Q: What is a Self-Directed RRSP/TFSA?
A: A Self-Directed RRSP (SD-RRSP) or Self-Directed TFSA (SD-TFSA) is a Registered Plan for which the Account Holder determines which and what types of investments are to be held in the Plan. The Account Holder sets up a Self-Directed contract under a CRA-approved Registered Plan, like those administered by Common Good Capital.
Q: Can Common Good Capital provide financial or investment advice?
A: Due to the self-directed nature of the Registered Plans administered by Common Good Capital (CGC), staff are prohibited from advising account holders in any capacity. CGC staff can describe the options available in a given situation and explain the effects of each so that the Account Holder can make an informed decision; however, we generally recommend that Account Holders speak with a financial, investment, or tax advisor for guidance.
Q: Can I invest in any company through Common Good Capital?
A: No, Common Good Capital only holds securities of companies that are members of our parent organization, the Canadian Worker Cooperative Federation (CWCF). Membership is generally limited to co-operative or similar entities (such as Community Economic Development funds), as well as non-profit organizations (NPOs). If such a company is interested in applying for Associate Membership for the purpose of allowing its investors to hold securities in our Registered Plans, Common Good Capital staff would be happy to discuss this option with them.
Q: How much can I contribute to a Self-Directed RRSP or TFSA?
A: The same limits that apply to any RRSP or TFSA contributions apply to Self-Directed RRSPs and TFSAs. Your deduction limit appears on the Notice of Assessment sent to you by the Canada Revenue Agency (CRA) after you file your annual income tax return.
Q: Can securities (investments) that I have purchased previously be deposited to my RRSP or TFSA with Common Good Capital?
A: Yes, as long as the security is issued by a member of Common Good Capital and meets the eligibility requirements to be held in a Registered Plan (i.e., the security is a Qualified Investment and is not Prohibited). This type of deposit can be made through a process called a Contribution In-Kind. The deposit of securities to the Registered Plan is considered a contribution; the value of the deposit is based on the Fair Market Value (FMV) of your securities at the time they are contributed to the Plan. If you are making a Contribution In-Kind to an RRSP, you will receive a Contribution Receipt for the value of the securities being deposited, which can be claimed as a tax deduction. Contributions to a TFSA are not tax deductible, due to the inherently tax-free nature of these accounts.
Q: Can I use money in an existing RRSP or TFSA to purchase securities through my account with Common Good Capital?
A: Yes, funds from an existing RRSP or TFSA can be transferred in to your Common Good Capital account of the same type to purchase new securities. Your Account Representative can provide you with the required forms to initiate this transaction.
Q: Can I view my account statement online?
A: Unfortunately, account statements are not available online. Common Good Capital is a very small financial institution, and is therefore not yet set up with online capabilities. However, we are happy to provide an updated account statement via mail or e-mail upon request.
Q: How can I obtain a copy of my account statement?
A: Each September, Common Good Capital mails out annual account statements which detail any and all transactions that took place in the preceding 12 months. If an Account Holder requires an updated statement in the interim period, Common Good Capital can provide one upon request by phone or email.
Q: What can I do with the securities (investments) and/or cash in my account?
A: Questions regarding the value, liquidity or maturity of an investment should be directed to the Security Issuer. The options to initiate a transfer out or withdrawal, either in-cash or in-kind, are generally available; however if you are intending to redeem (sell) an investment, liquidity can be an issue.
Cash funds in the account, which are generally a result of gains earned on the registered securities, can also be withdrawn or transferred out at any time; they also have the potential to be re-invested with any of Common Good Capital’s Program Members who have an open offering. Please visit our list of CGC Members for more information.
Q: How can I transfer my holdings to another financial institution?
A: You can initiate a transfer out by contacting the financial institution to which you wish to transfer your assets. They will have you complete a transfer authorization form and submit it to Common Good Capital for processing. Some institutions have their transfer authorization form available online; however, you may have to request it directly from others. Alternatively, you can complete the Canada Revenue Agency’s (CRA) form T2033, have it signed by your financial institution, and then submit it to Common Good Capital to initiate a transfer.
Q: How do I make a withdrawal from my account?
A: To withdraw assets from your account, you must complete a Withdrawal Request Form and return it to CWCF. This form can be found here.
Q: What are the withholding tax rates for RRSP withdrawals?
A: The default withholding tax rates for RRSP withdrawals by residents in all provinces except Quebec, as set by the Canada Revenue Agency (CRA), are currently as follows:
– 10% on amounts up to $5,000;
– 20% on amounts over $5,000 up to and including $15,000; and
– 30% on amounts over $15,000.
RRSP Account Holders (“Annuitants”) should be aware that the total value of the withdrawal will need to be claimed as income when filing your taxes for the year in which the withdrawal took place. Based on your income, you could potentially owe additional income tax, or you may receive a tax refund. Furthermore, if multiple withdrawals are requested over a short period of time in an attempt to avoid a higher withholding tax, it is the CRA’s position the lump rate applicable to the total withdrawal value should be used. Ultimately, you will be responsible for any resulting tax liability when you file your personal income tax return.
