Tax-free savings initiatives v2.0

Assessment, Benefit and Service Branch
Individual Returns Directorate

On this page

• Overview & Privacy Impact Assessment Initiation (PIA)
• Summary of the project, initiative or change
• Risk identification and categorization

Overview & Privacy Impact Assessment (PIA) Initiation 

Government institution

Canada Revenue Agency

Government official responsible for the PIA

Gillian Pranke
Assistant Commissioner
Assessment, Benefit and Service Branch

Head of the government institution or Delegate for section 10 of the Privacy Act

Anne Marie Laurin
Director General
Access to Information and Privacy Directorate
Public Affairs Branch

Name of program or activity of the government institution

Tax Services and Processing

We give taxpayers the accurate and timely information they need to comply with Canada’s tax laws and modernize our services, including expanding our digital services, making it easier for taxpayers to meet their tax obligations. In addition to the individual returns program, we register businesses for a business number and administer T2, T3, GST/HST, excise, and other levies programs. We help businesses and individuals to voluntarily comply with Canada’s tax laws by processing their information and payments as quickly and accurately as possible and telling them the results of their assessment or reassessment.

Standard or institution specific class of record:

Tax-Free Savings Initiatives (TFSA and FHSA)
CRA ABSB 210

Standard or institution specific personal information bank:

Tax-Free Savings Initiatives
CRA PPU 054
TBS Registration Number: 20150053

Legal authority for program or activity

Section 220 of the Income Tax Act provides the authority to exercise the powers and perform the duties required of the Minister under the Income Tax Act. The Minister of National Revenue has a mandate to administer and enforce the Income Tax Act and this mandate may be exercised by the Minister, the Commissioner of Revenue, the officers, clerks and employees of the CRA.

Personal information is collected under the authority of section 220(1) and section 150 of the Income Tax Act.

Section 146.2 of the Income Tax Act and section 223 of the Income Tax Regulations establishes the rules and requirements of the Tax-free Savings Accounts program.

Section 146.6 of the Income Tax Act governs the administration of the Tax-Free First Home Savings Account.

Section 207 of the Income Tax Act provides for taxes in respect of Registered Plans such as the Tax -Free Savings Account and the Tax-Free First Home Savings Account.

Subsection 237(1.1) and section 220 of the Income Tax Act allows for the collection and use of the SIN for identification purposes.

Summary of the project, initiative or change

Overview of the Program or Activity

The Tax-Free Savings Account was introduced as part of the budget tabled on February 26, 2008, and is part of Bill C-50 that received Royal Assent on June 18, 2008. This new measure became effective on January 1, 2009.

A Tax-Free Savings Account is a way for individuals who are 18 and older to set money aside tax free throughout their lifetime. Contributions to a Tax-Free Savings Account are not deductible for income tax purposes. Any amount contributed, as well as any income earned in the account (for example, interest or investment income earned) is generally tax free, even when it is withdrawn. Withdrawal of money from a Tax-Free Savings Account has no tax consequences and will not impact an individual’s eligibility for federal income-tested benefits and credits such as Employment Insurance, Old Age Security and the Canada Child Benefit.

What is a TFSA?

As described under subsection 146.2(5) of the ITA, an arrangement becomes a TFSA at the time it is entered into if:

• it is a qualifying arrangement
• the issuer files, in prescribed form and manner, an election with the Minister of National Revenue to register the arrangement as a TFSA under the social insurance number (SIN) of the holder. The election must be filed before March of the calendar year following the calendar year the arrangement was entered into, or such later date as is acceptable to the Minister

 An arrangement ceases to be a TFSA if any of the following events occurs:

• The last holder of the arrangement dies
• The arrangement ceases to be a qualifying arrangement
• The arrangement is not administered in accordance with the conditions in subsection 146.2(2) of the Income Tax Act

Tax-Free Savings Account issuers, the majority of which are Financial Institutions (FI), must register with the CRA in order to sell qualified Tax-Free Savings Account arrangements. The qualifications to be a Tax-Free Savings Account issuer are; a corporation licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as a trustee (a Canadian trust company);

• a company licensed to carry on an annuities business in Canada (such as an insurance company);
• a depositary:
  • a person who is, or eligible to become, a member of Payments Canada; or
  • a credit union that is a shareholder or member of a corporate body referred to as a “central” for purposes of the Canadian Payments Act.

To qualify to open a Tax-Free Savings Account, an individual must have a valid SIN or a temporary tax number (TTN), and be 18 years of age or older and consent to their information being shared with the CRA.

