Section 20.01

Members of a professional union, which is a person whose taxable income is exempt by virtue of section 149, make contributions, by means of source deductions, to a fund used, in turn, by the union to purchase drug insurance coverage for such members. Can a union member (a self-employed person carrying on a business) deduct an amount payable in respect of his or her contribution to the fund, even if it differs from the amount paid by the union to the insurance company for that individual's coverage?

After noting that the contract with the union “must show that the contributions were paid pursuant to a PHSP within the meaning of section 20.01,” CRA stated:

[A] contribution to a plan that qualifies as a PHSP could result in a deduction in computing the income from a business of the individual, who is a self-employed business owner, if all the conditions set out in subsection 20.01(1) were also met and to the extent that such an expense was reasonable in the circumstances.

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An insurance company sells a life and health insurance contract to self-employed workers, business owners and employees pursuant to which such individuals purchase life insurance and/or long-term disability coverage - and may also purchase supplementary coverage for hospital, medical and paramedical expenses and/or supplementary coverage for dental expenses, with the premium cost thereof separately disclosed. CCRA stated:

[C]overage for medical expenses, hospital expenses or both included in a contract of insurance of persons, which is presented separately on the invoice by the insurer to the insured, could qualify as a private health insurance plan. …

Provided that all the conditions of subsection 20.01(1) are satisfied and subsection 20.01(2) applies, an individual may deduct in computing income from a business an amount payable by the individual for the year as a premium to a private health services plan.