Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
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: Are payments in lieu of notice "retiring allowances"?
Position: No.
Reasons: Such payments are employment income since they are made in lieu of salary for the period of notice.
2000-005997
XXXXXXXXXX G. Kauppinen
(613) 957-8971
February 8, 2001
Dear XXXXXXXXXX:
Re: Retiring Allowances
This is in reply to your facsimile transmission dated December 4, 2000 regarding the above-noted subject.
You ask whether an amount paid to an employee whose employment has been terminated can be characterized as a "retiring allowance" as defined in subsection 248(1) of the Income Tax Act (the "Act").
The characterization of a payment made to an employee on termination of employment as employment income or a retiring allowance can only be made after the reasons for the payment have been fully ascertained.
It is the position of the Canada Customs and Revenue Agency that a payment made pursuant to paragraph 57(14)(a) in lieu of notice under section 57(1) of the Ontario Employment Standards Act (the "OESA") (eight weeks notice in writing if the employee was employed for eight years or more) is employment income (and not a retiring allowance) since such a payment is in lieu of the salary that the employee would have received during the period of notice.
On the other hand, "severance pay" paid pursuant to section 58 of the OESA would be considered to be a retiring allowance for purposes of the roll-over to a registered retirement savings plan pursuant to paragraph 60(j.1) of the Act.
We trust our comments will be of assistance.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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