Citation: 2011 TCC 176
Date: 20110322
Docket: 2010-2256(OAS)
BETWEEN:
SOROUR LANKARANI,
Appellant,
and
THE MINISTER OF HUMAN RESOURCES
AND SKILLS DEVELOPMENT,
Respondent.
REASONS FOR JUDGMENT
Hogan J.
Introduction
[1]
This is a reference
pursuant to subsection 28(2) of the Old Age Security Act (“OASA”)
for a determination of income as defined in section 2 of the OASA.
Factual Background
[2]
Under the OASA,
the guaranteed income supplement (GIS) is an adjunct to the old age security
pension for recipients who have low incomes. The general scheme of the GIS was
described by Hershfield J. of this Court in Ward v. Minister of Human
Resources and Social Development:
4 . . . Firstly, the entitlement to the GIS for
the 12 month period commencing June 1 of any year and ending July 31 of the
next year depends on the income of the applicant in that applicant’s base
calendar year which is the taxation year preceding the particular 12 month
period in respect of which an application for GIS is being made. That
particular 12 month period is referred to as the “current payment period”. To
account for certain situations where one’s income is expected to go down during
the upcoming GIS payment period and hence leave an applicant in a worse income
position than projected by looking at the previous calendar year’s income,
applicants are permitted in limited circumstances to make estimates of reduced
income so that the Minister can make any necessary adjustments to the amount of
the GIS to be paid to that applicant.
[3]
The Appellant submitted
an application for the GIS dated June 24, 2008. She retired on January 11, 2009
and began receiving the GIS in February 2009. The Appellant’s “first estimate”
of income was received by the Minister of Human Resources and Skills
Development (“Minister”) on January 14, 2009, and this estimate was used to determine
the Appellant’s eligibility for the GIS for the 2009‑2010 payment period.
[4]
On September 24, 2009,
the Minister notified the Appellant that because she had not reported an RRSP
withdrawal of $7,542.86 made in 2008, she had received a GIS overpayment. The
Minister consequently reduced the Appellant’s GIS entitlement and requested the
return of the overpayment.
[5]
The Appellant subsequently
initiated the appeal process and, since the issue in this case has to do with
income, the Review Tribunal referred the notice of appeal to this Court.
Respondent’s Position
[6]
The Respondent argues
that the Minister calculated the income of the Appellant correctly with respect
to the period covered by the appeal. Since the calculation of income under the OASA
is based on how income is determined under the Income Tax Act (“ITA”),
and RRSP withdrawals are income in the year in which they are taken, the
reduction of the GIS entitlement is correct under paragraph 14(2)(c) of
the OASA.
Analysis
Statute
[7]
The OASA
provides in section 2 a definition of “income” which reads in part as follows:
“income” of a person for a calendar year means the person’s income
for the year, computed in accordance with the Income Tax Act, except that
. . .
[8]
The amount of the GIS
benefit that a recipient is entitled to is calculated in accordance with section
12. The calculation is based on income, and the relevant provision of section
12 of the OASA for the purposes of this appeal is the following:
(6) In this section, “monthly base income” means, in relation to the
calculation of the supplement for a month in any given payment quarter,
(a) in the case of a person other than an applicant described
in paragraph (b) or (c), one-twelfth of the income of that person
for the base calendar year;
. . .
[9]
Section 10 of the OASA
defines “base calendar year” and “current payment period” as follows:
“base calendar year” means the last calendar year ending before the
current payment period.
“current payment period” means the payment period in respect of
which an application for a supplement is made by an applicant.
[10]
Where an old age
security pension recipient retires during a payment period, subsection 14(2)
allows the recipient to file an estimate of how his income will be affected so that
the Minister can adjust the GIS payment accordingly. That subsection requires
all other income from the base calendar year to be added to the estimated
pension and employment income for the purpose of calculating the adjusted GIS
payment. Subsection 14(2) of the OASA provides:
(2) If in a current payment period a person who is an applicant, or
is an applicant’s spouse or common-law partner who has filed a statement as
described in paragraph 15(2)(a), ceases to hold an office or employment
or ceases to carry on a business, that person may, not later than the end of
the second payment period after the current payment period, in addition to
making the statement of income required by subsection (1) in the case of the
applicant or in addition to filing a statement as described in paragraph 15(2)(a)
in the case of the applicant’s spouse or common-law partner, file a statement
of the person’s estimated income for the calendar year in which the person
ceased to hold that office or employment or ceased to carry on that business,
which income shall be calculated as the total of
(a) any pension income received by the person in that part of
that calendar year that is after the month in which the person ceases to hold
that office or employment or to carry on that business, divided by the number
of months in that part of that calendar year and multiplied by 12,
(b) the income from any office or employment or any business
for that calendar year other than income from the office, employment or business
that has ceased, and
(c) the person’s income for the base calendar year calculated
as though, for that year, the person had no income from any office or
employment or any business and no pension income.
