A Guide to RRSPs for Australian Expats Living in Canada

As an Australian Expat living in Canada, you have several retirement savings options available to help grow your nest egg while abroad. One of the most important to understand is the Registered Retirement Savings Plan (RRSP), a cornerstone of the Canadian retirement system.

If you are planning on working in Canada for a few years or building a long-term life there, setting up and contributing to an RRSP can offer powerful tax advantages and help grow your retirement savings efficiently. This blog provides a guide to RRSPs for Australian Expats living in Canada.

What Is an RRSP?

A Registered Retirement Savings Plan (RRSP) is a tax-deferred retirement account available to those who are residents for tax purposes in Canada. Contributions to an RRSP are tax-deductible, which means they reduce your taxable income in the year you contribute. Investments within the account grow tax-free until you withdraw the funds, usually in retirement, when you may be in a lower tax bracket.

To open and contribute to a Canadian RRSP, you generally need to be a tax resident of Canada, have earned income, and be 71 years of age or younger. For Australian Expats who are considered tax residents in Canada, this means you are eligible to participate in a Plan.

What Is a Self-Directed RRSP?

A Self-Directed RRSP is a type of RRSP that gives you greater control over the investments you hold within the account. With a self-directed RRSP, you can invest in:

• Stocks and bonds

• ETFs and mutual funds

• Gold and precious metals

• Mortgages and private lending (in some cases)

• Real estate investment trusts (REITs)

This is ideal for Australian Expats who prefer a hands-on approach to investing or looking for more diversification beyond standard RRSP offerings. Most major Canadian banks and brokerages offer self-directed RRSPs, and some offer low fees and robust online platforms for managing them.

Who Can Contribute?

As long as you’re a Canadian tax resident and earning income (employment, self-employment, etc.), you’re eligible to contribute to an RRSP. This includes permanent residents and many other types of visa holders.

Contribution Limits

Your annual RRSP contribution room is calculated as 18% of your previous year’s earned income, up to a yearly maximum set by the Canadian government (for 2024, it's $32,490 CAD). You can also carry forward unused contribution room from previous years. You’ll find your contribution room on your latest Notice of Assessment from the CRA (Canada Revenue Agency).

Tax Benefits of RRSP

One of the greatest benefits of RRSPs for Australian Expats living in Canada is that contributions are tax-deductible. If you're earning a decent income in Canada, contributing to your RRSP could significantly reduce your annual tax bill. There are also other tax benefits, including:

Tax-deferred growth: You won’t pay tax on any dividends, capital gains, or interest while funds are inside the RRSP.

Taxed on withdrawal: You'll pay tax only when you withdraw funds, which ideally happens in retirement at a lower tax rate.

Can I roll my RRSP into my Australian Superannuation fund?

The Australian Tax Office (ATO) does not recognise an RRSP as a “foreign superannuation fund (FSF)”. Because of this, it cannot be rolled over or transferred directly into an Australian super fund and does not receive favourable tax treatment. If you are looking to move the funds into an Australian superannuation account, you would first need to make a withdrawal from your RRSP, then contribute the funds (within the contribution limits) into your Australian Super fund.

Withdrawing from your RRSP – Canada

When you withdraw funds from an RRSP, your RRSP provider will withhold the tax on your behalf. The tax rates depend on your tax residency and the amount you withdraw. For tax residents of Canada, the rates are:

• 10% (5% in Quebec) on amounts up to $5,000

• 20% (10% in Quebec) on amounts of $5,000 and over, up to and including $15,000

• 30% (15% in Quebec) on amounts over $15,000

It is important to note that the tax withheld may not always be enough to account for the tax you owe at your personal tax bracket. You may have to pay more or less tax on the withdrawal when you include the withdrawal amount in your income tax return for that year.

If you make a withdrawal as a non-tax resident of Canada, there is a withholding rate of 25%, unless reduced by a tax treaty. For those living back in Australia at the time of withdrawal, the tax treaty that exists between Canada and Australia ensures the withholding rate is no more than 15%.

Withdrawing from your RRSP – Australia

Australia typically respects the tax-deferred nature of RRSPs, so Australians generally won’t pay tax on the investment growth within the account until such time as a withdrawal is made, regardless of whether they are living in Canada or have since returned to Australia.

When you withdraw funds from an RRSP as an Australian Expat living in Canada, the withdrawal is generally not taxable in Australia, so long as you are a non-resident for tax purposes of Australia during the entire Australian financial year.

If you return to Australia and become a tax resident there, the ATO typically views your RRSP as a foreign trust, with withdrawals assessable under s99B of the Income Tax Assessment Act of 1936. The amount taxable is the growth component of the fund (the corpus), which typically only includes the investment earnings but excludes any contributions made to the fund.

It is highly encouraged to seek tax advice from an Australian Tax Accountant before making withdrawals from an RRSP to understand the amount of assessable income in Australia and make use of any foreign tax credits that may be available.

RRSP vs. TFSA: Which Is Better for Expats?

While RRSPs for Australian Expats living in Canada are a popular savings option, there are other tools available in Canada, including the Tax-Free Savings Accounts (TFSAs). TFSAs also offer tax-free growth and withdrawals for Australian Expats, but the key difference is that the contributions do not reduce your Canadian taxable income. The most suitable savings option for you will depend on your personal situation and may involve a combination of both an RRSP and TFSA. You can read more about TFSAs for Australian Expats here.

Conclusion

In conclusion, RRSPs for Australian Expats Living in Canada can be a powerful tool for building wealth while living in Canada. For Australian Expats, it’s especially important to understand how this account fits into your broader cross-border financial picture. With some planning and the right advice, you can take full advantage of the RRSP while avoiding unexpected tax surprises down the road.

Runway Wealth Management is the trusted Financial Adviser to the Australian Expat community. Our tailored advice is backed by expertise, education and experience, which allows us to be at the forefront of Australian Expat Financial Planning.

If you would like to speak to one of our Expat Financial Advisers about this blog or if you have other queries, we would be more than happy to speak with you. Feel free to send us an enquiry through the ‘Contact Us’ tab provided in the below link:

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General Advice Disclaimer: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances, and objectives. We recommend you obtain professional financial advice specific to your circumstances.