Australian Expats with Canadian Tax-Free Savings Accounts (TFSAs): A Guide for Aussies living in Canada

When Australian Expats think about smart ways to grow their wealth while living abroad, assets such as property, shares, superannuation, or high-interest savings accounts often come to mind. If you're living in or planning a move to Canada, there's another powerful tool you should know about, known as the Canadian Tax-Free Savings Account (TFSA).

A TFSA can offer Australian Expats flexible investment options and tax-free growth during their time abroad. For Australian Expats with Canadian Tax-Free Savings Accounts, it can be an excellent way to save, invest, and build wealth in a tax-effective manner.

What is a TFSA?

Introduced in 2009, the TFSA is a Canadian government initiative that allows Canadian tax residents to earn tax-free investment income. Contributions to a TFSA are not tax-deductible, but any income earned inside the account, including interest, dividends, and capital gains, is tax-free, even when withdrawn.

You can use your TFSA to hold various investments such as Cash, Shares, Bonds, Mutual funds, ETFs and Guaranteed Investment Certificates.

TFSA Contribution Limits

Each year, the Canadian government sets a contribution limit. As of 2025, the annual contribution limit is $7,000, with unused room rolling over indefinitely.

For Australian Expats, it is important to note that your contribution room only starts accruing once you're a tax resident of Canada and over the age of 18. Investment income earned and changes in the value of your TFSA investments will not affect your TFSA contribution room for current or future years.

How Can Australian Expats with Canadian Tax-Free Savings Accounts Benefit?

Tax-Free Growth: As long as you're a Canadian tax resident, your investments inside the TFSA grow tax-free, with no tax on withdrawals when withdrawn while in Canada.

Investment Flexibility: You can use your TFSA as a traditional savings account or treat it like an investment portfolio. This flexibility makes it ideal for varying investment timeframes and financial goals, including saving for a home, emergency fund, or travel fund.

No Impact on Canadian Benefits: TFSA withdrawals don’t count as income and won’t affect eligibility for federal social security benefits (if you are eligible).

Are there any limitations for Australian Expats with Canadian Tax-Free Savings Accounts?

No Upfront Tax Deduction: Unlike RRSPs (Registered Retirement Savings Plans), contributions to a TFSA don’t reduce your taxable income. So if you’re looking for tax relief in the year you contribute, the TFSA won’t provide this.

Contribution Limits can be Restrictive: The annual limit is $7,000 in 2025, which can be tight if you're looking to aggressively invest or save for a major purchase. Even though unused room rolls over, the limit might not be enough for high-income earners or those planning for big goals such as a house deposit or early retirement.

Overcontributions result in Tax Penalties: The Canada Revenue Agency (CRA) tracks your TFSA contributions, and going over your limit triggers a 1% penalty per month on the excess until it's withdrawn. This can easily happen if you:

• Withdraw and re-contribute in the same year (contribution room is restored the next year);

• Use multiple TFSA accounts and lose track; or

• Forget to account for transfers.

  
  

What happens if Australian Expats with Canadian Tax-Free Savings Accounts leave Canada?

For Australian Expats, a TFSA is not taxable by the Australian Tax Office (ATO) while you remain a non-resident for tax purposes. However, this can change when you return to Australia and resume tax residency there. The ATO typically treats TFSAs as foreign trusts or non-compliant foreign investment vehicles, meaning income and capital gains may be taxable upon withdrawal when living in Australia.

It is important to consider how long you expect to invest using a TFSA while in Canada, as the tax advantages are significantly diminished if you return to Australia and continue using your TFSA when in Australia. There may also be more suitable investment options when in Australia, such as superannuation. It is encouraged to consult a tax adviser with cross-border experience if you’re planning to continue using a TFSA when in Australia.

Conclusions

TFSAs can be an advantageous way for Australian Expats living in Canada to build wealth, but it’s important to understand the tax implications when utilising a Canadian Tax-Free Savings Account. When used wisely, these accounts offer an opportunity for tax-free growth, flexible investing, and easy access to funds when you need them.

Before Australian Expats set up a Canadian Tax-Free Savings Account, speak with a Specialist Financial Adviser or Tax Professional to ensure you’re making the most of your situation as an Australian Expat in Canada.

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.