Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Whether retirement benefit under Workplace Safety and Insurance Act can be deducted under subparagraph 110(1)(f)(ii)?
Position: Yes
Reasons: On review of further submissions from taxpayer, we reconsidered our original views as expressed in E9808175. These retirement benefits can be characterized as paragraph 56(1)(a) or 56(1)(v) amounts but paragraph 56(1)(v) takes precedence because it is more specific. Accordingly, the amounts are deductible under paragraph 110(1)(f)(ii).
XXXXXXXXXX D. Duff
982663
August 5, 1999
Dear XXXXXXXXXX:
Re: Retirement Benefits paid under the Workplace Safety and Insurance Act ("WSIA")
This is in reply to your letter of October 15, 1998, regarding the taxation of retirement income benefits to be paid under the WSIA, and further to our letter of July 30, 1998, to XXXXXXXXXX on this issue. You asked that we reconsider our position on the retirement benefits as stated in the previous letter.
Facts
The WSIA is the reformed Ontario workers' compensation legislation and it replaced the Workers' Compensation Act (Ontario) effective January 1, 1998. Sections 43 to 48 of the WSIA fall under the heading, Compensation. Generally, section 43 provides for the compensation for the loss of salary as a result of an injury, while section 45 provides for the retirement benefits.
Subsection 45(2) of the WSIA provides that "If a worker has received payments for loss of earnings for 12 continuous months, the Board shall set aside for him or her an amount equal to 5 per cent of every subsequent payment to him or her for loss of earnings." This amount does not reduce the benefit payments made to the worker, however, the worker can elect to contribute an additional amount, up to 5% of his or her payments. Subsection 45(5) of the WSIA provides that "When the worker reaches 65 years of age, he or she is entitled to receive a retirement benefit under this section. The amount of the benefit is the sum of the amount set aside by the Board and the contribution by the worker, if any, plus the accumulated investment income on those amounts." Subsection 45(6) and the regulations provide for various types of payments to the worker at age 65. These are basically life annuities for the worker or for the worker and spouse, with or without a guaranteed term. If the total benefit per year is less than $1,142.20, the full amount is paid as a lump sum.
In our previous letter we stated that the benefits paid under subsection 43(1) of the WSIA would be included in income pursuant to paragraph 56(1)(v) of the Income Tax Act (the "Act") and deductible under subparagraph 110(1)(f)(ii) of the Act, however, retirement benefits paid under section 45 of the WSIA would be considered superannuation or pension benefits and included in income under paragraph 56(1)(a) of the Act.
It is your view that it is irrelevant whether the retirement benefits are a pension, as they are also amounts paid under a workers' compensation law and, as such, they would be included in income under paragraph 56(1)(v) of the Act. Since this provision is more specific than paragraph 56(1)(a) of the Act, these amounts should be treated as workers' compensation and not pension income.
As a result of the points raised in your submission, we have reconsidered our previous position and are now in agreement with your view as expressed above. Accordingly, in our view, the retirement benefits paid pursuant to section 45 of the WSIA would be amounts included in income pursuant to paragraph 56(1)(v) and deductible under subparagraph 11O(1)(f)(ii) of the Act.
We apologize for any inconvenience that our original views may have caused.
Yours truly,
Roberta Albert, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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