Old Age Security (OAS) pension is a key component of Canada’s public pension system that provides a basic level of financial support for Canadians seniors.
Some of the main features of the Old Age Security pension include:
- Age Requirement: To be eligible for the OAS pension, individuals must be at least 65 years old. There is an option to delay the pension and receive higher benefits if the individual chooses to start receiving payments after the age of 65. An individual can delay payment of the OAS pension for up to 60 months (5 years). There is no benefit in delaying the OAS pension beyond age 70.
- Residency Requirements: Applicants must be either Canadian citizens or legal residents of Canada at the time their OAS application.
- Time in Canada Requirement: To receive the full OAS pension, an individual must have lived in Canada for 40 years after the age of 18. Individuals who have lived in Canada for less than 40 years after age 18 will receive a partial OAS pension, based on the number of years in Canada divided by 40. For example, if an individual lived in Canada for 20 years after age 18, they would receive a payment equal to 20 divided by 40, or 50%, of the full Old Age Security pension.
In addition to the OAS pension, many individuals also rely on additional sources of income, such as the Canada Pension Plan (CPP) or personal savings, to supplement their retirement income. Low-income seniors may also be eligible for the Guaranteed Income Supplement, which is an additional benefit provided under the OAS program. It is important to note that government policies and program details may change, so it’s advisable to check the latest information from official government sources for the most up-to-date details on the Old Age Security pension program.
OAS Recovery Tax or OAS Clawback
While the OAS pension is available to most Canadians aged 65 and older, those who earn income above a minimum threshold amount may be subject to having some of their OAS clawed back. This is also known as the OAS Recovery Tax. For example, anyone whose income exceeded $81,761 in 2022 was subject to the OAS clawback rules and would have had to repay a portion of their OAS pension. Similarly, anyone with income above $86,912 in 2023 would be required to pay back a portion of their OAS.
| Year | OAS Maximum (monthly) | OAS Maximum (annual) | OAS Clawback Starting threshold | OAS Maximum Clawback threshold |
| 2024 | $713.34 | $8,560.08 | $90,997 | $142,609 |
| 2023 | $687.56 | $8,250.72 | $86,912 | $141,917 |
| 2022 | $642.25 | $7,707.00 | $81,761 | $133,141 |
Maximum Income to Avoid OAS Clawback
The maximum income to avoid OAS clawback for 2024 is $90,977. All income over and above that amount is subject to clawback.
How OAS Clawback is Calculated
The OAS clawback calculation is based on the difference between a person’s income and the minimum income threshold amount for the year. Generally speaking, an individual must repay 15% of the difference between the individual’s income and the minimum income threshold amount.
For example, let’s assume an individual has a net income of $100,000 in 2023. At this level of income, the individual’s income exceeds the minimum income threshold for 2023 ($86,912) by $13,088. As a result, the individual’s OAS clawback would be 15% of $13,088, which is $1,963.20 annually or $163.60 monthly for the period of July 2024 through June 2025. Therefore, rather than receiving his or her maximum monthly OAS payment of $713.34, the person in our example would receive $549.74 monthly after the clawback ($713.34 minus $163.60).
Please note that the above example is for reference and illustrative purposes only. A person’s true and accurate repayment amount may differ according to their unique and specific circumstances.
What is the Return Of Income Form?
In January, those receiving OAS benefits will receive:
- an Old Age Security Return of Income form (Form T1136) that must be completed; and,
- an NR4 Old Age Security information slip to use in completing the Form T1136 OAS Return of Income form.
The NR4 Old Age Security information slip shows the amount of Old Age Security that was paid to an individual in the previous year and the amounts deducted for taxes. It is important to enter the amounts that are indicated on the NR4 OAS slip on the OAS. Return of Income form. Once completed, an individual must send the OAS Return of Income form to CRA. Failure to submit this form to CRA by April 30 will result in the OAS benefits being stopped.
Once CRA receives the Old Age Security Return of Income form, the net world income that is reported by the individual is used to estimate their OAS pension repayment amount for the following tax year. In the event an individual has to repay as a result of the clawback, the repayment amount is then divided monthly and deducted from the person’s OAS pension payments as a recovery tax over 12 months, starting in July through to June of the following year.
Strategies to Minimize OAS Clawback
1. Defer OAS payments to age 70
Deferring OAS to a date past age 65 is particularly helpful for those individuals who may continue working past age 65. Individuals can defer OAS payments for a maximum of 60 months to age 70. For every month that OAS is deferred, the monthly payment will increase by 0.6% up to a maximum of 36% at age 70. In other words, by delaying OAS, an individual can not only avoid the OAS clawback but receive a higher payment amount per month when the individual’s income from other sources is perhaps lower.
2. Withdraw from your TFSA
Individuals don’t pay tax on income earned in a TFSA or amounts withdrawn from a TFSA. In particular, Federal income-tested benefits and credits such as Old Age Security (OAS) benefits, the Guaranteed Income Supplement (GIS), or Employment Insurance (EI) benefits will not be reduced as a result of the income that is earned in a TFSA or the amount withdrawn from the TFSA. It is advisable for those who are approaching age 65 to maximize their TFSA and perhaps transfer any non-registered funds into the TFSA if they have unused contribution room available.
3. Split income with your spouse
An individual that is receiving eligible pension income during the year can split or allocate the eligible pension income with their spouse for tax purposes. In a typical scenario, the higher income earner will generally allocate their eligible pension income to the lower income earner. For purposes of income splitting, eligible pensions include almost all pension types except for CPP and OAS. Generally, an individual can allocate up to 50% of the eligible pension income to their spouse.