It pays to apply for Guaranteed Income Supplement

Canadians can receive Old Age Security (OAS) benefits at age 65. OAS provides up to $551 a month.

Low-income seniors can also receive a Guaranteed Income Supplement (GIS) on top of their basic OAS.

Apply for GIS if your income is low. Maximum GIS benefits are $747 a month, including a $50-a-month top-up. Benefits are incometested.

The cut-off income level for GIS entitlement depends on age and marital status. For a single senior the GIS cut-off point is when your yearly income (excluding OAS) is $16,728. To find Service Canada’s online GIS calculator, do an Internet search for “table of Old Age Security payment amounts.”

What is the most you can earn before your GIS is cut off ? Look at line 150 of your 2013 income tax return. A single senior living on total income below $23,307 should apply for GIS. Since wages under $3,500 a year are ignored in the income test, your total income could even be as high as $26,807 before being cut off.

GIS entitlement depends on your household income. If you are married or living common-law, Service Canada also needs to know the income of your spouse or partner when you apply for GIS.

Let’s look at an example of a widowed senior who reported Canada Pension Plan (CPP) and workplace pension benefits totalling $16,128 for 2013. That is $600 below the $16,728 cutoff. Once she applies, she can receive about $25 per month GIS according to the online calculator.

Your benefit levels will be adjusted every July according to income reported on your annual income tax return. For every dollar of additional annual income you report, your GIS benefits for the following year are reduced by 50 cents. In effect, the GIS income test is equivalent to a 50 per cent marginal tax rate.

For a couple, the GIS cutoff level for household income is $22,080 (excluding OAS) when both spouses are OAS recipients. However, while one spouse is still under 65, the cut-off level is $40,080. If you are retired and living on non-registered savings, prior to starting RRIF withdrawals, your income may well be low enough to qualify for some GIS. You can only receive GIS if you apply.

You need to apply for GIS only once in your lifetime. Service Canada will automatically check for your entitlement each year, right after you file your income tax returns.

OAS clawback

There is an OAS clawback income test for high income seniors. Note that OAS clawback depends only on your individual income. Unlike the GIS income test, your spouse’s income level is not a factor in determining OAS clawback.

For 2014, there is no OAS clawback when an individual senior’s net income is under $71,592. Only five per cent of seniors have their OAS pensions clawed back.

For every dollar of income above the $71,592 threshold, the amount of basic OAS pension that has to be repaid increases by 15 cents. When your net income exceeds $115,716, your OAS will be fully clawed back.

If your individual net income is expected to stay above $115,716 at age 65 and for several years afterwards, then all of your OAS will be clawed back. If that’s your situation, you may want to voluntarily delay the start of your OAS. If you defer the start of your OAS pension, your monthly OAS payment will be increased by 0.6 per cent for every month you delay receiving it, up to a maximum of 36 per cent at age 70.

Your financial adviser can provide you with some helpful ideas on minimizing OAS clawback — including pension splitting, TFSAs, RRIF withdrawals and when to sell property. Terry McBride, a member of

Advocis, works with Raymond James Ltd. (RJL). The views of the author do not necessarily reflect those of Raymond James Ltd. (RJL). Information is from sources believed reliable but cannot be guaranteed. This is provided for information only. Securities offered through Raymond James Ltd., member of the Canadian Investor Protection Fund. Insurance services offered through Raymond James Financial Planning Ltd., not a member of the Canadian Investor Protection Fund.