For Canadian retirees, Old Age Security (OAS) serves as a reliable financial lifeline. However, just because these monthly payments are deposited into your account doesn’t mean the Canada Revenue Agency (CRA) isn’t keeping a close eye on them.
With increasing financial pressures and more Canadians depending on government benefits, the CRA has become more vigilant in ensuring OAS fits into the larger tax landscape.
In this article, we will cover three red flags the CRA is monitoring for OAS recipients and discuss how to effectively manage your pension payments without raising suspicion.
Red Flag #1: Unreported Income
A common misconception among retirees is that only OAS and Canada Pension Plan (CPP) benefits matter when it comes to taxes. This, however, is not the case. Many seniors supplement their income through part-time work, freelancing, renting out rooms, or selling products online.
Even minor side jobs can attract the CRA’s attention if they are not reported properly. The agency cross-checks financial records, including income slips, and any discrepancies could result in further investigation.
Red Flag #2: Aggressive Deductions or Credits
Claiming deductions or credits, such as medical expenses, charitable donations, or home renovations, can be legitimate, provided you have receipts to back them up. But the CRA may flag these claims if they seem out of proportion to your typical income or spending patterns.
This is especially true if you’re making numerous claims in a single year or using tax advisors who promise exceptionally high returns. If something seems too good to be true, the CRA is likely aware and will scrutinize it.
Red Flag #3: Exceeding the OAS Clawback Threshold
For the year 2025, seniors with a net income exceeding $90,997 will start to see a reduction in their OAS payments. This clawback is deducted on a monthly basis once the threshold is crossed.
What many seniors don’t realize is that investment gains, pension withdrawals, or even money taken from a Registered Retirement Savings Plan (RRSP) could push them over this limit.
The CRA calculates this clawback based on total income, so it’s essential to understand where you stand financially as tax season approaches.
Turning OAS into an Investment Opportunity
While the red flags may sound alarming, there is good news. If you don’t rely entirely on your OAS to cover everyday expenses, investing part of it could be a smart financial move.
One investment option retirees may want to consider is Chartwell Retirement Residences (TSX: CSH.UN), a company that operates senior living communities across Canada.
The real estate investment trust (REIT) offers an attractive option for retirees seeking a consistent income stream that doesn’t fluctuate with market volatility.
Chartwell as an Investment Option for Retirees
Chartwell shares are priced around $18, with a dividend yield of about 3.4% and monthly payouts. The consistent cash flow aligns well with how OAS payments are deposited, making it an excellent match for retirees seeking stable income.
Over the past year, Chartwell reported $917 million in revenue and maintains a market capitalization of nearly $5 billion. The company recently declared a monthly distribution of $0.051 per share for May 2025, continuing its history of reliable dividends.
Building Consistent Income
Investing a portion of your OAS can be an effective way to build a secondary income stream. For example, by setting aside $200 per month and purchasing Chartwell shares, you’ll start receiving dividends immediately.
Over time, these dividends can be reinvested to purchase more shares or withdrawn to cover daily expenses, creating a steady income engine fueled by real estate growth and demographic trends.
If you invest the maximum $8,732.04 in OAS, you could earn nearly $300 annually, or $24.65 monthly in dividends. Since Chartwell provides consistent monthly dividends and doesn’t produce extreme capital gains, it’s less likely to push your total income beyond the OAS clawback threshold.
As long as your overall income remains below the recovery limit and you properly report all earnings, the CRA will have no issue with how you manage your pension.
In summary, while there are red flags the CRA is closely monitoring for OAS recipients, understanding these can help you avoid complications. By reporting all income, claiming only legitimate deductions, and staying below the OAS clawback threshold, you can safely use your OAS payments.
Additionally, investing a portion of your OAS in stable, long-term assets like Chartwell Retirement Residences offers a reliable income source without risking your pension benefits.
FAQs
How can I avoid CRA scrutiny when claiming deductions?
To avoid attention from the CRA, make sure your deductions are consistent with your income and spending habits. Always keep receipts and avoid over-claiming or making multiple large claims in one year.
What is the OAS clawback and how does it affect me?
The OAS clawback is a recovery tax deducted from your OAS payments if your income exceeds $90,997. It includes income from investments, pensions, and RRSP withdrawals.
Can I invest my OAS to generate income without risking my benefits?
Yes, investing a portion of your OAS in stable, consistent assets like Chartwell Retirement Residences can generate additional income without jeopardizing your pension, as long as your total income remains below the clawback threshold.