[11]
Section 14 of the Old
Age Security Regulations
defines “pension income” for the purposes of section 14 of the OASA as
follows:
14 For the purposes of section 14 of the Act, “pension income” means
the aggregate of amounts received as
(a) annuity payments;
(b) alimony and maintenance payments;
(c) employment insurance benefits;
(d) disability benefits deriving from a private insurance
plan;
(e) any benefit, other than a death benefit, under the Canada
Pension Plan or a provincial pension plan as defined in the Canada
Pension Plan;
(f) superannuation or pension payments, other than a benefit
received pursuant to the Act or any similar payment received pursuant to a law
of a provincial legislature;
(g) compensation under a federal or provincial employee’s or
worker’s compensation law in respect of an injury, disability or death;
(h) income assistance benefits under an agreement referred to
in subsection 33(1) of the Department of Human Resources Development Act
by reason of a permanent reduction in the work force as described in that
subsection; and
(i) income assistance benefits under the Plant Workers’
Adjustment Program, the Fisheries Early Retirement Program or the Northern Cod
Adjustment and Recovery Program by reason of a permanent reduction in the work
force.
[12]
The ITA deals
with the taxation and administration of RRSPs. It prescribes in subsection
146(8) that amounts withdrawn from an RRSP are to be included in income for the
year in which they are withdrawn:
(8) There shall be included in computing a taxpayer’s income for a
taxation year the total of all amounts received by the taxpayer in the year as
benefits out of or under registered retirement savings plans, other than
excluded withdrawals (as defined in subsection 146.01(1) or 146.02(1)) of the
taxpayer and amounts that are included under paragraph (12)(b) in
computing the taxpayer’s income.
[13]
Further, paragraph
56(1)(h) of the ITA confirms that withdrawals from RRSPs are
taxable:
56(1) Without restricting the generality of section 3, there shall
be included in computing the income of a taxpayer for a taxation year,
. . .
(h) amounts required by section 146 in respect of a
registered retirement savings plan or a registered retirement income fund to be
included in computing the taxpayer’s income for the year;
. . .
[14]
In Chubak v. Canada
(Minister of Human Resources Development),
Beaubier J. held that amounts withdrawn from an RRSP are income to the taxpayer
for the purposes of the OASA, due to the operation of paragraph 56(1)(h)
and section 146 of the ITA.
[15]
Further, in Gramaglia
v. Minister of Human Resources and Social Development, Beaubier J.
held that amounts withdrawn from an RRSP under the Home Buyers’ Plan (HBP) and not
paid back into the RRSP as scheduled are to be included in income in making determinations
of GIS entitlement. Moreover, Bowie J. held in Furma v. Minister of
Human Resources Development
that when the RRSP matures before repayment under the HBP, the amounts not
repaid under the plan are income for the purposes of determining GIS
entitlement.
[16]
In summary, it is clear
that withdrawals from an RRSP are to be included in income under the ITA. Case
law makes it clear that RRSP withdrawals must also be reflected in the income
used to determine GIS entitlement.
[17]
For the determination
of the GIS amount to which she was entitled, the Appellant had to navigate a
technical set of rules that cannot be easily understood by most taxpayers.
[18]
First, when determining
income under the OASA, one must first look at the payment period in
question. In this case, it is the 2009-2010 payment period, which runs from
July 1, 2009 to June 30, 2010. In general, to determine entitlement
for this period, one must look at the income from the base calendar year.
[19]
The base calendar year
in this case is the calendar year that ended prior to the payment period in
question, and that year is the 2008 taxation year. Therefore, the Minister is
correct in using 2008 income figures to determine GIS eligibility for the 2009‑2010
payment period.
[20]
The next issue to
resolve is whether the RRSP withdrawal was properly included in the income
figures used to calculate the GIS. The RRSP withdrawal is assumed to have
occurred in 2008. Pursuant to subsection 146(8) of the ITA, withdrawals
made from an RRSP in a year are to be included in income for that year, and this
is reiterated in paragraph 56(1)(h) of the ITA. The cases
mentioned above confirm this. Therefore, the RRSP withdrawal made by the
Appellant in 2008 is to be included in her 2008 income under the ITA.
[21]
Since section 2 of the OASA
states that income under that Act is the same as income under the ITA
(with some exceptions, which do not apply here), the RRSP withdrawal amount was
properly included in the Appellant’s income for 2008 for the purposes of the OASA
as well.
[22]
The last issue, then,
is whether or not the RRSP amount was properly included in the income figure
used to determine whether the Appellant’s entitlement to the GIS should be
adjusted. Withdrawals from an RRSP are neither pension income nor employment
income under subsection 14(2) of the OASA. Therefore, these withdrawals
should be included under paragraph 14(2)(c). Section 14 includes all
income from the base calendar year which is not pension or employment income.
[23]
Therefore, since the
RRSP withdrawal was income in the 2008 taxation year, which is the base
calendar year for the 2009-2010 payment period, that withdrawal was properly
included by the Minister in determining the GIS entitlement for the 2009-2010
payment period under subsection 14(2) of the OASA.
Conclusion
[24]
For these reasons, it
is the decision of this Court that Sorour Lankarani was required by subsection
146(8) of the ITA to include $7,542.86 in her income for the calendar
year ending December 31, 2008, and the Commissioner of Review Tribunals
shall be so advised.
Signed at Ottawa, Canada, this 22nd
day of March 2011.
"Robert J. Hogan"
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