Modelling the Guaranteed Income Supplement (GIS)

What is the Guaranteed Income Supplement (GIS)?

In addition to the Old Age Security pension, your client may qualify for the Guaranteed Income Supplement (GIS), a non-taxable income that is based on income and is available to low-income Old Age Security pensioners.  Payment amounts for this benefit are based on factors including age, place of residence,  marital status, and other income.

Snap Projections does not automatically calculate GIS in your projections for a few reasons including the following:

  • the calculations are complex, involving a government data table that has over 5,000 rows of data which is updated quarterly
  • the dependency of the GIS amount on marital status, age, other income
  • the feedback that we have received from users is that GIS is rarely a factor in their projections

This article details the steps you can take in your projections to model the GIS manually. The GIS can be added as a non-taxable income and adjusted over the years based on the individual's other income.  

Prefer to watch a video?  

This 15 minute video features Leigh Martinson, Customer Success Manager with Snap Projections, and Jason Watt, Instructor at Business Career College walking through a few examples of incorporating GIS in your projections.  This video is also shared by Jason as part of his Retiring on Low Income pro-bono course for anyone to take free of charge. 

In this article:

  1. Determining the GIS benefit amounts
  2. How to include the GIS benefit in your projections
  3. Examples
1

Determining GIS benefit amounts

To find GIS benefit amounts you can refer to this Government of Canada website. For example, for a single person receiving a full OAS pension, the maximum GIS amount between October to December 2021 is $948.82/month. To receive this maximum GIS amount, their income (excluding OAS, GIS, or Allowance payments) must be less than $24. If their income is between $24 and $19,248 annually they'll receive a partial GIS payment with the amount decreasing as their income increases. If their income is above $19,248 then they're not eligible for GIS. 

A Service Canada form is available which lists the various income types that are included in the income threshold calculation for GIS eligibility.   Note that there is also an earnings exemption and the Instruction Sheet in this form provides details about this under Section E, Blocks 7 and 8.  Effective July 2020, the first $5,000 of employment or self-employment income is exempt when determining GIS.  In other words, there is no clawback on GIS based on the first $5,000 of employment income. On the next $10,000 of employment or self-employment income, there is a partial exemption of 50% beyond the $5,000 threshold.  This means there is only half the normal rate of clawback on the GIS in this range.  

Once you have estimated the GIS benefit your client is likely to be eligible for, you can add it to the projections.

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2

How to include the GIS benefit in the projections

Add a new income on the Income page.  If you enter a $0 amount in this table, then you can adjust the values expected each year on the Planning page. 

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Example Cases in Snap Projections

A

Example A: A single individual with no employment and self-employment income

Our first example is for a single person named Salvatore who receives $16,000 a year of income from a combination of CPP and RRIF income. He also receives his OAS pension, and this is not included in the calculation of his GIS benefit. Here are the projections for Salvatore before we include GIS.

To determine the GIS benefit that Salvatore is eligible for, we can use his Taxable Income minus his OAS pension which is excluded from his yearly income for GIS eligibility. 

Yearly Income (excluding OAS Pension and GIS) = Taxable Income - OAS = $23,384 - $7,384 = $16,000

Using the Gov't Benefits table, that correlates to a GIS amount of $135.86/month or $1,630.32/year.

In the projections, we add that amount as a non-taxable income for Salvatore, indexed at 2%.

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B

Example B: A single individual with both employment and self-employment income

When calculating the GIS clawback, the first $5,000 employment or self-employment income has no bearing. On the next $10,000 of employment or self-employment income, there is only half the normal rate of clawback. This example will provide an illustration.

Annette currently receives $16,000 per year of income from the following sources: 
  • $4,000 from CPP
  • $7,000 from employment
  • $5,000 from self-employment

Annette's GIS clawback will be based on:

  • $4,000 from CPP
  • $1,000 from employment, (a $5,000 exemption, and then the next $2,000 only gets ½ the normal clawback)
  • $2,500 from self-employment (only ½ the normal clawback applies)

Annette will have a GIS clawback based on $7,500 of income, even though her income is $16,000/yr from the above sources.

