You’re free to transfer cash or investments at any time out of your TFSA into another Questrade account with no additional tax penalty. Unlike RRSPs, TFSAs do not apply a withholding tax, nor are transfers out of a TFSA treated as income for tax purposes.
Please keep in mind however that any transfers of cash or investments out of your TFSA may temporarily decrease your available contribution room. When you withdraw or transfer cash/investments out of a TFSA, the amount withdrawn is added back to your contribution room the next calendar year.
For example: You have a TFSA with a balance of $50,000 CAD, and based on your age, you still have an ‘extra’ $5,000 of contribution room. If you transfer $10,000 out of the TFSA, you cannot re-contribute the whole amount, as you only have an ‘extra’ contribution room of $5,000.
The amount you withdrew from the TFSA is added back to your contribution room on Jan 1st every year. The following year, you ‘gain back’ the contribution room from the withdrawal of $10,000 in addition to the unused room of $5,000 plus the new amount for the year of $6,500 (for ‘23) for a total of $21,500 in excess contribution room.
Generally, if you’re not close to the contribution limit, this is not a concern. However if you treat your TFSA like a ‘chequing’ account with many withdrawals, then re-contributions in the same calendar year, this can potentially cause issues if you exceed the overall contribution limit.
