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Qualified Investments:
What Can I Hold
in my RRSP?
By: Ryan Chua, JD/MBA
If you are like most Canadians, saving for retirement is fairly straightforward affair. Perhaps you entrusted a financial advisor to invest your RRSP funds in a mix of stocks, mutual funds and GICs. However, with the rise in popularity of self-directed RRSP accounts, and an ever expanding range of investments products to choose from, many investors looking to maximize their returns might be dipping their toes in less conventional investments.
Variety is good for investors. Having a diverse portfolio can help an investor reduce risk and potentially improve returns. There are, of course, restrictions on what investments you can purchase in your RRSP. As specified under the tax rules and regulations, investments in your RRSP must be “qualified investments.” The rules dealing with whether an investment qualifies as such can be quite complex and technical1. Unfortunately, there is no definitive list setting out each and every qualified investment; rather, the CRA sets them out by category. And as the categories of RRSP eligible investments expand—and as the tax rules and regulations continue to change—it can be quite the challenge for the average investor to know exactly what can or cannot be held in an RRSP.
The consequences of buying a non-qualified investment in your RRSP can be quite severe. Under the tax rules and regulations, you could face a tax of 50% of the fair market value of such non-qualified investments at the time they were acquired or became non-qualified – even though they’re held within your RRSP. Fortunately, it’s possible to have this tax refunded in certain cases (generally, if you can demonstrate that the investment had been made inadvertently); however, it is best to ensure your investments qualify at the outset.
1These rules and restrictions also apply to investments held in other registered plans such as RRIFs, RDSPs, TFSAs and RESPs.