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.
Principal Issues:
The issue is whether the payments being received by a caregiver are exempt under paragraph 81(1)(h) of the Income Tax Act.
Position TAKEN:
A definitive opinion was not given. Rather, broad general comments were provided.
Reasons FOR POSITION TAKEN:
The issue involves a question of fact and the information provided to us was incomplete.
941586
XXXXXXXXXX M. Eisner
January 25, 1995
Dear XXXXXXXXXX:
Re: Tax Exempt Payments
This is in reply to your letter of June 10, 1994 in which you asked us whether or not certain payments were exempt from income tax.
In your letter, you have outlined two situations and have asked us for our comments on whether or not the payments in each situation are exempt. In the case of the first situation, the circumstances relate to a taxpayer other than yourself. In view of the confidentiality provisions of the Income Tax Act, it is not possible to make comments in respect of that situation.
In your situation, you have indicated that you are employed by XXXXXXXXXX as a support worker for two injured individuals. You live in a house that has been leased to XXXXXXXXXX and you pay your share of certain costs such as rent and food.
On the basis of the information available, it is unfortunately not possible to determine whether or not the payments you receive as a caregiver are exempt from income tax. However, we are providing general comments which we hope will assist you in that regard.
The consideration of whether or not the payments you receive are exempt involves paragraph 81(1)(h) of the Income Tax Act. In relation to your circumstances, this provision exempts from income certain social assistance payments received by an individual to the extent that such payments
(a)are received directly or indirectly by the individual under a federal or provincial program for the benefit of another person (other than a spouse or a person related to the individual or his or her spouse), and
(b)are made on the basis of a means, needs, or income test,
provided that the person being cared for resides in the individual's principal place of residence.
In connection with the above requirements, the Department does not consider that a payment can be regarded as having been directly or indirectly received under a provincial program for the benefit of another person where the caregiver is receiving salary or wages from the employer. Rather, the caregiver is receiving remuneration for services rendered to the employer and is free to use such remuneration in whatever manner he or she chooses. In addition, the caregiver is not receiving the employment income on the basis of a needs, means or income test. Accordingly, if the payments you are receiving from XXXXXXXXXX are in the nature of salary or wages as you have indicated, they would represent taxable employment income rather than being exempt under paragraph 81(1)(h) of the Income Tax Act.
The above situation can be contrasted with the situation where the source of the funds used by an entity to make the payments to a caregiver, who is an independent contractor, are funds received by the entity under a federal or provincial program and the funds can be regarded as having been paid to the entity in respect of the cared-for individual on a needs, means or income test. In such circumstances, the payments received by the caregiver would be exempt under paragraph 81(1)(h) of the Act assuming that the other requirements are met. We also note that this would be the case notwithstanding that the payments received by the caregiver includes an amount for services rendered by the caregiver.
The issue of whether you are an employee or an independent contractor can only be determined following a review of all the relevant information including a copy of the contract between yourself and XXXXXXXXXX.
For the purposes of obtaining further assistance in determining whether the payments you are receiving are exempt, you should make a submission to the Calgary District Taxation office which would include a copy of the contract described in the preceding paragraph. In addition, your submission should include information on whether your employer is receiving social assistance payments in circumstances similar to those described in the second preceding paragraph. Presumably this information could be obtained from XXXXXXXXXX.
We trust you will find the foregoing satisfactory.
Yours truly,
P.D. Fuoco
for Director
Business and General Division
Rulings Directorate
Legislation and Policy Branch
