🐑 Why We Chose Malaysia Instead
Before we settled on KL, we looked seriously at retiring to Australia (Fran has family in Melbourne) and briefly considered the US Sunbelt snowbird route. The more we researched the Australia and especially the US tax implications, the more complicated the picture became. The Canada-Australia treaty has some real friction around RRSP treatment. The Canada-US situation — particularly the TFSA foreign trust issue — is genuinely complex for dual residents. This post covers what we found, so you can make an informed decision before committing.
Side-by-Side Quick Reference
Income / Account Type
🇺🇸 US
🇬🇧 UK
🇦🇺 Australia
CPP/OAS withholding by Canada
15%
15%
15%
RRIF periodic withholding by Canada
15%
15%
15%
RRSP/RRIF — local tax on growth
Deferred (treaty)
Deferred (general)
May be taxed annually
TFSA — local tax treatment
Foreign trust — complex
Not recognised as exempt
Not recognised as exempt
CPP/OAS — taxed locally?
Yes — like US Social Security
Credit for Canadian tax paid
Credit for Canadian tax paid
Snowbird complexity
High — 182-day IRS test
Low
Low
TFSA — close before moving?
Strongly recommended
Consider it
Consider it
CPP / OAS Withholding
15% withheld by Canada (Article XVIII)
RRIF Periodic Payments
15% withheld by Canada (treaty rate)
RRSP/RRIF — US Tax on Growth
Deferred — US recognises RRSP/RRIF as Canadian pension plans. Growth inside is not taxed by the IRS until withdrawal (requires election on US return)
TFSA — US Tax Treatment
Treated as a foreign grantor trust by the IRS. Annual Forms 3520 and 3520-A required. Income taxable in the US each year. Strongly consider closing before moving to the US.
CPP/OAS — Taxed in US?
Yes — treated similarly to US Social Security. Up to 85% of CPP/OAS may be included in US taxable income. Credit available for Canadian withholding paid.
US Social Security in Canada
US Social Security paid to Canadian residents: Canada taxes it, with a 15% exemption (85% included in Canadian income). 15% withholding by US applies.
Snowbird Risk
IRS Substantial Presence Test: spending 183+ days in the US over 3 years (weighted formula) can trigger US tax residency. Snowbirds spending 4–5 months/year in the US are in the risk zone.
Dual Citizens
The US taxes its citizens on worldwide income regardless of where they live. Canadian-US dual citizens retiring to the US face full US taxation on all worldwide income. The "saving clause" in the treaty preserves this right.
⚠️ The Canada-US tax relationship is genuinely the most complex bilateral tax situation most Canadians will encounter. If you're considering retiring to the US — or spending significant time there as a snowbird — a CPA who specialises in Canada-US cross-border tax is essential, not optional.
⚠️ The TFSA foreign trust issue is serious. The IRS treats the TFSA as a foreign grantor trust because it doesn't meet the US definition of an exempt pension plan. This means: annual Forms 3520 and 3520-A must be filed, income inside the TFSA is taxable in the US each year (eliminating the tax-free advantage entirely), and failure to file carries steep penalties. For most Canadians moving to the US, closing the TFSA before departure and reinvesting in a US brokerage account is the right call.
CPP / OAS Withholding
15% withheld by Canada (treaty rate)
RRIF Periodic Payments
15% withheld by Canada (treaty rate)
RRSP/RRIF — UK Tax on Growth
Generally deferred — UK treats RRSP/RRIF as a foreign pension. Growth not taxed until withdrawal. Claim relief under the treaty to ensure this treatment.
TFSA — UK Treatment
Not recognised as tax-exempt under UK law. Income and gains inside TFSA may be taxable in the UK annually. Consider restructuring before moving.
CPP/OAS — Taxed in UK?
CPP/OAS is taxable in the UK as foreign pension income. However, you claim credit for Canadian withholding tax paid (15%) against UK tax liability. Net additional UK tax depends on your marginal UK rate.
UK State Pension in Canada
UK State Pension received by Canadian residents is taxable in Canada. UK withholds nothing — Canada taxes it as foreign pension income.
Snowbird / Part-Year
UK residence-based (not citizenship-based). No equivalent to the US Substantial Presence Test. Statutory Residence Test determines UK tax residency — generally 183+ days in the UK makes you resident.
✓ The Canada-UK treaty is relatively straightforward for Canadian retirees. The main items to sort out: RRSP/RRIF treaty election on your UK self-assessment return, and understanding how UK tax credits apply against Canadian withholding on CPP/OAS/RRIF income. A UK-Canada specialist accountant for the first year is worthwhile.
CPP / OAS Withholding
15% withheld by Canada (treaty rate)
RRIF Periodic Payments
15% withheld by Canada (treaty rate)
RRSP/RRIF — Australian Tax
Australia may treat RRSP/RRIF as a foreign superannuation fund. Growth inside RRSP/RRIF may be taxed annually by Australia at marginal rates — check with an Australia-Canada specialist before moving significant RRSP balances.
TFSA — Australian Treatment
Not recognised as tax-exempt. Growth and income inside TFSA may be taxable in Australia annually. Consider restructuring — or at minimum, hold low-yield assets in TFSA before moving.
CPP/OAS — Taxed in Australia?
Taxable in Australia as foreign pension income. Credit available for Canadian withholding (15%) against Australian tax. Net additional tax depends on Australian marginal rate (may be significant for higher incomes).
Australian Age Pension
Australian Age Pension received by Canadian residents is taxable in Canada as foreign pension income. Australia may also withhold — claim foreign tax credit in Canada.
Capital Gains
Generally taxed in country of residence (Australia). Australia's CGT discount (50% for assets held 12+ months) may apply to Canadian assets sold after becoming an Australian resident.
⚠️ The RRSP/RRIF treatment is the key issue for Canadians with large registered account balances moving to Australia. Australia's Superannuation system is built around a very different structure, and foreign pension funds don't always map cleanly to it. Get specialist Australia-Canada tax advice before making the move.
The Bottom Line — What This Means for Your Decision
All three countries reduce Canada's CPP/OAS and RRIF withholding rate to 15% — that's consistent across the three treaties and is a meaningful benefit. But the local tax treatment of your retirement income once it arrives, and the treatment of your RRSP, RRIF, and TFSA, varies significantly.
✓ The UK is the cleanest for straightforward Canadian retirees. Residence-based taxation, RRSP/RRIF generally deferred, credit mechanism for Canadian withholding. No equivalent to the US citizenship tax or the RRSP/RRIF foreign fund complications of Australia.
✓ Australia is manageable but requires careful RRSP/RRIF planning and professional advice before moving. The superannuation framework creates friction with Canadian registered accounts that doesn't exist with the US or UK treaties.
⚠️ The US is by far the most complex — especially for TFSA holders, dual citizens, and snowbirds. The TFSA foreign trust issue alone is a significant planning item. If you're considering the US, start the tax planning conversation 12–18 months before your intended move date.
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Sources & Disclaimer: This article is for informational purposes only and does not constitute tax or legal advice. Canada-US treaty information from Canada-US Tax Convention 1980 (as amended), IRS Publication 597, CRA IT-270R3. Canada-UK treaty from UK-Canada Double Taxation Convention. Canada-Australia treaty from Agreement between Canada and Australia for the Avoidance of Double Taxation. TFSA IRS treatment from IRS PFIC/foreign trust guidance and multiple cross-border CPA sources. Tax treaties and their interpretation change — always verify with current CRA and local tax authority guidance, and consult a cross-border CPA specialising in your specific country pair.