Principal Issues: What is the tax treatment of payments from a maternity leave plan in a given situation?
Position: Payments from maternity leave plan are included in box 14 on the T4 slip.
Reasons: Previous positions.
August 27, 2020
XXXXXXXXXX Head Office Income Tax Rulings Directorate I. Landry, M. Fisc.
2016-067580
Tax treatment of supplementary maternity benefits
Dear Madam,
This letter is in response to Ms. XXXXXXXXXX's letter of November 8, 2016, in which she requested our comments on the tax treatment of supplementary maternity benefits paid under the Group Insurance and Maternity Leave Plan for Quebec's Subsidized Childcare Centres [Régime d’assurance collective et de congés de maternité des centres de la petite enfance et des garderies subventionnées du Québec] (the “Plan”). We have assumed that the Plan is not a trust plan. Ms. XXXXXXXXXX further asked about the deductions to be withheld at source on those maternity benefits.
All statutory references herein are to provisions of the Income Tax Act (the "Act").
Our Comments
We are of the view that supplementary maternity benefits paid under the Plan are income that should be reported in Box 14 of the T4 information slip, Statement of Remuneration Paid.
In addition, any person who pays supplementary maternity benefits under the Plan in a taxation year must deduct or withhold the amount prescribed pursuant to subsection 153(1).
Finally, an employment insurance (EI) premium deduction must be made on any amount made to augment maternity benefits, as in this situation, unless the following two conditions are satisfied:
- The total amount of the supplement and weekly EI benefits combined does not exceed the employee's gross regular weekly earnings.
- The supplement does not reduce the employee's accrued credits such as retiring allowance, unused sick leave or vacation leave.
For more information on payroll deductions, please refer to T4001 Employers’ Guide – Payroll Deductions and Remittances available on our website at https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4001/employers-guide-payroll-deductions-remittances.html#P209_8497
We hope that these comments are of assistance.
Michel Lambert, CPA, CA, M. Fisc.
Manager
Business and Employment Income Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
UNCLASSIFIED