604.299.9274

Blog


Support of Refugees: Tax and Filing Requirements

Two Technical Interpretations (May 26 and March 3, 2017) considered whether support provided to a refugee would be required to be reported on a Form T5007, Statement of Benefits.

Essentially, the CRA considered whether the support would constitute “social assistance” which would require a T5007. If the amount is not considered “social assistance”, no T5007 would be required.

CRA opined that amounts would be considered “social assistance” if provided by a government or government agency, or other organization such as a charity (the “source” test”) and the payment is made on the basis of one of the following (the “purpose” test):

  • an “income” test, which is based solely on the income of the applicant;
  • a “means” test, which is similar to the income test but also takes into account the assets of the applicant; and
  • a “needs” test, which not only takes into account income and assets but also financial needs of the applicant.

 

Social assistance payments should be reported on Form T5007, unless a specific exclusion applies (related to, for example, medical expenses, child care, legal fees, job training, or funeral expenses). Also, payments that are paid in a series that total less than $500 need not be reported on a T5007.

While CRA opined that, for example, support provided by a church would likely constitute “social assistance”, support provided by an individual would not constitute “social assistance”. A review of the specific facts should be conducted to determine the filing obligations.

Further, if the amount is considered “social assistance” the amount must be reported on a tax return. While a deduction may be available, such that no tax may be owing on the amount, certain other income tested benefits such as the Canada Child Benefit may be affected. If the taxpayer had a spouse or common-law partner when the payments were received, the individual with the higher net income must report all of the payments, regardless of whose name is on the slip.

 If you are involved with supporting refugees, consider whether you or your group should be issuing a T5007 slip to the recipients of the support.


Tax Tip: tuition tax credit extended

The tuition tax credit has been extended to include courses at a post-secondary educational institution that are not at a post-secondary school level. This may include, for example, courses on basic literacy or numeracy, or learning a second language.


Employee Discounts on Merchandise – Change In CRA Policy

 

Historically, CRA has stated that an employee enjoying a discount on the purchase of merchandise from their employer is only taxable if a limited number of specified situations exist, such as where the employer makes a special arrangement with the employee or group of employees to buy the merchandise at a discount; the employee buys the merchandise for less than the employer’s cost; or the employer makes a reciprocal arrangement with another employer so that the employees of one employer can buy merchandise from the other at a discount.

While the above guidance is still published in certain CRA documents, CRA has recently released updated guidance which appears to limit this administrative position. In CRA Folio S2-F3-C2, CRA noted that where an employee receives a discount on merchandise because of their employment, the value of the discount is generally a taxable benefit. This would apply regardless of whether the discount was provided by the employer or a third-party.

This updated guidance appears to be consistent with a number of Court decisions.

Consider your business policy in respect of discounts on merchandise for employees in light of this updated administrative position.

 


Are you ready for retirement?

The Canadian Retirement Income Calculator (https://www.canada.ca/en/services/benefits/publicpensions/cpp/retirement-income-calculator.html) provided by the Government of Canada estimates retirement income generated through a number of programs such as the Canada Pension Plan, Old Age Security pension, an individual’s employer’s pension plan, RRSPs, and other sources based on past and intended contributions.

When using this tool, individuals should have their CPP Statement of Contributions, financial information about their employer’s pension, most recent RRSP statement, and any other information related to savings that will provide for ongoing monthly retirement income.

Use this tool to help assess your financial readiness for retirement.