Guaranteed Income Supplement Explained

Are you a low-income senior living in Canada? You may qualify for extra money to help you cover living expenses. Residents of Canada who receive a monthly Old Age Security (OAS) check may be eligible for an additional benefit. The Guaranteed Income Supplement (GIS) is a supplement to OAS that you may qualify for under the Old Age Security Act.

Let’s look at what is GIS, who is eligible to receive the supplement, and the amount you may expect to get based on your income. Knowing your benefits can help you plan for retirement.

What is the Guaranteed Income Supplement?

The Guaranteed Income Supplement is money available to low-income seniors who receive or are eligible to receive an Old Age Security pension. You must meet the following criteria to qualify for GIS:

• Currently receive an OAS pension

• Have an annual income (or combined annual income for couples) lower than the maximum annual threshold

Your GIS eligibility is reviewed annually using the income information from your Federal Income Tax and Benefit return. Based on your income, your benefit will automatically renew if you still qualify.

If you already receive the GIS benefit, you’ll get a letter in the mail with either of the the following notices:

• Your benefit has been renewed or stopped

• You need to provide additional information in order to qualify for a benefit

The goal of the OAS and GIS is to provide a basic amount of income from the government. To prevent abuse of this benefit, there are several clawbacks designed to prevent seniors from accessing more benefits than allowed.

Clawbacks apply to the total OAS and GIS income a person has received in any given tax year. The Old Age Security Pension Recovery Tax is a clawback that reduces benefits by 15 percent of taxable income in excess of the maximum annual income allowed.

This changes from year to year so always verify the number for the current tax year.

Once you start receiving GIS, the amount you get will be adjusted automatically. This calculation is based on your most recent tax return after you file it.

If you’re not sure how much you need to save for retirement, check out Wealthsimple’s free retirement calculator.

GIS eligibility

To be eligible for the GIS, you need to be the recipient of basic OAS. In addition, you must:

• Be a resident of Canada (and live in the country for most of the year)

• Have an income that is lower than the maximum allowed income level

If you’re a non-sponsored immigrant, you may be eligible for GIS based on how long you have lived in Canada after turning 18. Sponsored immigrants may also be eligible provided they meet certain criteria.

The maximum allowed income level depends on your marital status. If you have a spouse, it also depends on whether your significant other is receiving the Allowance or the OAS. The rates change quarterly and get adjusted for inflation using the Consumer Price Index.

Below are the maximum monthly payment amounts and maximum annual income to receive the OAS pension for October to December 2019.

Typically, the GIS calculation takes into account only the previous year’s income. However, if an OAS pensioner or spouse has a reduction in income or retires, Service Canada may determine eligibility using an income estimate for the current year.

The estimate is reviewed once taxes are filed. If the reported income differs from the estimated income, there may be an adjustment to the GIS paid. This could either result in additional GIS being paid out or having excess GIS deducted from future payments.

How is GIS calculated?

The GIS amount is calculated based on income for the past calendar year. The GIS payment year runs July through June and not January through December. As an example, GIS payments for July 2019 through June 2020 would be based on 2018 income.

GIS income is reduced by 50 cents for every dollar of other income you receive starting with the maximum payable amount. Your exact GIS supplement depends on several factors including your filing status, if your spouse/common-law partner is an OAS pensioner or receives the Allowance.

To estimate your GIS eligibility, you will need to report income and deductions, including:

• Benefits from a Canada Pension Plan (CPP) or a Quebec Pension Plan (QPP)

• Additional pension income, including private pensions or foreign pensions

• Income from Registered Retirement Savings Plans (RRSPs) that you cashed in a given year

• Employment Insurance income

• Rental property income

• Investment income including interest

• Dividends and capital gains income

• Other income including alimony and workers’ compensation benefits

• Employment net income minus the $3,500 earnings exemption, CPP or QPP contributions and Employment Insurance premiums

• Self-employment net income minus CPP or QPP self-employment contributions and Employment Insurance premiums

• RRSP deductions, union dues, employment expenses and other deductions

Review your most recent tax return and use it as a guideline to estimate your GIS estimate using these tables.

