Regarding the taxability of pension benefits received by a Status Indian, where such benefits relate to contributions attributable partly to taxable employment income and partly to exempt employment income, CRA stated:
[W]hen determining the exempt percentage of superannuation or pension benefits received by a Status Indian, reference should be made to the exempt percentage of employment income earned in each year in which contributions were made or in which superannuation or pension benefit credits accrued. …
There may, however, be situations where no period of service is taken into account for the purpose of determining the benefits payable … for example, in the context of a long-term disability insurance plan whose coverage comes into effect when the employee is hired and whose benefits depend on the employee's annual salary at the time the benefit period begins. In such a case, we are of the view that in order to determine the exempt percentage of benefits, reference must be made to the employment of the Status Indian at the time the disability occurs. If, at that time, the Status Indian's employment income is 40% exempt, then this percentage will also apply to disability insurance benefits.
… [T]here may be situations where extenuating circumstances may make it appropriate to consider a longer period … .