Principal Issues: Whether the loss of retirement income benefit provided for by the Workplace Safety and Insurance Act received after the death of the injured worker by his estate should be included in income of the estate pursuant to paragraph 56(1)(v) of the Act and deducted from its taxable income under subparagraph 110(1)(f)(ii) of the Act, assuming that the injured worker did not have a clear right to the amount at the time of death.
Position: Yes.
Reasons: The Workplace Safety and Insurance Act is a worker's compensation law of Ontario and the estate received the amount under that law. As mentioned in file #9826635, paragraph 56(1)(v) takes precedence on paragraph 56(1)(a) because it is more specific.
XXXXXXXXXX 2011-042167 Sylvie Labarre, CA February 22, 2012
Dear Sir,
Subject: Loss of WSIB retirement income benefit
This is in response to your letter of September 20, 2011 in which you asked us if the amount described below, received by your father's estate, is taxable under the Income Tax Act (Canada ) (the "Federal Act").
The Workplace Safety and Insurance Board ("WSIB") sent your father's estate an amount of money. That amount of money represented the compensation for loss of retirement income. That benefit was paid as a lump sum.
Our Comments
It is section 45 of the Ontario Workplace Safety and Insurance Act, 1997 that provides for the payment of qualifying WSIB compensation for loss of retirement income. According to that section, injured workers who receive benefits for loss of earnings under the insurance plan for 12 continuous months (with the exception of a worker who was 64 years of age or older on the date of the injury) may be entitled to compensation for loss of retirement income when they reach the age of 65. If the period of twelve 12 months is reached, the WSIB begins to set aside for the worker an amount equal to 5 per cent of every subsequent payment to him or her for loss of earnings. The worker may also elect to contribute an amount equal to 5 per cent of every payment to him or her for loss of earnings. Those amounts are part of the compensation for loss of retirement income.
That compensation is paid to the worker when the worker reaches the age of 65 or to the worker’s survivors if the worker dies before turning 65.
Given that your father's estate received the amount of the compensation, we have assumed that your father had not reached the age of 65 at the time of his death and that he therefore had no legal right to that benefit. The comments in this letter reflect this assumption.
As we understand it, the estate (or survivor) has received WSIB compensation by virtue of a Canadian or provincial Workers' Compensation Act in respect of an injury, disability or death.
Such compensation would first be added to the net income of the person who received it under paragraph 56(1)(v). However, in a situation like yours where the recipient is not the employer or former employer of your father, that person would be entitled to an equivalent deduction in computing that person’s taxable income under subparagraph 110(1)(f)(ii). Consequently, that amount should be reflected in the tax return of the person who received it in two places. Since the amount of compensation is a component of net income, that amount could, however, have an impact on computations that are made on the basis of net income, if any. However, the receipt of that compensation does not in itself entail any additional tax because the taxable income does not include the amount of the compensation.
According to what you indicated, it is unclear whether you received the amount or whether the estate received the amount of compensation.
As indicated in Guide T4011 - 2011 Preparing Returns for Deceased Persons, you are required to file a T3 Trust Income Tax and Information Return for income the estate earned after the date of death. For example, if the estate received WSIB compensation, that amount would appear on line 19 "Other Income" at Step 2 – Calculating total income as compensation by virtue of the Ontario Workers Compensation Act and be included under paragraph 56(1)(v) and on line 54 "Other deductions" at Step 4 – Calculating taxable income as a benefit under the Ontario Workers Compensation Act deducted under subparagraph 110(1)(f)(ii).
Alternatively, if you received the WSIB award qua survivor rather than as the estate, you should indicate in your T1 Income Tax and Benefit Return the amount of the benefit payable on line 144 "Workers' compensation benefits" and on line 250 "Other payments deduction".
If the assumption we made about your father's age is not correct or if you have additional questions about this letter, please do not hesitate to contact Sylvie Labarre at (613) 946-5357.
These comments do not constitute advance income tax rulings and are not binding on the Canada Revenue Agency with respect to a particular situation.
Best regards,
Stéphane Prud'Homme, Notary, M. Fisc.
Manager
Reorganizations Section III
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy
and Regulatory Affairs Branch