LSIF Foreign Content Rules Changed


Update: Federal Budget 2005

Foreign content limits on RRSPs are now completely removed, eliminating the need to calculate foreign content limits and the bump up in room that LSIF investors enjoyed. The following information is maintained for historical purposes only:

Historical Background Only:

Federal Budget 2000 Had Good News for LSIF Investors

Increased Foreign Content Limits up to 50% for 2001 and beyond

LSIF shareholders increase their foreign content limit in their RRSP or RRIF from the current maximum of 30% up to a a maximum of 50%.

The 2000 federal budget increased the foreign property content limit for all RRSPs and RRIFs from 20% to 25% for the year 2000, and to 30% for 2001 and thereafter. Additionally, an increase to the "3 for 1 bump-up rule" has also been proposed. Under this rule, an extra $3 of foreign property "room" is generally made available in an RRSP or RRIF for each $1 invested in shares of a labour sponsored investment fund.

This foreign property "bump" was subject to a 20% limit, meaning that the foreign property content of the RRSP or RRIF can only be increased from 20% to a maximum of 40%. Under the budget proposal however, this 30% limit is increased, allowing an investor, by making sufficient investments in labour sponsored funds, to hold up to 45% of his or her RRSP or RRIF in foreign property in 2000 and up to 50% thereafter.

The proposed changes took effect as of the budget date, February 28, 2000. Therefore, investors can already take advantage of these changes for their RRSPs or RRIFs. Increases take effect at the end of the month of the LSIF purchase. Investors no longer must wait three months to take advantage of this legislation.

ScotiaMcLeod does not provide tax or accounting advice. If you have further questions, please consult your labour fund directly, Canada Customs and Revenue, or a tax expert.

 



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