Transfers to do with TFSAs can be a little complicated depending on the type of transfer involved. There are basically two types of TFSA transfers:
- Direct transfers between TFSA accounts (or Qualifying Transfers)
- Indirect transfers (or withdrawals)
If you have more than one TFSA, you are permitted to make direct transfers of assets between TFSA accounts, and in this case the transfers will not impact your TFSA contribution room. The transfers must be directly between TFSAs registered to the same individual. These direct transfers between TFSA accounts are termed Qualifying Transfers and are initiated and completed by your financial institutions.
Direct transfers are not permitted, however, between an individual’s TFSA and their RRSP, Spousal RRSP, RRIF, LIF, Non-Registered Account, etc. As well, a direct transfer cannot occur between one individual’s TFSA account and the TFSA account of another individual.
Note: If you would like to make a direct transfer, contact the financial institution that will be receiving the TFSA assets. They will supply all of the necessary forms and they can answer any questions you might have.
Indirect transfers (withdrawals)
If the TFSA transfer is not done directly between accounts and financial institutions, then the assets coming out of one TFSA will be considered a withdrawal, not a transfer. In such a case where the transaction is considered a withdrawal, your future unused TFSA contribution will increase. If the withdrawn funds are subsequently deposited to another TFSA they will be deducted from your current TFSA contribution room, which might cause all or a portion of the deposit to be classified as an over-contribution and subject to penalty taxes.
Note: There may also be administration fees associated with partial and full TFSA account transfers.