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.
Principal Issues: Are amounts paid to a support home provider exempt under paragraph 81(1)(h) of the Act?
Position: If the amounts that the caregiver receives are for the benefit of the care recipient, and providing all other conditions are met, they will likely qualify for the exemption under paragraph 81(1)(h) of the Act.
Reasons: All of the conditions of 81(1)(h) of the Income Tax Act must be met.
XXXXXXXXXX
2014-055203
N. Shea-Farrow
March 5, 2015
Dear XXXXXXXXXX:
Re: Payments made to a support home by a "Funds Administrator"
We are writing in response to your letter of July 28, 2014, which we received on October 24, 2014, requesting our comments on the income tax treatment of amounts that are paid to a support home provider.
According to your letter, you are the Guardian Funds Administrator for your adult daughter who has a XXXXXXXXXX disability. You receive funds in connection with XXXXXXXXXX under the XXXXXXXXXX (the "Program"). You indicate in your letter that you receive the funds for the purpose of obtaining a support home where your daughter can reside and receive supports. You would like to know whether the amounts paid with this funding to an individual that provides these services to your daughter are exempt under paragraph 81(1)(h) of the Income Tax Act (the "Act"). It is our understanding that the payments are authorized under the XXXXXXXXXX.
Our Comments
This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R6, Advance Income Tax Rulings and Technical Interpretations.
It is our understanding from the Government of XXXXXXXXXX website that the Program funds agencies to pay for the staff supports that an individual with a XXXXXXXXXX disability needs, or the services can also be provided through a XXXXXXXXXX (the "Agreement"). In an Agreement, an individual with a XXXXXXXXXX disability, a family member, or a close friend can directly hire staff or a service provider that has been approved for the Program. Through the XXXXXXXXXX, a person who signs the Agreement becomes a "Funds Administrator" who accepts responsibility for planning supports and services, being an employer and being accountable for the services provided. The Funds Administrator is not paid to do this.
Paragraph 81(1)(h) of the Act exempts from income social assistance payments to an individual caregiver (the "caregiver") for the benefit of another individual (the "care recipient") under that caregiver's care. The care recipient can be either a child or an adult. The amount the caregiver receives must meet all the following conditions to be excluded from income:
- The payment is a social assistance payment ordinarily made on the basis of a means, needs, or income test.
- The payment is made under a program provided for by federal, provincial, or territorial law.
- The payment is received directly or indirectly by the caregiver for the benefit of the care recipient.
- The care recipient must not be the caregiver's spouse or common-law partner, or related to the caregiver or the caregiver's spouse or common-law partner.
- No family allowance under the Family Allowances Act or any similar allowance provided for by provincial or territorial law can be payable in respect of the care recipient for the period for which the social assistance payment is made.
- The care recipient resides in the caregiver's principal place of residence, or the caregiver's principal place of residence must be maintained for use as the care recipient's residence during the period for which the payment is made.
The term "social assistance" is not defined in the Act. Generally, social assistance means aid provided by a government or government agency on the basis of need. It appears from the XXXXXXXXXX and the Program's website that the funding under the Program is not determined by an actual financial means, needs or income test of the individual with the XXXXXXXXXX disability. Generally, it is implicit that care recipients for whom funding is received would not be capable of financially supporting themselves or living independently. Therefore, it is our opinion that the requirement under paragraph 81(1)(h) of the Act for the social assistance to be ordinarily based on a means, needs or income test can be satisfied by an implicit test applicable to adults with a XXXXXXXXXX disability that began in childhood.
For the purpose of paragraph 81(1)(h), it does not matter if the social assistance payments are made directly by a government or government agency or if they are received indirectly through another organization, be it a not-for-profit or for-profit entity. Therefore, if the payments are for social assistance, the fact that they are made indirectly through the Funds Administrator to the caregiver will not disqualify an amount that would otherwise qualify under paragraph 81(1)(h) of the Act.
As noted in the last bullet, the care recipient must reside in the caregiver's principal place of residence, or the residence must be maintained for the care recipient's use. An individual's principal place of residence is the place where the individual regularly, normally or customarily lives. This requirement is not met in situations where the caregiver and the care recipient do not share common living areas in the residence.
In our view, if the amounts that the caregiver receives are social assistance received for the benefit of the care recipient, and providing all other conditions are met, the payments will likely qualify for the exemption under paragraph 81(1)(h) of the Act and would not have to be included in income.
We trust our comments will be of assistance.
Yours truly,
Pamela Burnley, CPA, CA
Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
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