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: 1. Whether the payments under the AHCB, will be considered a social assistance payment pursuant to paragraph 56(1)(u).
2. If yes, will a T5007 be required to be issued to the Care Recipients?
3. Will the government of XXXXXXXXXX be required to issue a T4A?
Position: 1. Question of fact, but likely yes.
2. Question of fact, but likely yes. A reporting exception may be available, if payments from Care Recipient to Caregiver are made in respect of qualifying medical expenses.
3. Not likely.
Reasons: 1. The payments under the AHCB will likely be considered a social assistance payment pursuant to paragraph 56(1)(u).
2. Social assistance payments described in paragraph 56(1)(u) are reported on a T5007, unless the payment is specifically excluded from this reporting requirement. Paragraph 233(2)(a) of the Regulations excludes payments made in respect of qualifying medical expenses incurred by or on behalf of the payee.
3. Social assistance payments as described in paragraph 56(1)(u) are generally reported on a T5007 and are not described in subsection 200(2) of the Regulations.
Dawn Kennedy HEADQUARTERS
Intergovernmental Relations Advisor Income Tax Rulings
Service, Innovation and Integration Branch Directorate
Canada Revenue Agency Chris Brennan CPA, CA
2024-100715
XXXXXXXXXX At Home Caregiver Benefit
We are writing in response to your email of February 1, 2024, regarding your questions about the Government of XXXXXXXXXX proposed At Home Caregiver Benefit (AHCB). More specifically, you have asked us to confirm XXXXXXXXXX view that payments under the AHCB, will be considered social assistance payments pursuant to paragraph 56(1)(u) of the Act. In addition, you have asked us to comment on XXXXXXXXXX reporting requirements for the payments to Care Recipients, under the AHCB.
Background
Our understanding from the information you provided to us is that the aim of the AHCB is to recognize the important role of currently unpaid primary caregivers who care for individuals living at home with significant ongoing care needs and as a result are at a high risk of institutionalization. The payments under the AHCB represent an acknowledgement of the range of direct and indirect costs borne by primary caregivers. It is not payment for services.
A Care Recipient must :
- be 65 years of age or older, or meet other eligibility factors and be part of the Home Care long term supportive population group;
- be resident of XXXXXXXXXX with a valid health card;
- be eligible to receive Home Care;
- not be a current resident of a community care, long term care or any other residential facility;
- agree to the terms and conditions of the At Home Caregiver Benefit program, and;
- be assessed by Home Care and assigned to the long-term supportive population group and has had an interRAI (HC) assessment completed with specific outcome scale scores met.
XXXXXXXXXX will determine a individual’s eligibility based on the individual’s impairment of their ability to perform Activities of Daily Living (ADL). Examples of ADL’s are meal preparation, ordinary housework, managing finances, managing medications, and shopping.
A Caregiver must be:
- 18 years of age or older who plays the main role in providing or coordinating ongoing care of the Care Recipient and is unpaid;
- resident of XXXXXXXXXX with a valid health card or have applied for a health card, and;
- lawfully entitled to be in or to remain in Canada; with a permanent residency status.
The amount of the AHCB will be based on an income test of the Care Recipient using the Care Recipient’s net income from line 23600 of their personal tax return. The proposed three tiers of the amount of the AHCB, to be paid to the Care Recipient, will be:
- tier one $500/month,
- tier two: $1,000/month,
- tier three $1,500/month.
We were not provided any information on the income levels required for each tier, however, the information provided states that the AHCB will be open to individuals of all income levels with the tier two and tier three amounts being paid to individuals with lower income levels.
Paragraph 56(1)(u) of the Act
Paragraph 56(1)(u) of the Act requires that social assistance payments received in the year and made on the basis of a means, needs, or income test are to be included in a taxpayer’s income unless such amounts are required to be included in the taxpayer’s income or the income of the taxpayer’s spouse or common-law partner under a different provision of the Act. Amounts included in a taxpayer’s income under paragraph 56(1)(u) of the Act are offset by a matching deduction under paragraph 110(1)(f) of the Act, so that there are no income tax implications related to this income inclusion other than it may affect certain income-tested benefits.
The first requirement in paragraph 56(1)(u) of the Act is that the amount must be “social assistance”. The term “social assistance” is not defined in the Act but generally means aid provided by governments or government agencies, although it can also be provided by other organizations (such as a charity), on the basis of need. It would appear that the payments made under the AHCB would likely fall within the general meaning of social assistance.