Individuals that are non-residents of Canada who meet the above criteria can still open an account. Any contributions made while a non-resident will be subject to a 1% tax for each month the contribution stays in the account.

TFSA issuers will be required to electronically file with the CRA the transaction details for each TFSA each year. Transaction details include contribution and withdrawal amounts, the Social Insurance Number, other identification information (e.g., name, date of birth and address) of the account holder. Individuals will not be required to provide information to the CRA on their individual income tax returns regarding TFSA contributions or withdrawals.

The CRA will use the transaction details filed by the TFSA issuers to calculate and advise individuals of their unused TFSA contribution room. This information will also be used to assist in identifying and assessing various potentially applicable taxes such as the 1% per month tax on excess contributions. Unused contribution room and all transaction details, including dates, will be made available on the CRA’s My Account and Represent a Client secure portals, as well as MyCRA mobile app. Account holders can also contact a CRA contact centre and request either a TFSA Room Statement to show available contribution room or a TFSA Transaction Summary to obtain a copy of the contributions and withdrawals provided by their financial institution. The CRA’s automated Tax Information Phone Service (TIPS) will also provide unused contribution room. A dedicated telephone enquiries service also exists to support financial institutions and individuals.

The Department of Finance Canada will annually receive TFSA information from the CRA.  This data will be used to help the government assess the impact of this legislation and assist with program improvement.

The TFSA program creates a considerable amount of data to be managed by the CRA. A modern, robust and independent system was developed for this new initiative and provides for almost all processes to be entirely automated.

The system is capable of producing TFSA notices of (re)assessment to be sent to taxpayers when they are subject to one or more of the TFSA-related taxes. The TFSA system has linkages to an electronic letter creation system that allows users to create and generate customized outputs such as letters, notices, statements, etc. It provides a common content/verse management facility, letter creation facility and a common and reliable archiving database.

Some TFSA and T4 First Home Savings Account (T4FHSA) slip (information on the First Home Savings Account program is below) data will be stored in an Agency Data Warehouse (ADW) that will be accessed solely by authorized CRA employees for statistical reporting, research, and analytic purposes. All accesses will be monitored, and access will be limited to those individuals who have registered with the area responsible for maintaining the ADW and who have a work-related need to know.

The current ADW repository of information was modified to accommodate the inclusion of significant amounts of TFSA and T4FHSA data that will accumulate exponentially over the next several years. This will fulfill the CRA’s commitment to effectively manage the overall stewardship of all Agency data. The TFSA and T4FHSA data will provide for ongoing regular and ad-hoc internal and external statistical reports. The ADW does have a completed PIA.

What’s New

The TFSA records, which are sent by issuers, have not changed, and therefore, the data collected for the TFSA program has remained the same since inception. The process to accept the records has not changed. The issuer will consider the completed application as a request to file an election to register the qualifying arrangement as a TFSA once the holder has provided consent. The issuer is responsible for determining what constitutes consent (such as the electronic or digital signature, or telephone acceptance).

CRA has developed a data mart since the original PIA to provide high-level business intelligence on the CRA’s TFSA-related activities.

Since 2011, CRA began sharing an individual’s date of death with the relevant issuer, to ensure that TFSA records filed by that issuer are accepted in a timely manner. 

The CRA uses an external service provider to convert paper correspondence into digital format. A privacy protocol assessment was completed by the CRA in December 2022 to review and mitigate any privacy concerns.

The Tax-Free First Home Savings Account was introduced in 2022. This new registered account savings initiative was created to help individuals save for their first home. To be eligible, an individual must be a resident of Canada, be at least 18 years of age, and must not have lived in a home that they owned at any time in the year the account is opened, or the preceding four calendar years.

Starting in April 2023, eligible individuals may open a Tax-Free First Home Savings Account with a qualified First Home Savings Account issuer and start participating by making transfers in from an RRSP/RRIF or tax-deductible contributions.

The First Home Savings Account (FHSA) is a qualifying arrangement between a holder and an issuer that is registered with the Canada Revenue Agency (CRA). Its main purpose is to give prospective first-time home buyers the ability to save for a down payment on a tax-free basis.

