Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
ADM'S OFFICE 97-04772M
PENDING
RETURN TO INCOME TAX RULINGS
AND INTERPRETATIONS DIRECTORATE
15TH FLOOR, ALBION TOWER
February 10, 1998
XXXXXXXXXX
Dear XXXXXXXXXX:
The Honourable Herb Dhaliwal, Minister of National Revenue, has asked me to respond to your letters of July 4 and July 14, 1997, addressed to XXXXXXXXXX, wherein you requested our comments regarding the tax treatment of disability benefits and statistics pertaining to benefits paid under the Canada Pension Plan and the Employment Insurance program.
The Department of National Revenue (the "Department") is responsible for applying the provisions of the Income Tax Act (the "Act") as enacted by Parliament. Although the Department is also responsible for certain parts of the Employment Insurance Act and the Canada Pension Plan, the main responsibility for the administration of these statutes, including the payment of benefits, belongs to Human Resources Development Canada. Accordingly, we cannot provide you with any assistance regarding the statistics you requested in your letter of July 4, 1997.
With respect to the tax treatment of disability benefits, paragraph 6(1)(f) of the Act generally provides that amounts received by an employee or an ex-employee as compensation for the loss of income from an office or employment, that were payable under a sickness, disability, accident or income maintenance insurance plan to which the employer made a contribution, are to be included in income. I have enclosed a copy of Interpretation Bulletin IT-428 which provides further details regarding the taxation of amounts received under a disability plan.
As regards Canada Pension Plan ("CPP") disability benefits, as provided in clause 56(1)(a)(i)(B) of the Act, a taxpayer must include in income the amount of any benefit received under the CPP. However, subsection 56(8) of the Act allows individuals receiving CPP disability pensions to exclude from income in the year of receipt benefits that relate to prior years (except where the prior year benefits are less than $300) and to pay tax on those benefits as if they had been received in the prior year to which they relate. Section 120.3 of the Act sets out rules concerning the taxes payable in respect of the excluded amount. These provisions may reduce the tax liability of a recipient of CPP disability benefits by taxing the benefits as if they had been paid and included in income in those previous years. Please refer to paragraphs 1 and 4 of Interpretation Bulletin IT-499R, a copy of which is enclosed. Any benefits received under the Employment Insurance Act, including benefits payable for unemployment caused by illness or injury, would have to be included in income under subparagraph 56(1)(a)(iv) of the Act.
I trust that these comments will be of assistance.
Yours sincerely,
Denis Lefebvre Assistant Deputy Minister Policy and Legislation Branch
C. Chouinard
957-2098
August 26, 1997
4-972145