In Year 1, pending the employee’s application for worker’s compensation from the CSST for a disability (which ceased later in the year), the employer paid the employee salary insurance benefits of $40,000, with the employee receiving $10,000 in salary in Year 1 outside the period of disability.
In Year 2, the CSST paid $30,000 in benefits for Year 1 and issued a T5007 slip to the employee for that amount. The employer reversed the accounting entries for the $40,000 in salary insurance benefits paid in Year 1 and, as required by the collective agreement, paid the employee the difference between the amount received from the CSST and the salary that the employee would normally have received had he been at work. The employee also received his regular salary of $65,000.
CRA indicated that the wage maintenance amount of $40,000 paid in advance of the receipt of the workers’ compensation was reportable as s. 6(1)(f)(iii) income , with the employee taking a s. 8(1)(n) deduction when this amount was repaid out of his regular salary, and with the workers’ compensation being included in his income on receipt under s. 56(1)(v).