Some key features of the FHSA include:

• holders can contribute or transfer in from their registered retirement savings plan (RRSP) up to $8,000 per year
• the lifetime contribution and transfer in limit is $40,000
• holders can carry forward unused portions of their FHSA participation room up to a maximum of $8,000
• contributions are tax-deductible
• withdrawals used to purchase a qualifying home are non-taxable
• holders can have more than one FHSA
  • subject to the FHSA participation room and lifetime FHSA limits
  • the maximum participation period starts when they open their first FHSA

A withdrawal from an FHSA is not required to be included in the holder’s income if it is:

• a qualifying withdrawal
• a designated amount
• an amount otherwise included in the holder’s income

In all other cases, the amount withdrawn from their FHSA is a taxable withdrawal and must be included as income on their income tax and benefit return for the year the withdrawal is received.

If they transfer property directly from their FHSA to another FHSA, a registered retirement saving plan (RRSP), or a registered retirement income fund (RRIF), this is a transfer and not a withdrawal.

If funds in the registered account have not been used for a qualifying first home purchase within 15 years of first opening the account, the Tax-Free First Home Savings Account would have to be closed. Any unused savings could be transferred tax free into an RRSP or RRIF, or otherwise be withdrawn on a taxable basis.

Beginning in January 2024, Account issuers such as financial institutions will be required to electronically file with the CRA transaction details on individuals who have registered for an account. Transaction details will include personal information on the account holder such as the Social Insurance Number, contact information in addition to contribution and withdrawal amounts. Starting with the 2023 tax return, individuals participating in the program will be eligible to claim contributions made in 2023.

Scope of the Privacy Impact Assessment

This Privacy Impact Assessment governs CRA’s administration of the Tax-Free Savings Account and Tax-Free First Home Savings Account. These programs will be referred to within this document as the Tax-Free Savings Initiatives.

Certain compliance activities, such as audits and criminal investigations, are separate programs and therefore are not included within the scope of this Privacy Impact Assessment. In addition, activities completed under the taxpayer relief program are not in the scope of this PIA.

Programs and initiatives that focus on economic benefits and credits are constantly changing.

Therefore, when a new initiative or a change to an existing credit or benefit is identified, this privacy impact assessment will be reviewed and updated accordingly.

• The PIA covers all Tax-Free Savings Initiatives, related service and compliance activities conducted in headquarters (HQ):
  • The Tax-Free Savings Initiatives are responsible to provide functional direction for the national processing and automated systems used in the assessing of tax-free initiative returns. We build and maintain strong, effective working relations with internal stakeholders, the financial industry and other government departments. We strive to improve program efficiency in accordance with Agency goals and objectives. The initiatives align themselves with the CRA’s mandate concerning taxpayer service (provision of information and facilitation of delivery) and ensuring compliance with the Income Tax Act (related to, for example, taxable withdrawals, excess contributions and non-qualified or prohibited investments).
• The PIA also covers all Tax-Free Savings Initiative-related operations in the regions (Sudbury TC and Winnipeg TC):
  • Agents provide support on matters related to Tax-Free Savings Initiative records, in response to financial institutions telephone and written enquiries. Agents help financial institutions correct their rejected records to ensure accurate data is available to compute the TFSA contribution room and annual FHSA participation limit.
  • Agents process forms RC240 (filed when a TFSA holder passes away without a successor on the account) and RC243 (filed by TFSA holders to declare taxes owing, including excess/non-resident tax and anti-avoidance-related taxes).
  • Agents will be processing FHSA returns and FHSA-related forms.
  • Agents answer complex queries related to transfers, contribution room, annual FHSA participation limit, implications for non-residents, non-qualified or prohibited investments, advantages extended in non-arm’s length situations, and tax on excess contributions and transfers.
  • Agents complete assessments and reassessments, as needed, to resolve queries.
  • Agents will be completing CRA adjustments on accounts to account for taxable and non-taxable transactions within the FHSA such as: a taxable withdrawal to a qualifying withdrawal.
• The PIA covers user accounts, access rights and security authorization that are controlled by various managers. CRA personnel must comply with the Agency Security Policy as well as CRA-specific policies which require that access rights are only granted on a need-to-know basis.

THE PIA DOES NOT INCLUDE:

• Registered Plans Directorate activities
• Audit activities on TFSA and FHSAs
• Activities completed under the taxpayer relief program, collections, criminal investigations, or the administration and processing of the personal income tax and benefits return. These programs are assessed in separate Privacy Impact Assessments.

Risk identification and categorization

A) Type of program or activity

Compliance / Regulatory investigations and enforcement    

Level of risk to privacy: 3

Details:

Personal information is collected and used to administer the Tax-Free Savings Initiatives, including determining eligibility, validation, identifying and assessing potentially applicable taxes, penalties and interest.