Q: Can withholding taxes be waived on RRSP withdrawals?
A: As a general rule, withholding tax cannot be waived. However, there are some cases where tax is not required to be deducted, including: withdrawals under the Home Buyers Plan (HBP) or Lifelong Learning Plan (LLP); certain Estate situations; and withdrawals made due to over-contribution, under certain conditions. In such circumstances, additional paperwork is generally required prior to Common Good Capital being able to process the withdrawal request without withholding any taxes.
Q: Can I request additional tax to be deducted on an RRSP withdrawal?
A: Yes, additional tax can be deducted upon request. To do so, please specify on the Withdrawal Request Form the percentage you would like Common Good Capital to deduct and remit, and date and initial the request.
Q: How much is my annual Account Fee, and how is this fee paid?
A: The annual Account Fee for investors whose Account Representative is a co-op (specified or non-specified) is $55, inclusive of G/HST. The annual Account Fee for investors whose Account Representative is a Community Economic Development entity (e.g. CEDIF, CEDB or CEDC) or Non-Profit Organization (NPO) is $65, inclusive of G/HST.
Annual Account Fees are billed by Common Good Capital (CGC) directly to Account Representatives (i.e., Security Issuers) every December. It is up to the Account Representatives to determine how these fees are paid. Some Account Representatives bill their investors for these fees and remit payment to CGC on your behalf, while others cover the fees for their investors. CGC can also accept instructions from Account Representatives to deduct these fees from the cash balances in their investors’ accounts. When you open your account, your Account Representative should discuss their approach to collecting and paying these fees with you.
If an account is closed after March 31 in a given year, the Annual Account Fee is deducted from the source at the time of the closure. In some cases, the Account Representative may cover this fee on behalf of their investors, so the Account Holder will not be charged.
Q: How can I pay a fee that I owe to Common Good Capital?
A: If there is a sufficient cash balance in your account, our staff can deduct the fee from those funds. Other payment options are as follows:
– send an e-transfer to email@example.com;
– mail a cheque made payable to ‘CWCF’ to 1-41 Aberdeen Street, Kentville NS, B4N 2M9; or
– call our office at (902) 678-1683 to provide credit card information.
Q: How much are my securities currently worth?
A: Common Good Capital does not make determinations of Fair Market Value (FMV) for the securities that are held in trust in our Plans. Instead, when this information is required, we request that the Security Issuer provides us with this value by means of an Issuer Representation Letter. If an investor disagrees with the FMV as provided by a Security Issuer, the onus is on the investor to provide Common Good Capital with sufficient evidence of a different value.
The FMV of a security may be calculated as the amount the investor would receive for that security if the Security Issuer were to dissolve on that specific day, taking into account all of the Issuer’s assets and deficits before distributing the proceeds to its investors. The FMV may also be determined based on one of the following: the amount the Security Issuer is currently willing to pay to repurchase its securities; the value for which the securities are being sold in a current offering; or the value for which the securities were recently sold/purchased in a private sale. For securities that are not publicly traded, which is the case for many of those held in trust by Common Good Capital, FMV can sometimes be quite difficult to determine.
Q: I’ve misplaced my RRSP Contribution Receipt and/or T4RSP. Can I obtain a copy?
A: Yes, Common Good Capital can produce a duplicate of a receipt that has already been issued and send it to the authorized mailing address or email address on file for the Account Holder.
Q: Will Common Good Capital send me my Equity Tax Credit receipt?
A: Common Good Capital does not administer the Equity Tax Credit (ETC); this is done by the province where the CED is registered. As such, ETC receipts are provided directly by the province based on a report from the Security Issuer. You will need to contact the appropriate department in your province for more information.
Q: What happens in the year I turn 71?
A: Legislation requires that any RRSPs held by an investor must be closed by the end of the calendar year in which the individual turns 71 years of age. You will receive a letter from Common Good Capital early in the year in which you turn 71 outlining your options, which generally include either withdrawing the assets in the Plan and claiming them as income, or transferring the assets to a Registered Retirement Income Fund (RRIF). Common Good Capital does not administer RRIF accounts, so investors interested in this option would need to identify another financial institution to hold the assets. Please note that due to the nature of the investments held in trust by Common Good Capital, a lack of liquidity may prevent you from redeeming your securities for their cash value, and you may be required to withdraw or transfer the assets in-kind.
TFSAs do not mature, and can continue to be held beyond age 71.
Q: Are there any downsides to investing in a co-op, non-profit organization or similar entity through a Self-Directed RRSP or TFSA?
A: There is a certain level of risk involved with placing all or much of your registered investments in these types of entities. If the company fails or dissolves, you will likely lose those registered funds. This risk will have to be weighed by each individual as you decide whether to invest in co-ops, CEDs, NPOs, or more secure investment instruments within a Registered Plan. The level of investment risk you are comfortable with is something only you can decide. Common Good Capital strongly recommends consulting a financial advisor before making an investment through our Self-Directed Program, and all new investors are required to review and sign our Program Review / Risk Acknowledgement before opening a registered account.