Withdrawing from a spousal RRSP is permitted and withholding tax rates apply. However keep in mind that tax on withdrawals from a spousal plan will be taxed in the annuitant’s name only if no contributions have been made to the spousal RRSP by the contributor in the year of withdrawal or the past two years before that. If so, then attribution rules would apply.
| Withdrawal Amount | Up to $5,000 | Between $5,000 and up to $15,000 | Over $15,000 |
| Tax Rate withheld for Canadian residents | 10% | 20% | 30% |
| Tax Rate withheld for the province of Quebec | 5% | 10% | 15% |
Withdrawing from a Spousal RRSP -Attribution Rules
Attribution rules, also known as the 3-Year Rule, were created for the purpose of discouraging the use of a spousal RRSP for short term income splitting. The goal of spousal RRSPs is to encourage Canadians to accumulate assets for the purpose of retirement income.
For example, Jennifer’s spousal RRSP has a value of $50,000. She wants to withdraw $10,000 in which withholding tax of 20% would apply. Jeff contributed $10,000 last year to Jennifer’s spousal RRSP. Since this contribution by Jeff was within 3 years, then the withdrawal will be taxed in Jeff’s hands due to attribution rules. $10,00 will be added to Jeff’s taxable income in the year of withdrawal.
Exceptions to Attribution Rules
- If the contributing spouse dies within the year of withdrawal, attribution rules will not apply
- If you or your partner become non residents when the funds are withdrawn, attribution rules will not apply
- If your relationship has suffered a breakdown or you and your spouse are living apart, attribution rules will not apply
