Higher-income senior clients are often disappointed when their Old Age Security (OAS) benefit gets clawed back – and as their advisor, you could bear the brunt of that disappointment.

Here’s how to answer common client questions about OAS reductions, and how to help them avoid the clawback in the first place.

What is OAS?

OAS is a taxable monthly social security payment program available to most seniors aged 65 and older. Since the benefit is not based on employment history, it may be available even if a person has never worked in Canada.

Am I eligible for OAS?

In order for a person to be eligible for OAS pension, he or she must:

  1. be at least 65 years old;
  2. be a Canadian citizen or legal resident at the time the OAS application is approved; and
  3. have resided in Canada for at least 10 years since age 18, continuously and immediately before approval of the OAS pension.

Read: Keep the claws off OAS

If someone leaves Canada, are they still eligible for OAS?

Yes, as long as they meet the first two criteria above. With respect to the third point, however, instead of residing in Canada for 10 years since the age of 18, they would have had to reside in Canada for at least 20 years (cumulatively).

If an individual doesn’t qualify based on the criteria above, they may still be eligible for OAS if they lived in a country with a social security agreement with Canada, or they’ve contributed to the social security system in a country with which Canada has a social security agreement. Examples include the U.S.,  Germany, France and Australia.

Read: What sixtysomethings expect from their advisors

Can I work while receiving OAS?

It is possible to work and receive OAS simultaneously, but the income earned may create a partial OAS benefit instead. The government applies the OAS recovery tax or clawback once a person’s net income (including employment and investment income) exceeds $73,756 (2016) or $74,788 (2017). The clawback is at a rate of 15% until OAS has been eliminated completely, which occurs once net income reaches $119,615 (2016) or $121,314 (2017).

Read: Should retirement age eligibility be based on life expectancy?

How do I minimize OAS clawback?

If you have clients who have income near or above the threshold, obtain a copy of their T1 personal tax return in order to decipher the types of income the client is reporting.

Consider these common OAS clawback reduction strategies:

  • If clients need to supplement income, they can consider making withdrawals from a TFSA. TFSA withdrawals are not taxable and are not included in the taxpayer’s income, making them exempt from clawback.
  • Look at the types of investment income your client is currently receiving. Do they have non-registered investments that are paying dividends? If yes, you may want to discuss limiting their exposure to dividend-producing investments or having them hold these investments in a registered account. OAS clawback is based on net income, which includes dividends received from Canadian corporations on a grossed-up basis. That gross-up increases net income and could expose the client to OAS clawback.
  • If you have clients who are working and have income between $73,756 and $119,615, they may want to delay receiving their OAS until income is lower. This is a new option that allows seniors to delay OAS until sometime between age 65 and age 70. If clients decide to delay OAS, they are able to increase their future monthly payments by 0.6% per month for every month they delay receiving OAS — to a maximum of 36% at age 70. If you have clients approaching 65 who are still earning income, be sure to explain their options.
  • Consider using corporate-class mutual funds within a non-registered account instead of mutual fund trusts, dividend-paying stocks or bonds. Corporate-class funds generally have lower distributions than their mutual fund trust equivalents. Making this change can help senior clients who have sizeable non-registered investment portfolios invested in mutual fund trusts or other higher-taxed investments.
  • Consider basing RRIF withdrawals on the younger spouse’s age to reduce the amount that is required to be withdrawn on an annual basis.
  • Check if your clients 65 or older are eligible to income split their RRIF, CPP or pension income with their spouse or common-law partner. If they are, doing so will help reduce net income and hopefully avoid or reduce clawback.

Read: What new tax brackets mean for your clients


OAS is a hot topic for many senior clients, and you will likely have clients impacted by the clawback. Take the opportunity to review their investments to determine if their current income mix is optimal.

Jacqueline Power is a tax director with Mackenzie Investments. She can be reached at
Originally published on
See all comments Recent Comments


It says you are using 2017 numbers for the threshold and maximum, but are those not 2016 numbers?
should it be $74,788 & 121,028? for 2017

Friday, Oct 27, 2017 at 12:35 pm Reply


Thanks Chris. The article is updated with 2016 and 2017 numbers.

Friday, Oct 27, 2017 at 3:31 pm

Ken Allred

Is OAS automatically reinstated if a persons taxable income goes down below the OAS clawback level of $73,756?

Wednesday, Oct 4, 2017 at 4:30 pm Reply


From Frank Di Pietro (colleague of the author): “Yes, assuming the individual files his or her tax return on time, and on an annual basis. The OAS payments are on a July to June cycle. Therefore, payments from July 2017 to June 2018 are based on the income reported on the 2016 tax filings. So, if the individual’s income drops in 2017 below the clawback threshold, then the OAS payments will reflect this beginning in July 2018 and continue until June 2019 and the individual would receive the full OAS benefit.”

Thursday, Oct 5, 2017 at 10:16 am

Mike Kaine

I’ve been wondering if leverage could work to reduce the claw back. If you borrowed $100,000 at 3% and invested in corporate class investments with a 1% advisor fee, could you have a $4000 deduction? With the corporate class you’d have the potential for a capital gain down the road but in the mean time you’d save the claw back.

Monday, Jun 19, 2017 at 12:43 pm Reply


Hi Mike,

Please see the response from author Jacqueline Power. Note that this response is not meant to be advice and you should consult a qualified tax professional to assist with your specific situation. – the editors (1/2)

Monday, Jun 19, 2017 at 3:20 pm


(2/2) As per the caveats above:

“Generally, the interest paid on money borrowed for investment purposes if used to try to earn investment income, including interest and dividends would be a deductible interest expense. With respect to the 1% advisor fee the criteria outlined below would need to be satisfied in order to write off the advisor fee.

• Section 20(1)(bb) of the Income Tax Act (ITA) provides a tax deduction for “amounts other than a commission paid by the taxpayer in the year to a person
– i) for advice as to the advisability of purchasing or selling a specific share or security of the taxpayer, or;
– ii) for services in respect of the administration or management of shares or securities of the taxpayer”

If these apply and both the interest and advisor fees can be deducted then the individual is correct and it would result in a $4,000 deduction when calculating net income.”

Monday, Jun 19, 2017 at 3:21 pm

Add a comment

Have your say on this topic! Comments are moderated and may be edited or removed by
site admin as per our Comment Policy. Thanks!