Let's take a look at this in Snap Projections. Since the yearly income for GIS eligibility disregards OAS income, we can make the following calculation:

In the first year of the projections:

Yearly Income (excluding GIS and OAS)
+ Taxable Income 
- $5,000 exemption for $7,000 of employment income 
- 50% exemption on the remaining $2,000 of employment income
- 50% exemption on the $5,000 of self-employment income
- OAS
 = $23,532 - $5,000 - $1,000 - $2,500 - $7,532
= $7,500

Using the Gov't Benefits table, that yearly income for a single person correlates to a GIS amount of $522.82/month or $6,274/year. We add that to the projections as a non-taxable income stream, indexed each year.

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C

Example C: A single individual with changing income over time

Below, we will walk through a longer example to illustrate how to estimate the GIS amount that your client will be eligible for and then include this in the projections in future years.

Example: A single person eligible to start receiving GIS next year. 

In this simple example, John is retiring this year and expects to start receiving his government benefits next year when he turns 65.  He has no employment or self-employment income when he retires.

John is single and has resided in Canada exclusively during his life. He expects to receive 65% of the maximum benefit for CPP, 100% of the OAS benefit, and will draw from his non-registered assets to support his desired annual after-tax spending amount of $36,000.

We will first add the new Income column for GIS as shown above. Here are John's projections before we have added any GIS amounts.

John's taxable income is made up of his CPP and OAS benefits and investment income from his non-registered account. For taxable income details, we clicked the blue icon at the top of the Taxable Income column. 

Since OAS should be excluded from the income used for the calculation for GIS, we will subtract that amount from John's total taxable income. Let's look at the year 2022 to start with. 

Year 2022:

Yearly Income (excluding OAS Pension and GIS) = Taxable Income - OAS = $22,082 - $7,532 = $14,550

Using the Gov't Benefits table, that correlates to a GIS amount of $195.86/month or $2,350/year.

Back in the projections for John, we have entered this GIS amount starting in 2022 and copied it down to age 71, indexed with inflation.  This is an approximation as John's Taxable Income slightly changes every year as his investment income decreases over time as his account depletes.  At age 72, John's RRIF income begins, and his Taxable Income increases accordingly. 

We can do another lookup in the Gov't Benefits table to see what amount of GIS he could be eligible for in that future year.  John turns 72 in 8 years. We need to convert his future income to today's dollars to use the table which is based on the year 2021 in the example.  Once we have the current year's GIS amount, we index it to the value it would be expected to be in 2029.  

Year 2029

Yearly Income (excluding OAS Pension and GIS) = Taxable Income - OAS = $26,761 - $8,652 = $18,109

Using an indexing rate of 2%, $18,109 in 2029 equates to $18,109/1.02^8 = $15,456 in 2021.

Using the Gov't Benefits table, that correlates to a GIS amount of $157.86/month or $1,894/year (in 2021). In 2029 this amount would be $1,894*1.02^8 = $2,219.

In the projections, you can have Snap make this calculation for you. Enter $1,894 for the income under the GIS column in the year 2029, index it at 2%, and click the blue checkmark. Snap calculates the $2,219 for you. 

We have copied this amount down to John's age 79 while indexing it at 2%. 

Year 2037

Once John's non-registered account is depleted, he is forced to take larger RRIF withdrawals which increases his income over the threshold for GIS eligibility. 

Yearly Income (excluding OAS Pension and GIS) = Taxable Income - OAS = $54,084 - $11,151 = $42,933

This amount exceeds the GIS threshold. We enter $0 for GIS from 2037 onwards.

GIS threshold in 2021 = $19,248

GIS threshold in 2037, in 16 years = $19,248*1.02^16 = $26,423

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