B) Type of personal information involved and context

Social Insurance Number, medical, financial or other sensitive personal information and/or the context surrounding the personal information is sensitive. Personal information of minors or incompetent individuals or involving a representative acting on behalf of the individual. 

Level of risk to privacy: 3

Details:

Personal information collected and used for the Tax-Free Savings Initiatives includes the Social Insurance Number, financial information, biographical information, name, contact information, residency, date of birth, and date of death.

C) Program or activity partners and private sector involvement

Private sector organizations or international organizations or foreign governments 

Level of risk to privacy: 3

Details:

Information may be shared with other federal or provincial government institutions in accordance with legislation and formal information sharing agreements, including the Department of Finance Canada for program modeling, policy, and fiscal evaluation. Personal information is disclosed to Public Services and Procurement Canada for the issuance of payments and Revenue Quebec for the purpose of an adjustment of income.

Information may also be shared with internal CRA programs/activities, including contact centres to respond to taxpayer enquiries, Registered Deferred Income and Savings Plans (CRA PPU 226), Compliance Programs (for audit and enforcement) and Income Tax and Charity Objections, Determinations and Appeals to the Courts (CRA PPU 172).

Information may also be used or disclosed for the evaluation and supervision of CRA officials in the administration of their duties under the relevant Acts (e.g., audit trails), program evaluation (quality assurance and data integrity), strategy development, data matching, statistics and reporting.

Information is shared with an approved third-party storage provider for the digitalization of paper correspondence.

D) Duration of the program or activity

Long-term program

Level of risk to privacy: 3

Details:

There is no sunset date for the TFSA and FHSA programs. Both are long-term programs.

E) Program population

The program affects certain individuals for external administrative purposes.

Level of risk to privacy: 3

Details:

The program impacts individuals, successor holders, survivors and designated beneficiaries, who apply for and open a Tax-Free Savings Account (TFSA), or a First Home Savings Account (FHSA).

F) Technology & privacy

1. Does the new or modified program or activity involve the implementation of a new electronic system, software or application program including collaborative software (or groupware) that is implemented to support the program or activity in terms of the creation, collection or handling of personal information?

Risk to privacy: No

2. Does the new or modified program or activity require any modifications to IT legacy systems and/or services?

Risk to privacy: Yes

3. Does the new or modified program or activity involve the implementation of one or more of the following technologies?

Enhanced identification methods - this includes biometric technology (i.e. facial recognition, gait analysis, iris scan, fingerprint analysis, voice print, radio frequency identification (RFID), etc.) as well as easy pass technology, new identification cards including magnetic stripe cards, "smart cards" (i.e. identification cards that are embedded with either an antenna or a contact pad that is connected to a microprocessor and a memory chip or only a memory chip with non-programmable logic).

Risk to privacy: No

Use of Surveillance - this includes surveillance technologies such as audio/video recording devices, thermal imaging, recognition devices, RFID, surreptitious surveillance/interception, computer aided monitoring including audit trails, satellite surveillance etc.

Risk to privacy: No

Use of automated personal information analysis, personal information matching and knowledge discovery techniques - for the purposes of the Directive on PIA, government institutions are to identify those activities that involve the use of automated technology to analyze, create, compare, identify or extract personal information elements. Such activities would include personal information matching, record linkage, personal information mining, personal information comparison, knowledge discovery, information filtering or analysis. Such activities involve some form of artificial intelligence and/or machine learning to uncover knowledge (intelligence), trends/patterns or to predict behavior.

Risk to privacy: Yes

G) Personal information transmission

The personal information is transmitted using wireless technologies.

Level of risk to privacy: 4

Details:

Financial institutions submit their information returns to CRA electronically through the secure internet file transfer (XML) application, My Business Account portal or Web forms.

The information is then dismantled and processed within multiple internal systems. CRA may troubleshoot errors with financial institutions through the use of email and or via phone.

Individuals can access their contribution room or annual FHSA participation room statements through the secure web portals My Account and Represent a Client.

CRA employees use laptops with Secure Remote Access to work remotely across Canada. Both casual and routine telework employees are required to enter into an agreement with the Agency outlining an employee’s responsibilities and obligations; in addition, employees must be trained on the protection and handling of information and security awareness.

Files transferred to Revenue Quebec and federal partners are done through secure electronic measures using encryption technologies.

Individuals can use the Tax Information Phone Service (TIPS) to obtain their TFSA contribution room limit.

H) Potential risk that in the event of a privacy breach, there will be an impact on the individual or employee

Details:

If the personal information is compromised, it has the potential to cause financial, mental and/or physical harm, and embarrassment to the affected individual.