-the taxable part of annuity payments from a superannuation or pension fund or plan; and
-if received as a result of the death of a spouse or common-law partner, or if the pensioner is age 65 or older at the end of the year:
– annuity and registered retirement income fund (including life income fund) payments; and
– Registered Retirement Savings Plan annuity payments. Note: Old Age Security and Canada or Quebec Pension Plan payments do not qualify.

5. How do individuals elect to split eligible pension income?

The pensioner and spouse or common-law partner have to make a joint election in prescribed form with their income tax returns for the year on or before their filing due date (generally April 30 of the year following the tax year, or June 15 if self-employed). The new Form T1032, Joint Election to Split Pension Income, will be available by January 2008. The 2007 income tax return will include a new line for the pensioner to deduct the amount of pension allocated to the spouse or common-law partner. A new line will also be added for the spouse or common-law partner to report the allocated pension income.

6. Who will claim the tax withheld at source from the eligible pension income?

The income tax that is withheld at source from the eligible pension income will have to be allocated from the pensioner to the spouse or common-law partner in the same proportion as the pension income is allocated.

7. Will pension income splitting affect the pension income amount?

The pensioner will be able to claim whichever amount is less: $2,000 or the amount of his or her eligible pension income after excluding amounts allocated to his or her spouse or common-law partner.

The spouse or common-law partner will be able to claim whichever amount is less: $2,000 or the amount of his or her pension income that is eligible for the pension income amount, including the allocated pension income.

Note: A pension that qualifies for the pension income amount in the hands of the pensioner does not necessarily qualify for the pension income amount in the spouse or common-law partner’s hands because eligibility can depend on age (see question 4).

8. Does pension splitting affect the Goods and Services Tax/Harmonized Sales Tax (GST/HST) credit, Canada Child Tax Benefit (CCTB), and other federal or provincial benefits and tax credits?

Allocating pension income to a spouse or common-law partner reduces the pensioner’s net income and increases the spouse or common-law partner’s net income. As a result, benefits and tax credits that are calculated based on the total of the net incomes of both spouses or common-law partners—such as the GST/HST credit, CCTB, and related provincial or territorial benefits—will not change as a result of pension splitting.

However, pension splitting will affect any tax credits and benefits that are calculated using one individual’s net income, such as the age amount, the spouse or common-law partner amount, and the repayment of Old Age Security benefits.