If you have a loss or reduction in income in the current tax year, you may be able to ask for a recalculation. A provision under the GIS allows for your payment to be recalculated based on your current year’s income.

If this is the case for you, you will need to contact Service Canada to ask for a form for estimating your current year’s income.

GIS application

If you are eligible for an OAS pension, you will be automatically enrolled to receive it. This automatic enrollment has also been extended to the GIS. If you were automatically enrolled for the OAS pension, you will also be enrolled automatically for the GIS (provided you are eligible).

Watch your mail for a notice from Service Canada the month after your 64th birthday notifying you if you are eligible for an automatic enrollment. Those that didn’t receive the Service Canada letter will need to fill out an application.

If this is you, fill out and mail form ISP-3550 (Application for the Old Age Security Pension and the Guaranteed Income Supplement). The mailing address is listed on the last page of the application.

Seniors who were unable to apply when eligible due to a medical condition should fill out a Declaration of Incapacity form. You can get the form by contacting Service Canada. Provided you meet the eligibility criteria, you may be able to get your pension with an earlier start date.

To fill out your GIS application, you will need to gather the following personal information:

• Social Insurance Number (SIN)

• SIN and date of birth for your spouse or common-law partner, if applicable

• All addresses where you have lived since age 18

• Your bank details if you want to sign up for direct deposit

• The date you’d like your pension to start

You have the option to fill out a paper application or apply online. Online applications must:

• Be at least one month past their 64th birthday

• Not have applied for or be receiving an OAS pension

• Reside in Canada

• Not have a power of attorney or other legal representative on their account

Apply online using your My Service Canada Account (MSCA). If you don’t have one, you can register here.

GIS forms

If you fill out the paper GIS application, you will need to use the Application for the OAS and the GIS (ISP-3550) form. Print out and fill out all required information.

Include certified true copies of all required documents along with your paper application and mail them to the nearest Service Canada office. You can find the closest office to your location by going here.

Another option is to bring the filled-out paper application and all documents to a Service Canada office. Go here to find the closest office to your home. An upside to submitting your GIS forms in person is that a Service Canada employee can certify your documents free of charge.

Those age 65 and older who are already receiving the OAS pension should apply as soon as possible for the GIS. This will prevent them from losing any payments. Eligible pensioners can receive up to a maximum of 11 months of retroactive payments from the date of application.

In such cases, you must apply for the GIS in writing. Fill out GIS form ISP-3025, Application for the Guaranteed Income Supplement for the applicable payment year. The application should include certified true copies of all required documents.

After you’ve filled out and submitted all required documents, Service Canada will review your application. You will be notified if your application is approved or not, or if you need to provide more information or documents.

What to expect after your GIS application gets approved

Service Canada will send you a letter stating that your GIS application has been approved. You will also receive information about your monthly GIS amount, your first payment date and if you’re entitled to any back payments.

You should expect to receive your GIS payments with your OAS pension payments each month. Your GIS payment will start the latest of:

• the month following becoming eligible for the GIS

• the same month as when you start to receive your OAS pension

• the month following your 65th birthday, or

• up to 11 months before the date of your application if you applied after your 65th birthday,

Just because you start receiving GIS payments doesn’t mean you will always be eligible. You may stop getting your GIS payment if:

• You do not submit your individual Income Tax and Benefit Return with the Canadian Revenue Agency by April 30; in addition, if you do not submit information about your previous year’s net income or combined net income for couples by June of each year

• You live outside of Canada for more than six months in a row

• Your net income (or combined net income for couples) exceeds the maximum annual income threshold

• You serve time in federal prison for a sentence of two years or longer

• You pass away

The Bottom Line

If you’re eligible or already receive an OAS pension, it’s worth checking if you are eligible to receive the GIS payment. It’s targeted toward low-income seniors and can help them bridge the income gap.

Enrollment in the GIS program is automatic upon eligibility for the OAS pension. However, it’s always worth checking if you are able to collect the GIS, especially if your have experienced a drop in income.