The OAS clawback is a special tax that the government imposes on OAS payments if a person's net income for the year exceeds a certain annual threshold.
How is the OAS clawback calculated in Snap?
As shown on the Government of Canada Website, a person's net income for 2020 will be used to calculate the clawback for OAS benefits for the period July 2021 - June 2022. However, for the OAS clawback calculations in Snap, we have decided to base the current year's clawback on the same year's taxable income for simplicity. Here is an example.
The OAS threshold amount for the year 2020 is $79,054 as set by the Canadian Government. A person would need to repay 15% of the difference between their net income before adjustments and this threshold amount.
Here is a simple example with a client that has only a defined benefit pension income of $90,000 in 2020. Their net income before adjustments is their employment income plus the full value of the OAS pension amount they are eligible to receive before any clawback. In 2020, this is $90,000 + $7,362 which is $18,308 over the threshold. ($97,362 - $79,054 = $18,308).
The OAS clawback in 2020 in Snap is calculated as 15% of $18,308 which is $2,746.
NOTE: If the OAS clawback is $0 for every year of the projections, the OAS Clawback column will not be displayed at all. The OAS Clawback column is only displayed on the individual planning pages, not the Combined page.
You will notice that the OAS Clawback is decreasing in this example each year. This is because the pension income remains consistent at $90k per year and the OAS clawback threshold is assumed to increase with inflation each year. (You can update the inflation setting in your scenario under Scenario Setup -> General.) In this case, inflation is set to 2.1%.
How is the OAS benefit displayed in Snap?
The amount shown in the OAS column is the OAS benefit received by the client. (The OAS clawback has already been subtracted from the client's maximum annual OAS amount.)
Continuing the example above, here is this client's OAS information from the Gov't Benefits page.
2020 OAS benefit = Maximum annual OAS amount - OAS Clawback
2020 OAS benefit = $7,362 - $2,746 = $4,616
Is the amount in the OAS Clawback column included in Cash-flow?
No, it differs from other columns in that respect and it is an exception. OAS clawback is already factored in, in the OAS amount reduction (if we subtracted it again from cash flow, we would be double-counting it).
In the Report, where can I see the OAS Clawback?
Under the Income Details section of the report, both the OAS Pension and OAS Clawback are displayed.