Peter K. Noack 995-0051
This is in reply to your letter of July 3 concerning the deductibility of your contributions under the Public Service Superannuation Act for elective service, i.e. service with XXXX while you were not a contributor.
Such contributions made in a year will be deductible from your income for the year up to a maximum of $3,500 provided that you do not make similar contributions to another plan. The total amount of all such contributions that may be deducted from your income is also subject to a ceiling calculated as $3,500 times the number of years in which you rendered services while you were not a contributor.
The amount of the contribution that is in excess of the maximum deduction for a year may be carried forward and claimed as a deduction from your income of subsequent years under subsection 8(8) of the Income Tax Act (the "Act") subject to the same limitations as in the year in which the contribution was made.
Paragraph 60(j) of the Act permits the deduction in a year of your contribution for elective service in the year or within 60 days after the end of the year to the extent of the amount of pension income included in the year under subparagraph 56(1)(a)(i) of the Act. After retiring you may continue to claim deductions under the carry forward provisions subject to the maximum deduction of $3,500 for a year.
The instalment interest element of your contributions is considered to be a non-deductible interest expense by virtue of subsection 18(11) of the Act; it is not a contribution to a pension plan for the purpose of paragraph 8(1)(m) or paragraph 60(j) of the Act and, therefore, cannot be deducted from your income under any circumstances.
Yours truly,
for Director Financial Industries Division Rulings Directorate Legislative and Intergovernmental Affairs Branch