The second requirement in paragraph 56(1)(u) of the Act is that the payment must be “made on the basis of a means, needs or income test.” We consider each one of these tests to be a financial test and they are described as:
1. An “income” test, which is a test based solely on the income of the applicant.
2. A “means” test, which is similar to an income test, but also takes into account the assets of the applicant.
3. A “needs” test takes into account the income, assets and financial needs of the applicant.
The information provided states that the determination of the amount of the payment under the AHCB will be determined based on an income test. Therefore, we can confirm XXXXXXXXXX view that the assistance under the AHCB would likely be considered a social assistance payment made on the basis of a means, needs or income test, and would be included in the income of the Care Recipient pursuant to paragraph 56(1)(u) of the Act. As noted above, this amount would be offset by a matching deduction under paragraph 110(1)(f) of the Act.
Paragraph 81(1)(h) of the Act
Paragraph 81(1)(h) of the Act exempts from income social assistance payments to an individual caregiver for the benefit of a person under the caregiver's care when all of the following conditions apply:
a) The payment is a social assistance payment ordinarily made on the basis of a means, needs, or income test.
b) The payment is made under a program provided for by a federal, provincial or territorial law.
c) The payment is received directly or indirectly by the caregiver for the benefit of the cared-for individual.
d) The cared-for individual is not the caregiver's spouse or common-law partner or related to the caregiver or the caregiver's spouse or common-law partner.
e) No family allowance under the Family Allowances Act or any similar allowance provided for by provincial or territorial law is payable in respect of the cared-for individual for the period for which the social assistance payment is made.
f) The cared-for individual resides in the caregiver's principal place of residence, or the caregiver's principal place of residence is maintained for use as the cared-for individual's residence, during the period for which the payment is made.
Pursuant to paragraph 251(2)(a) of the Act, two individuals are considered related if they are connected by blood, marriage, common-law partnership or adoption. If any such relationships exists between the Care Recipient and either the Caregiver or the Caregiver's spouse, the tax exemption under paragraph 81(1)(h) of the Act will not apply to the payments under the AHCB.
As described in paragraph (f) above, 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 situations where the Care Recipient is residing in the Caregiver’s principal place of residence and they are not related, and all other conditions of 81(1)(h) of the Act are met, it would appear that the payments under the AHCB would meet the criteria for exemption under paragraph 81(1)(h) of the Act. If all of the requirements of paragraph 81(1)(h) of the Act are met, paragraph 81(1)(h) of the Act would override any provisions that would otherwise apply (including paragraph 56(1)(u) of the Act) and the payments under the AHCB and would not be required to be included in the Care Recipient’s income.
Reporting requirements
When an organization concludes that it has made social assistance payments as described in paragraph 56(1)(u) of the Act to an individual, subsection 233(1) of the Income Tax Regulations (the Regulations) requires the organization that provided the social assistance to report the payment on Form T5007, Statement of Benefits (T5007), unless the payment is specifically excluded from this reporting requirement.
In circumstances where paragraph 81(1)(h) of the Act applies to the payments under the AHCB, the payments would be exempt from being included in the Care Recipient’s income. As a result, XXXXXXXXXX would not have a reporting requirement for those payments.
You have also asked whether XXXXXXXXXX is required to issue a T4A, Statement of Pension, Retirement, Annuity, and Other Income (T4A) to the Caregiver.
Subsection 200(2) of the Regulations describes payments that are required to be reported on a T4A. A T4A is prepared by a payor (including an employer) of certain amounts related to employment (e.g., pension, lump-sum payments, retiring allowances, fees or other amounts for other services, etc.) and other amounts such as scholarships, fellowships, bursaries, grants and financial assistance. In this particular situation, XXXXXXXXXX is making payments to the Care Recipient and not the Caregiver. The payments to the Care Recipient, under the AHCB, will likely be considered a social assistance payment as described in paragraph 56(1)(u) of the Act (unless specifically excluded from the income pursuant to paragraph 81(1)(h) of the Act). Social assistance payments as described in paragraph 56(1)(u) of the Act are generally reported on a T5007 and are not described in subsection 200(2) of the Regulations. Therefore, XXXXXXXXXX is not required to issue a T4A to the Caregiver.
Unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency’s electronic library. After a 90-day waiting period, a severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. You may request an extension of this 90-day period. The severing process removes all content that is not subject to disclosure, including information that could reveal the identity of the taxpayer. The taxpayer may ask for a version that has been severed using the Privacy Act criteria, which does not remove taxpayer identity. You can request this by e-mailing us at: ITRACCESSG@cra-arc.gc.ca. A copy will be sent to you for delivery to the taxpayer.
Yours truly,
Eric Wirag, CPA, CMA
Manager, Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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