for which a CESG payment has been received.
Over-contributions
An over-contribution occurs when all contributions made by all subscribers to all RESPs for a single beneficiary exceed the lifetime limit of $50,000. Each subscriber for that beneficiary is liable to pay a 1% per-month penalty tax for their share of the over-contribution that is not withdrawn by the end of the month.
Contribution withdrawals
Contributions can be withdrawn without tax implications and are done at the plan level (not at the beneficiary level). If contributions are withdrawn when no beneficiary in the RESP is eligible for an EAP, it may trigger the repayment of the CESG as this incentive is paid based on contributions.
If unassisted contributions are withdrawn before a pending grant is paid in the RESP:
- the CESG must be repaid to Employment and Social Development Canada (ESDC) when it is received as the contribution no longer meets the requirement for the CESG payment
Repayment of the CESG due to an assisted contribution withdrawal
The promoter must use the following formula to determine the amount of the CESG to repay:
A / B X C
Where:
- A is the balance in the CESG account of the RESP immediately before the withdrawal
- B is the balance of the total assisted contributions in the RESP immediately before the withdrawal
- C is the amount of assisted contribution withdrawn
Anti-churning rule
If assisted contributions are withdrawn before a beneficiary is eligible for an EAP:
- all beneficiaries under the RESP are no longer eligible for the Additional CESG for the remainder of the year and the next 2 calendar years
However, they will remain eligible for the Basic CESG. This anti-churning rule applies across all plans for each tainted beneficiary.
Repayment of the CESG
Repayment of the CESG is not required when:
- the contributions are withdrawn to eliminate over contributions and the excess amount is $4,000 or less at the time of the withdrawal
- a beneficiary of the RESP is eligible for an EAP
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