TSFA Knowledge Based Certification Practice Test

Transferring TFSA funds between institutions is tax-free when you use a direct trustee-to-trustee transfer. The money moves straight from the issuing institution to the new one, so you don’t take possession of the funds and no withdrawal is reported. Because the funds stay inside the TFSA, there’s no tax consequence and your TFSA contribution room isn’t affected. This is the standard way to move a TFSA between banks or investment firms while keeping its tax-advantaged status.

If you withdraw and then re-contribute later, you’re not moving the funds within the TFSA and you can run into contribution room issues—potentially triggering penalties if you over-contribute or mis-time the recontribution. So the direct transfer path is the clean, tax-free option.