An organization (apparently, a federal Crown corporation or agency) may “write off or remit” an employee debt based on employee financial hardship or bankruptcy, or as a result of collection of the debt becoming statute-barred. Will s. 6(15) apply?
Respecting where the debt is remitted under s. 23(2.1) of the Financial Administration Act for reasons of financial hardship, CRA stated:
Since the debt is settled or extinguished because of the organization’s decision and not the operation of another law… the benefit is connected to the employee’s employment…[and] would be included…under paragraph 6(1)(a).
Conversely:
[W]here… the employee debt is extinguished as a result of… bankruptcy proceedings, the benefit is not connected to the employee’s employment and the amount of the debt extinguished is not included in the employee’s income.
After having already stated that an employee debt is settled or extinguished where the “employer writes off or remits” it, CRA addressed the statute-barring situation:
[T]he debt is not settled or extinguished by operation of the [statute-barring]…. Where your organization writes off a debt because it is not legally enforceable… the benefit is connected to the employee’s employment. …[T]he amount of the debt written off would be included in the employee’s employment income under paragraph 6(1)(a).