Does selling my business affect my CPP and Old Age Security?

Service Canada runs both the Canada Pension Plan (CPP) and Old Age Security (OAS). It says employment does not affect OAS eligibility, but income does, and it counts taxable interest, dividends and capital gains in the net income it looks at. A sale of your business may or may not produce income of that kind. This page sets out what Service Canada says and does not predict the effect on your pension.

CPP

Service Canada says that important factors in your CPP retirement pension include both how long and how much you contribute. It says that a self-employed person makes the whole contribution, and that the contributions are based on net business income after expenses. Its contribution page does not mention sale proceeds, so this page does not say that a sale adds to or reduces your CPP.

OAS and net income

Service Canada says income affects OAS eligibility, and that what is included as net income includes taxable interest, dividends and capital gains. It says your income tax return is used to determine your net income when you apply. If a sale produces a taxable capital gain, ask an accountant whether and how it shows up in your net income for the year of the sale.

The recovery tax

Service Canada says that if your net world income exceeds the threshold amount for the year, you have to repay part or your entire OAS pension, and that the pension is reduced as a monthly recovery tax. The threshold changes each year, so check Service Canada’s current page rather than any figure quoted elsewhere. For the wider retirement planning picture, see how to plan to retire from your business and hand it over.